External Auditors
Review of External Auditors
The Audit Committee has responsibility delegated from the Board for making
recommendations on the appointment, reappointment, removal and
remuneration of the external auditors. There have been no instances of
disagreements between the Board and the Audit Committee relating to the
external auditors.
Subject to the annual appointment of auditors by the shareholders, the Audit
Committee conducts a continuous review of the relationship between the
Group and the auditors. This review includes:
- the consideration of audit fees that should be paid and advance approval
of any other fees in excess of £50,000 per annum which are payable to
auditors or affiliated firms in respect of non-audit activities;
- the consideration of the auditors’ independence and objectivity;
- the nature and scope of the external audit and the arrangements which
have been made to ensure co-ordination where more than one audit firm
or offices of the same firm are involved; and
- discussions on such issues as compliance with accounting standards.
The Committee formally assesses the effectiveness of the external audit
process on an annual basis. This assessment includes consideration of the
auditors’ independence and objectivity, taking into consideration relevant
laws, regulations and professional requirements. The assessment involves
considering all relationships between the Group and the auditors, including the nature and quantum of non-audit services. Assurances are obtained from
the auditors that they and their staff have no financial, business,
employment, family or other personal relationship with the Group that could
affect the auditor’s independence and objectivity, taking account of relevant
Ethical Standards. The auditors explain to the Audit Committee their policies
and processes for maintaining independence and monitoring compliance
with relevant requirements.
Whilst the Group has no set frequency for tendering the external audit, the
Group’s external audit was last tendered in 2002 and resulted in a change of
external auditors. The audit engagement partner last changed in 2011. The
Group is not aware of any restrictions that would limit its choice of external
auditors.
The Audit Committee, having considered the external auditors’ performance
during their period in office, recommends re-appointment. The audit fees of
£0.8m (2011: £0.8m) for PricewaterhouseCoopers LLP and non-audit related
fees of £0.2m (2011: less than £0.1m) were discussed by the Audit
Committee and considered appropriate given the current size of the Group
and the level of corporate activity undertaken during the year.
The Committee believes that the level and scope of non-audit services does
not impair the objectivity of the auditors and that there is a clear benefit
obtained from using professional advisors who have a good understanding of
the Group’s operations. Other accounting or consulting firms have been used
where the Group recognises them as having particular areas of expertise or
where potential conflicts of interest for the auditors are identified.
Policy on the Auditors Providing Non-Audit Services
Procedures in respect of other services provided by the auditors are in place to
safeguard audit objectivity and independence. The Group’s policies on nonaudit
services are:
- Audit related services – These are services that the auditors must undertake
or are best placed to undertake by virtue of their role as auditors. Such
services include formalities relating to bank financing, regulatory reports,
and certain shareholder circulars. The auditors would generally provide all
such services.
- Tax consulting – It is the Group’s policy to select the advisor for each
specific piece of tax consulting work who has the most appropriate skills
and experience for the work required. The Group uses a range of advisors
for tax consulting, including the auditors where they are best suited to the
work being undertaken.
- General consulting – For other consulting work, the Group will select an
advisor after taking account of the skills and experience required and the
expected cost of the work. The Group uses a range of advisors for general
consulting, including the auditors where they are best suited to the work
being undertaken. The auditors are only permitted to provide general
consulting when the Group, the Audit Committee and the auditors are
satisfied that there are no circumstances that would lead to a threat to the
audit team’s independence or a conflict of interest that could not be
effectively mitigated.