BT 2009 Annual Report Download - page 56

ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
54 BT GROUP PLC ANNUAL REPORT & FORM 20-F
company. The overall policies and the processes to implement them
were reviewed and appropriately modified in the light of the
provisions of the Sarbanes-Oxley Act relating to non-audit services
that external auditors may not perform. The
Audit Committee
monitors the extent of non-audit work being performed by the
external auditors and approves any work not included on the list of
services the Committee has pre-approved before it is undertaken. It
also monitors the level of non-audit fees paid to the auditors.
Details of non-audit work carried out by the external auditors are in
note 32 in the Notes to the consolidated financial statements on
page 129.
The
Audit Committee reviews BT’s published financial results, the
Annual Report & Form 20-F and other published information for
statutory and regulatory compliance. It reports its views to the
Board to assist it in its approval of the results announcements and
the Annual Report & Form 20-F.
The Committee also reviews the disclosure made by the Chief
Executive and Group Finance Director during the certification process
for the annual report about the design and operation of internal
controls or material weaknesses in the controls, including any fraud
involving management or other employees who have a significant
role in the company’s financial controls. The Board, as required by
UK law, takes responsibility for all disclosures in the annual report.
The
Audit Committee reviews internal audit and its relationship
with the external auditors, including plans and performance; and
monitors, reviews and reports on risk management processes and
the standards of risk management and internal control, including
the processes and procedures for ensuring that material business
risks, including risks relating to IT security, fraud and related
matters, are properly identified and managed.
It reviews promptly all material reports on the company from the
internal auditors and ensures that appropriate action is taken on
issues arising from such reports, including monitoring
management’s responsiveness to the findings and
recommendations of the internal auditors.
It reviews the processes for dealing with complaints received by
the company regarding accounting, internal accounting controls or
auditing matters and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or
auditing matters (‘whistleblowing’ procedures), ensuring
arrangements are in place for the proportionate and independent
investigation and appropriate follow up action.
Committee activities
At each of its meetings, the Committee reviews with the Director
Internal Audit and appropriate executives the implementation and
effectiveness of key operational and functional change and
remedial programmes and IT programmes. The Committee also sets
aside time at every meeting to seek the views of the internal and
external auditors in the absence of management.
During the year, the
Audit Committee business included
consideration of the following:
May:
the effectiveness of internal control procedures;
the annual financial statements, full year results announcement,
and related formal statements;
the basis of accounting for long term contracts;
BT Global Services major contracts review;
annual review of security, business continuity and fraud;
annual report on the performance of the Internal Audit and
Regulatory Compliance functions;
annual update on ‘whistleblowing’.
Introduction
The Audit Committee is chaired by Phil Hodkinson. The other
members are Maarten van den Bergh, Clay Brendish,
Patricia Hewitt and Carl Symon. They are all independent
non-executive directors. With the exception of Patricia Hewitt who
joined the Committee on 8 May 2008, they were members of the
Committee throughout the 2009 financial year. Appointments are
for a period of up to three years, which may be extended for two
further three year periods, provided the director remains
independent. The Board considers that the Committee’s members
generally have broad commercial knowledge and extensive
business leadership experience, having held – between them –
various prior roles in major business, Government and financial
management, treasury and financial function supervision and that
this constitutes a broad and suitable mix of business, financial
management and IT experience. The Board has reviewed
membership of the Committee and is satisfied that it includes a
member in the person of Phil Hodkinson who has the recent and
relevant financial experience required for the provisions of the Code
and is an ‘audit committee financial expert’ for the purposes of the
US Sarbanes-Oxley Act. The Committee typically meets four times
each financial year: in May, July, November and February and the
chairman of the Committee reports on the discussions at the next
Board meeting.
The Group Finance Director, Company Secretary, Director Internal
Audit and Director Group Financial Control although not members
of the
Audit Committee , will attend meetings with the agreement
of the chairman of the Committee. The external auditors will
normally attend meetings, although they will not be present when
the Committee discusses their performance and/or remuneration.
The papers and minutes of
Audit Committee meetings are sent to
directors who are not members of the Committee.
Committee role
The Committee’s terms of reference are available from the Company
Secretary and are posted on our website at www.bt.com/committees
The Committee recommends the appointment and
reappointment of the external auditors and considers their
resignation or dismissal, recommending to the Board appropriate
action to appoint new auditors. It ensures that key partners are
rotated at appropriate intervals. The partner currently responsible
for BT’s audit has held that position for two years. The Committee
discusses with the auditors the scope of their audits before they
commence, reviews the results and considers the formal reports of
the auditors and reports the results of those reviews to the Board.
The Committee reviews the auditors’ performance each year by
gathering feedback from Committee members and senior
management, and by considering reports on the audit firm’s own
internal quality control procedures and assessment of
independence. During the 2009 financial year, the Committee
placed particular emphasis on understanding the quality of audits
conducted in respect of the group’s overseas subsidiaries and is
satisfied that the performance of the external audit process
continues to be effective. No contractual obligations exist that
restrict the group’s choice of external audit firm.
As a result of regulatory or similar requirements, it may be
necessary to employ the external auditors for certain non-audit
work. In order to safeguard the independence and objectivity of the
external auditors, the Board has determined policies as to what
non-audit services can be provided by the external auditors and the
approval processes related to them. Under those policies, work of a
consultancy nature will not be offered to the external auditors
unless there are clear efficiencies and value-added benefits to the
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE DIRECTORS
REPORT OF THE DIRECTORS