Aviva 2009 Annual Report Download - page 97

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Performance review
Aviva plc Audit committee report continued
Corporate responsibility
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
management including a review of its risk management
function and the management actions put in place to maintain
business as usual activities.
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
service was fit for purpose and recommended that a re-tender
process should not be undertaken in 2009 but that the
relationship and the effectiveness of the auditor be kept
under review. Ernst & Young audits all significant subsidiaries
of the Group.
The Company introduced a revised external auditor policy
on 1 January 2008 aimed at safeguarding and supporting the
independence and objectivity of the external auditors. The policy
was updated to reflect current global best practice on auditor
independence, and is in full compliance with all UK, US and
International Federation of Accountants (IFAC) rules. The revised
external auditor policy aims to be simpler to interpret, providing
greater clarity on what services may and may not be provided by
the Group’s external auditors.
The external auditor policy 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 services of the external auditor, including requiring that all
services provided by the external auditor are pre-approved by
the Committee. It distinguishes between those services where
an independent view is required and that should be performed
by the external auditor (such as statutory and non-statutory
audit and assurance work), prohibited services where the
independence of the external auditor could be threatened and
they must not be used, and 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 and risk management reviews (ie 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. The Committee receives a quarterly report
of compliance against the external auditor policy and the policy
has worked effectively during 2009.
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.
The Group paid £15.0 million to Ernst & Young for audit
services in 2009, relating to the statutory audit of the
Group and Company financial statements and the audit
of Group subsidiaries and associates pursuant to legislation
(2008: £12.1 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 £19.0 million, giving a total fee to Ernst &
Young of £34.0 million
(2008: £25.0 million) . Further details are
provided in note 12 to the consolidated financial statements.
In addition, the Group engaged the organisation Corporate
Citizenship in relation to certain assurance work, including
verification of its Corporate 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 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 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
3 March 2010.
Russell Walls
Chairman, Audit Committee
Governance