HSBC 2010 Annual Report Download - page 198

HSBC HOLDINGS PLC
Report of the Directors: Governance (continued)
Board committees > Group Audit Committee / Group Risk Committee
196
Committee’s activities
The Committee held six meetings in 2010 – see
page 190 for details of Directors’ attendance at these
meetings. Following each meeting the Committee
reports to the Board on its activities.
The Committee undertook the following
activities in the discharge of its responsibilities:
• the Committee satisfied itself that the system of
internal control and compliance over financial
reporting was effective through regular reports
from the Group Finance Director, the Group
Chief Accounting Officer, and the Group Head
of Internal Audit; presentations from other
functional and business heads on the financial
control framework; review of minutes of
meetings of the GMB, the GRC, Risk
Management Meetings, the Group Reputational
Risk Committee and the Disclosure Committee;
reports on US compliance; and through the
processes described in more detail on page 202
in relation to internal controls. The Committee
also reviewed the adequacy of resources,
qualifications and experience of staff in the
finance function. The Group Head of
Compliance and the Group Chief Risk Officer
regularly attended Committee meetings and
other senior financial, internal audit, legal and
compliance executives attended as appropriate.
The Committee had regular dialogue with the
external auditor and the Group Head of Internal
Audit, with opportunities at each meeting for
dialogue to take place without management
present;
• the Committee satisfied itself that the internal
audit function was effective and adequately
resourced through regular meetings with and
reports from the Group Head of Internal Audit
on internal audit issues and review of an annual
report on the activities of the internal audit
function and planned activities for the following
year;
• the Committee received regular updates on the
application of changes in law, regulation and
accounting policies and practices including
financial reporting pursuant to the Sarbanes-
Oxley Act, Basel II compliance and changes
to the FSA’s large exposure rules;
• the Committee provided oversight of the
external auditor through regular meetings with
the external auditor, reviewing the auditor’s
strategy paper in relation to the audit and
receiving reports on the effectiveness and
progress of the audit of financial statements.
The Committee has approved policies on the
provision of non-audit services by the auditor
and its affiliates and on the employment by
HSBC of former employees of the auditor or
its affiliates. The Committee reviewed the
independence and objectivity of the auditor
through meetings with the auditor, annual
reports on employment of former employees of
the auditor and its affiliates and quarterly reports
on provision of non-audit services. The external
auditor provided written confirmation of its
independence under industry standards. The
Committee approved the remuneration and
terms of engagement of the auditor;
• the Committee advised the Board on meeting its
external financial reporting obligations through
a review of financial statements and interim
statements prior to approval by the Board;
endorsement of the inclusion of the going
concern statement in financial statements;
review of the disclosure of the results of the EU-
wide stress test conducted by the Committee of
European Banking Supervisors; a presentation
from the Head of Group Planning and Tax on
the Group’s tax position; review of accounting
Authority Membership Responsibilities
The Board
• Executive and non-
executive Directors
• Approves financial statements
• Appoints senior financial officers
• Delegates authorities in relation to financial matters
The GAC
• Independent non-
executive Directors
• Advises the Board on:
– ensuring an effective system of internal control and compliance over financial reporting; and
– meeting its external financial reporting obligations
• Responsible for selection, oversight and remuneration of the external auditor
Boards and
audit
committees of
principal
subsidiaries
• In relation to boards,
executive and non-
executive directors.
Committees may have
additional members
who are not directors.
• Provide bi-annual certificates to the GAC or intermediate audit committees relating to financial
statements and internal control procedures of relevant subsidiary