HSBC 2003 Annual Report Download - page 205

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each of the Head of Group Compliance, the Group
General Manager Legal and Compliance, and the
Group General Manager Internal Audit and receives
periodic presentations from other functional heads
and line management.
The key processes used to review the
effectiveness of the system of internal control include
the regular reports from the heads of key risk
functions; the production and regular updating of
summaries of key controls applied by subsidiary
companies measured against HSBC benchmarks
which cover all internal controls, both financial and
non-financial; annual confirmations from chief
executives of principal subsidiary companies that
there have been no material losses; contingencies or
uncertainties caused by weaknesses in internal
controls; internal audit reports; external audit reports;
prudential reviews; and regulatory reports.
The Committee reports on its activities at each
Board meeting and, twice annually, produces a
written summary of such activity.
The Committee has approved procedures for the
receipt, retention and treatment of complaints
regarding accounting, internal accounting controls
and auditing matters, and the confidential and
anonymous submission by employees of concerns
regarding questionable accounting or auditing
matters.
To ensure continuing auditor objectivity and to
safeguard the independence of HSBC's auditors the
Committee has determined a framework for the type
and authorisation of non-audit services which KPMG
may provide.
The Group Audit Committee has adopted
policies for the pre-approval of specific services that
may be provided by the principal auditor (KPMG)
during 2003 and 2004. These policies are kept under
review and amended as necessary to meet the dual
objectives of ensuring that HSBC benefits in a cost
effective manner from the cumulative knowledge and
experience of its auditors whilst also ensuring that
the auditors maintain the necessary degree of
independence and objectivity. These pre-approval
policies apply to all services where HSBC Holdings
or any of its subsidiaries pays for the service, or is a
beneficiary or addressee of the service and has
selected the service provider, or influences the choice
of service provider. All services entered into with
KPMG Audit Plc and its affiliates (‘KPMG’ ) after 5
May 2003 were pre-approved by the Group Audit
Committee or were entered into under pre-approval
policies established by the Group Audit Committee.
The pre-approved services relate to the provision
of objective advice, attestation type services or
opinions on areas such as controls and are an input
into management decision making. They fall into the
following four categories:
Audit services
In addition to the statutory audit appointments that
are approved by the Group Audit Committee, this
category includes services that are normally provided
by the independent auditor in connection with
statutory and regulatory filings or engagements, such
as reviews of interim financial information, letters to
securities underwriters in connection with debt or
equity offerings, the inclusion of auditors’ reports in
filings with the SEC and certain reports on internal
control over financial reporting.
Audit-related services
These services are those provided by the principal
auditor that are reasonably related to the performance
of the audit or review of the Group’ s financial
statements. Examples of such services are due
diligence services provided in connection with
potential acquisitions, audits or reviews of employee
benefit plans, ad hoc attestation or agreed-upon
procedures reports (including reports requested by
regulators), and accounting and regulatory advice on
actual or contemplated transactions.
Tax services
This category includes both tax advice and
compliance services. Examples of such services are
advice on national and local income taxation matters,
(including assistance in data gathering for
preparation, review and submission as agent of tax
filings), advice on tax consequences of management-
proposed transactions and assistance in responding to
tax examinations by governmental authorities. The
pre-approved tax services explicitly exclude
proposals for tax structures unconnected with a
contemplated transaction whose main motive is to
reduce taxation.
Other services
This category includes various other assurance and
advisory services such as training or advice or
assurance provided on specific elements of financial
data and models, IT security and advice, and
providing due diligence on financial reviews of