RBS 2012 Annual Report Download - page 316

314
Report of the Group Audit Committee continued
In addition to the annual evaluation performed by the Group Audit
Committee, the External Auditors will also conduct their own annual
review of audit quality. Twelve service criteria for the audit have been
defined by the External Auditors to measure their performance against
the quality commitments set out in their annual audit plan, under the
headings of ‘quality of audit, approach and conduct’, ‘independence and
objectivity’, ‘quality of the team’ and ‘value added’.
The Group Audit Committee is responsible for making recommendations
to the Board in relation to the appointment, re-appointment and removal
of the External Auditors. In order to make a recommendation to the
Board, the Group Audit Committee considers and discusses the
performance of the External Auditors, taking account of the outcomes of
the annual evaluation carried out. The Board submits the Group Audit
Committee's recommendations to shareholders for their approval at the
Annual General Meeting. The Board has endorsed the Group Audit
Committee's recommendation that shareholders be requested to approve
the reappointment of Deloitte LLP as External Auditors at the Annual
General Meeting in 2013. The Group Audit Committee also fixes the
remuneration of the External Auditors as authorised by shareholders at
the Annual General Meeting.
Deloitte LLP has been the company’s auditors since March 2000. There
are no contractual obligations restricting the company's choice of External
Auditors. A revised version of the UK Corporate Governance Code was
issued by the Financial Reporting Council in September 2012 which
provides that companies should put the external audit contract out to
tender at least every ten years. The Group Audit Committee has
considered the requirements and will consider each year whether there
are any circumstances or events such that the contract for the audit of the
Group should be put out to tender. Furthermore, unless the Committee
determines otherwise, the audit contract will be put out to tender every
ten years as will any new appointment following the resignation of the
incumbent auditors.
Audit and non-audit services
The Group Audit Committee has adopted a policy on the engagement of
the External Auditors to supply audit and non-audit services, which takes
into account relevant legislation regarding the provision of such services
by an external audit firm.
In particular, the Group does not engage the External Auditors to provide
any of the following non-audit services:
x bookkeeping or other services related to the accounting records or
financial statements;
x financial information systems design and implementation;
x appraisal or valuation services, fairness opinions or contribution-in-
kind reports;
x actuarial services;
x internal audit outsourcing services;
x management functions or human resources;
x broker or dealer, investment adviser, or investment banking services;
x legal services and expert services unrelated to the audit; or
x other services determined to be impermissible by the US Public
Company Accounting Oversight Board.
The Group Audit Committee reviews the policy annually and
prospectively approves the provision of audit services and certain non-
audit services by the External Auditors. Annual audit services include all
services detailed in the annual engagement letter including the annual
audit and interim reviews (including US reporting requirements) and
periodic profit verifications.
Annual audit services also include statutory or non-statutory audits
required by any Group companies that are not incorporated in the UK.
Terms of engagement for these audits are agreed separately with
management, and are consistent with those set out in the audit
engagement letter insofar as local regulations permit. During 2012,
prospectively approved non-audit services included the following classes
of service:
x capital raising, including consents, comfort letters and relevant
reviews of registration statements;
x provision of accounting opinions relating to the financial statements
of the Group and its subsidiaries;
x provision of reports that, according to law or regulation, must be
rendered by the External Auditors;
x permissible services relating to companies that will remain outside
the Group;
x reports providing assurance to third parties over certain of the
Group's internal controls prepared under Standards for Attestation
Engagements (SSAE) No. 16 or similar auditing standards in other
jurisdictions; and
x reports and letters providing assurance to the Group in relation to a
third party company where the Group is acting as equity/ debt
underwriter in a transaction, in the ordinary course of business.