RBS 2013 Annual Report Download - page 59
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Report of the Group Audit Committee
57
• actuarial services;
• internal audit outsourcing services;
• management functions or human resources;
• broker or dealer, investment adviser, or investment banking
services;
• legal services and expert services unrelated to the audit; and
• 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 Auditor. 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.
A
nnual audit services also include statutory or non-statutory audits
required by 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 to
the extent permitted by local regulations. During 2013, prospectively
approved non-audit services included the following classes of service:
• capital raising, including consents, comfort letters, reviews of
registration statements and similar services in respect of documents
that incorporate or include the audited financial statements of the
Group;
• accounting opinions, including accounting consultations and support
related to generally accepted accounting principles and financial
reporting matters relating to the financial statements of the Group
and its subsidiaries;
• any reports that, according to law or regulation in the relevant
jurisdiction, must be (and may only be) rendered by the External
Auditor;
• reports providing assurance to third parties over certain of the
Group’s internal controls prepared under US Statement of Auditing
Standards 70 “Service Organisations” or similar auditing standards
in other jurisdictions; and
• 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.
For all other permitted non-audit services, Group Audit Committee
approval must be sought, on a case-by-case basis, in advance. The
Group Audit Committee reviews and monitors the independence and
objectivity of the External Auditor when it approves non-audit work, taking
into consideration relevant legislation, ethical guidance and the level of
non-audit services relative to audit services. The approval process is
rigorously applied to prevent the External Auditor from functioning as
management, auditing their own work, or serving in an advocacy role.
A
competitive tender process is required for all proposed non-audit
services engagements where the fees are expected to exceed £100,000.
Engagements below £100,000 may be approved by the Chairman of the
Group Audit Committee; as an additional governance control all
engagements have to be approved by the Group Chief Accountant and
Group Procurement. Where the engagement is tax related, approval
must also be obtained from the Head of Group Taxation. Ad hoc
approvals of non-audit services are ratified by the Group Audit
Committee each quarter. During 2013, the External Auditor were
approved to undertake certain significant engagements which are
categorised and explained more fully below:
Regulatory requests and attestations (three engagements)
Regulators, both UK-based and overseas, requested certain work be
undertaken by the Group during 2013 to provide assurances and meet
certain requirements. In all three such engagements undertaken by the
External Auditor, their existing knowledge of the Group was highlighted
as a strong benefit. It allowed the work to commence quickly and with
minimal disruption in all instances. The benefits of maintaining
consistency between similar engagements was also highlighted.
Tax advisory and compliance services (one engagement)
Tax advisory services were provided to a subsidiary established by RBS
and Blackstone. The External Auditor had been involved in establishing
the subsidiary company and so had an in-depth understanding of its
structure and tax liabilities.
Membership of a company acquired by Deloitte (one engagement)
Bersin has provided an annual membership to the RBS Group since
2010. This has allowed our HR and Learning & Talent Practitioners to
access extensive online research libraries. Bersin was acquired by
Deloitte in December 2012 and so at the point the Group’s Bersin
membership was due for renewal ad hoc approval by the Group Audit
Committee was sought.
Non-statutory audit of full year accounts (one engagement)
A
s part of the disposal of certain UK branches, it has been necessary to
prepare audited accounts for the business for 2012 and 2013. The
External Auditor was selected to provide audit services based on its
extensive experience of the Group’s systems and process, as well as its
specific knowledge of the project. In addition, following the completion of
the banking licence application for the business, the new legal entity
would be a wholly-owned subsidiary of the Group; it is the Group’s policy
to use the Group’s External Auditor to audit the accounts of all
subsidiaries except in exceptional circumstances.
In addition, the External Auditor is engaged from time to time by the
Group to perform services in relation to the restructuring of loans and
other financing. The Group is not liable for these fees, and often has a
limited role in the selection process. As an additional governance control,
these engagements are subject to the ad hoc approval process.
Information on fees paid in respect of audit and non-audit services
carried out by the External Auditor can be found in Note 5 to the
consolidated accounts on page 403.
Brendan Nelson
Chairman of the Group Audit Committee
26 February 2014