Aviva 2007 Annual Report Download - page 93
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Please find page 93 of the 2007 Aviva annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Internal audit
The Group’s internal audit function reports to
management on the effectiveness of the Company’s
systems of internal controls, the adequacy of these systems
to manage business risk and to safeguard the Group’s
assets and resources. Through the Group Audit Director,
the internal audit function provides objective assurance on
risks and controls to the Committee. The plans, the level
of resources and the budget of the internal audit function
are reviewed at least annually by the Committee, which
also undertakes an annual review of the effectiveness
of the Group’s internal audit function against guidance
criteria provided by the Institute of Chartered Accountants
in England and Wales. In addition, the Group Audit
Committee is consulted in determining the remuneration
of the Group Audit Director. This review is complemented
with a questionnaire to assess the effectiveness of Group
Audit and completed by a sample of the major Business
Units, audit committee members and Executive members.
As of 1 April 2007, the Group internal audit structure was
modified and the reporting line of all internal audit
resources from each business unit have been centralised
so that they report to the Group Audit Director, rather than
to the business unit head.
External auditor
Ernst & Young LLP (Ernst & Young) was appointed
auditor of the Company in 2001 having previously been
the auditor of Norwich Union plc. Following the annual
external audit effectiveness review the Committee
concluded that the audit was fit for purpose and
recommended that a re-tender process should not
be undertaken in 2007 but that the relationship and
the effectiveness of the auditor be kept under review.
The audit signing partner changed as part of a rotation
process in 2002 and in line with that process there has
been a further rotation in audit partner following the
sign-off of the statements for the 2006 financial year.
Ernst & Young audits all significant subsidiaries of the
Group other than Delta Lloyd (the Group’s subsidiary
operating in the Netherlands, Belgium, Luxembourg and
Germany), which is audited by PricewaterhouseCoopers
LLP (PwC). To fulfil its Group reporting responsibilities
Ernst & Young reviews the work of PwC in accordance
with standard auditing practices.
The Company has policies aimed at safeguarding and
supporting the independence and objectivity of the
external auditors. The policies regulate the appointment
of former audit employees to senior finance positions
in the Group and set out the approach to be taken
by the Group when using the services of the auditor.
It distinguishes between those matters where an
independent view is required, such as audit and assurance
work, and other advisory services. In addition to statutory
audits, audit and assurance work includes reviewing
statutory returns, actuarial assurance, regulatory advice
requiring auditor reporting, due diligence on acquisitions
and disposals, fraud investigations and control reviews
and audit reviews. As a general principle the auditor
cannot be engaged by the Company for any other
purpose, although the policy recognises that there may
be areas of minor significance where, for pragmatic
reasons, it may be in the Group’s interests to use the
external auditor for this work.
Annually, the Committee reviews a formal letter provided
by the external auditor confirming its independence and
objectivity within the context of applicable regulatory
requirements and professional standards.
As part of the Committee's continual drive for
improvement, the policy in respect of external auditors
underwent a detailed review this year. The policy was
updated to reflect current global best practice on auditor
independence, which is considered to be full compliance
with all UK, US and International Federation of
Accountants (IFAC) rules. The revised policy aims to be
simpler to interpret, providing greater clarity on what
services may and may not be provided by the Group’s
auditors. This revised policy became operational from
1 January 2008.
The Group paid £10.2 million to Ernst & Young LLP for
audit services in 2007, relating to the statutory audit of
the Group and Company financial statements and the
audit of Group subsidiaries and associates pursuant to
legislation (2006: £9.2 million). The fees for other services
which included advice on accounting and regulatory
matters, reporting on internal controls, corporate
governance matters, and due diligence work were
£8.9 million giving a total fee to Ernst & Young of
£19.1 million (2006: £15.8 million). Further details
are provided in note 12 to the accounts. In addition,
the Group engaged the SMART Company in relation
to certain assurance work including verification of its
Corporate Social Responsibility Report.
During the year, the Committee performed its annual
review of the independence, effectiveness and objectivity
of the external auditor; assessing the audit firm, the 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. The questionnaire sought
opinions on the importance of certain criteria and
the performance of the auditor against those criteria.
The questionnaires were collated by the Group Company
Secretary. Based on this review, the Committee concluded
that the audit service of Ernst & Young was fit for purpose
and provided a robust overall examination of the Group’s
business and the risks involved.
In line with the Combined Code requirement the
Board undertook a review of the effectiveness of
all its committees during the year, including the Audit
Committee. In addition, the Committee also carried
out a self-evaluation of its effectiveness.
This report was reviewed and approved by the Board
on 27 February 2008.
Russell Walls
Chairman, Audit Committee
Aviva plc
Annual Report and
Accounts 2007
89
Governance