Barclays 2010 Annual Report Download - page 162

Corporate governance
Corporate governance report continued
(3) Accountability
Sir Michael Rake, Chairman of the Board Audit Committee, now reports on the Board Audit Committee’s activities during 2010.
Board Audit Committee Chairman’s report
Member Independent
Meetings
eligible to
attend
Meetings
attended
Sir Michael Rake (Chairman) I 11 11
Alison Carnwath
(from 1st October 2010) I33
Fulvio Conti I 11 9
Simon Fraser I 11 11
Sir Andrew Likierman I 11 11
Secretary
Lawrence Dickinson
Key
OA on appointment
I independent
2010 was my first full year as Chairman of the Board Audit Committee
and one which saw us appoint a new lead audit partner, Andrew Ratcliffe,
who succeeded Phil Rivett. I am pleased to report that the handover
to the new lead audit partner went smoothly and the transition was
properly and effectively managed. My report on the Committee’s work
during 2010 is set out below.
What is our role?
We are responsible for reviewing accounting policies and the contents
of financial reports to ensure that we are satisfied with the integrity of the
financial statements and particularly the key financial judgements within
them. We also monitor the Group’s disclosure controls and procedures
and the internal control environment. We consider the adequacy and
scope of the external and internal audit and we oversee the relationship
with our external auditors. The Committee’s full terms of reference are
available from the corporate governance section of our website at:
www.barclays.com/corporategovernance
Who are the Committee?
The membership of the Committee and attendance at meetings held
in 2010 is set out above. The Board has determined that Sir Andrew
Likierman and I are the designated financial experts for the purposes
of the US Sarbanes-Oxley Act of 2002. Sir Andrew Likierman has ‘recent
and relevant financial experience’, as recommended by the Combined
Code, as a result of his accountancy background, his career with HM
Treasury and his appointment as Chairman of the National Audit Office.
I have an accountancy background, having worked at KPMG for over
thirty years, latterly as Chairman of KPMG International. Sir Andrew
Likierman and I also serve on the Board Risk Committee, ensuring there
is appropriate overlap between the two committees.
The Group Finance Director, Chief Risk Officer, Group General Counsel
and Chief Internal Auditor attend each Committee meeting, as does the
lead audit partner from our external auditor. Before each Committee
meeting, I hold a private session with Committee members to take
soundings on the matters to be discussed at the meeting. Committee
members also meet privately with the Chief Internal Auditor and the
external auditor after the majority of our meetings, without Management
present, to follow up on any particular matters.
Outside of our formal meetings I am in regular contact with
Management, including the Group Finance Director, the Chief Risk
Officer, the Chief Internal Auditor (who may raise with me any issues
of concern) and the lead audit partner of our external auditors. During
the year, I also visited the Group’s businesses in Spain, USA, Kenya and
South Africa, attending meetings of the local Governance and Control
or Subsidiary Audit Committees. I also held one-to-one meetings with
management in London, New York and Dubai.
What did we do in 2010?
We met eleven times in 2010 and the chart on page 162 shows how
we allocated our time at our meetings. The work of the Committee
principally falls under three main areas: financial statements and
accounting policies, internal control and oversight of internal and
external audit.
Financial Statements and Accounting Policies
Reviewing the financial statements and accounting policies requires us
to make certain judgements and I set out below some of the key issues
we discussed in 2010 in conjunction with the external auditors.
– We continued to review closely the fair value of our credit market
exposures and the form and content of our disclosures. We reviewed
marks by asset category, movements in exposures and the underlying
collateral by vintage and rating. We received an update at both the
half-year and full-year and also ahead of each Interim Management
Statement and discussed the valuations with Management.
– Impairment testing of the goodwill held on the Group’s balance sheet
was conducted in 2010. We reviewed the results of the impairment
testing and agreed with Management’s assessment that the goodwill
associated with our businesses in Russia should be written off in full.
We were content that other goodwill held on the balance sheet
remains appropriate.
– We received regular reports on current and forecast impairment, which
set out the trends in both retail and wholesale credit risk by business
unit and the level of potential credit risk loans and the level of
impairment held against them. We specifically reviewed the impairment
charge in the interim and preliminary results announcements and were
satisfied that the charge was appropriate. In particular, we reviewed the
accounting treatment and performance of the Protium loan. We agreed
that it was appropriate to impair the loan in order to reduce the carrying
value of the loan to the fair value of the underlying assets, given
Management’s intention to restructure or seek earlier repayment of
the loan. During 2010, a considerable amount of work was carried out
to understand the impairment situation in Spain, where increased
impairment in H1 2010 was driven largely by the deteriorating Spanish
economy and further falls in property values.
160 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10