Aviva 2013 Annual Report Download - page 79

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Aviva plc
Annual report and accounts 2013
77
Directors’ and Corporate governance report continued
Chief Audit Officer
The CAO had direct access to the Board Chairman, the
committee chairman and the committee members. The
committee worked with the Group CEO to determine the
CAO’s objectives and evaluate his levels of achievement, and
to approve the CAO’s remuneration. His annual performance
related bonus was unconnected to the Group’s financial
performance. During the year the CAO’s reporting line changed
from the CFO to the Group CEO.
Whilst he is a member of the Group Executive, the
committee is satisfied that the CAO’s independence has been
maintained as adequate safeguards are in place to maintain the
independence, authority and standing of the CAO and the
Internal Audit function. The committee remained satisfied that
the Internal Audit function had sufficient resources during the
year to undertake its duties.
External auditor
PwC was appointed as the Group’s auditor in 2012 following
a formal tender process. The external audit contract will be put
out to tender at least once every ten years.
During the year, the committee performed its annual review
of the independence, effectiveness and objectivity of the
external auditor, assessing the audit firm, audit partner and
audit teams. The process was conducted by means of a
questionnaire, completed Group-wide by members of senior
management and members of the Group’s finance community
and the committee. The questionnaire sought opinions on the
importance of certain criteria and the performance of the
external auditor against those criteria. Based on this review,
the committee concluded that the audit service of PwC was fit
for purpose.
The Company has an external auditor business standard in
place which is aimed at safeguarding and supporting the
independence and objectivity of the external auditor. The
standard is in full compliance with all UK, US and International
Federation of Accountants (IFAC) rules and takes into account
the Auditing Practices Board Ethical Standards for Auditors.
The standard regulates the appointment of former audit
employees to senior finance positions in the Group and sets out
the approach to be taken by the Group when using the non-
audit services of the principal external auditor. It distinguishes
between (i) those services where an independent view is
required and services that should be performed by the external
auditor (such as statutory and non-statutory audit and assurance
work); (ii) prohibited services where the independence of the
external auditor could be threatened and must not be used; and
(iii) other non-audit services where the external auditor may be
used. Non-audit services where the external auditor may be
used include: non-recurring internal controls (such as the work
commissioned in relation to Aviva Investors) and risk
management reviews (excluding outsourcing of internal audit
work), advice on financial reporting and regulatory matters, due
diligence on acquisitions and disposals, project assurance and
advice, tax compliance services, and employee tax services.
During the year the committee received quarterly reports of
compliance against the standard.
The Group paid £16.6 million to PwC for audit and audit-
related assurance services in 2013, relating to the statutory audit
of the Group and Company financial statements, the audit of
Group subsidiaries, additional fees relating to the prior year audit
of Group subsidiaries and audit-related assurance services (2012:
£15.8 million).
The fees for other services, which are in compliance with
applicable UK, US and International Federation of Accountants
independence rules, included Market Consistent Embedded Value
supplementary reporting, advice on accounting, risk and
regulatory matters, reporting on internal controls, reporting on
the Group’s Individual Capital Assessment and Economic Capital
and work in relation to preparing the business for Solvency II
implementation, were £7.6 million (2012: £16.0 million), giving
a total fee to PwC of £24.2 million (2012: £31.8 million). In
addition the Group paid PwC £0.2 million (2012: £0.2 million) in
relation to the audit of Group occupational pension schemes.
The Group paid £1.1 million to PwC in relation to other non-
audit services in respect of continuing operations. This included
£0.2 million relating to a regulatory advice engagement and £0.9
million for a number of other, individually smaller services. In line
with the external auditor business standard, the committee
satisfied itself that for these engagements, robust controls
(including appropriate levels of review) were in place to ensure
that PwC’s objectivity and independence was safeguarded, and
concluded that it was in the interests of the Company to purchase
these services from PwC due to their specific expertise. Further
details are provided in note 13.
Committee performance and effectiveness
The committee undertook an annual review of its performance
and effectiveness which concluded that overall the committee
was effective in carrying out its duties. The committee agreed
that its priorities for 2014 should include: monitoring
implementation of compliance with the requirements of being
classified as a Global Systemically Important Insurer; continuing
to monitor improvements in the control environment; greater
oversight of management actions to reduce operational risk;
and increasing the level of reporting from business unit audit
committees.