BT 2005 Annual Report Download - page 53

As a result of regulatory or similar requirements, it may
be necessary to employ the company’s 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 company’s 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 company. The
overall policies and the processes to implement them
were reviewed and appropriately modified in the light of
the provisions of the US Sarbanes-Oxley Act of 2002
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 company’s
auditors and approves such work before it is undertaken.
It also monitors the level of non-audit fees paid to the
external auditors.
The Audit Committee reviews the company’s published
financial results, the Annual Report and 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 and 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 or 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 monitors and reviews the
standards of risk management and internal control, the
effectiveness of internal control, financial reporting,
accounting policies and procedures, and the company’s
statements on internal controls before they are agreed by
the Board for each year’s annual report. It also reviews
the company’s internal audit function and its relationship
with the external auditors, including internal audit’s plans
and performance. It reviews the arrangements for dealing,
in confidence, with complaints from employees about
accounting or financial management impropriety, fraud,
poor business practices and other matters. At each of its
meetings it reviews with the group chief internal auditor
and appropriate executives the implementation and
effectiveness of key operational and functional change
and remedial programmes. The Committee also sets aside
time at every meeting to seek the views of the company’s
internal and external auditors in the absence of
executives.
In addition to carrying out those regular tasks which
are within the Committee’s terms of reference and which
are described above, it has also carried out its annual
consideration of the group’s risk register, as submitted to
it by the Operating Committee, and reviewed the
company’s system of internal control, its accounting
systems, IT security and fraud and related matters. It also
considered the effect on the company’s results of the
introduction of international financial reporting standards,
which have applied to the company’s results from the
financial year beginning on 1 April 2005. The Committee
has also reviewed at each of its meetings during the 2005
financial year the steps being taken within the group with
regard to the application of the Sarbanes-Oxley Act
dealing with the internal control over financial reporting.
It also specifically evaluated its performance and
processes and has reviewed the experience, skills and
succession planning within the Group’s finance function.
The Group Finance Director, the Secretary, the group’s
chief internal auditor and the company’s external auditors
attend the Committee’s meetings. The Committee met
four times during the 2005 financial year.
Remuneration Committee
The Remuneration Committee comprises solely independent
non-executive directors and is chaired by Sir Anthony
Greener. It met five times during the 2005 financial year.
Further details about the Committee are included in the
Report on directors’ remuneration.
Nominating Committee
The Nominating Committee consists of the Chairman, the
Deputy Chairman, John Nelson and Maarten van den
Bergh. Its members have not changed during the 2005
financial year. The Secretary and, where appropriate, at
the invitation of the Chairman, the Chief Executive
attends the Committee’s meetings. It ensures an
appropriate balance of experience and abilities on the
Board, using this evaluation to review the size and
composition of the Board and to recommend any
proposed changes to the Board. It keeps under review the
need for appointments to the Board, prepares a
description of the specific experience and skills needed for
an appointment, considers candidates who are put
forward by the directors and external consultants, and
recommends to the Board the appointments of all
directors after having met short-listed candidates. It also
reviews the time required from the Deputy Chairman and
other non-executive directors to carry out their duties and
advises the Board on succession planning for the positions
of the Chairman, Deputy Chairman, Chief Executive and
all other Board appointments. The Committee met four
times during the 2005 financial year. It reviewed the
current structure, profile and balance of the Board,
approved the Chairman’s and Chief Executive’s job
descriptions and the Board and Board committee
evaluation questionnaire and process. The Committee
also reviewed and recommended to the Board the
continued appointments as non-executive directors of
Baroness Jay, John Nelson (who did not take part in the
review of his own reappointment) and Carl Symon.
52 BT Group plc Annual Report and Form 20-F 2005 Corporate governance