BT 2010 Annual Report Download - page 64

62 BT GROUP PLC ANNUAL REPORT & FORM 20-F
provisions of the Sarbanes-Oxley Act relating to non-audit services
that external auditors may not perform. The
Audit Committee
monitors the extent of non-audit services being performed by the
external auditors and approves any services not included on the
list of services the Committee has pre-approved before it is
undertaken. It also monitors the level of non-audit fees paid to the
auditors. Details of non-audit services carried out by the external
auditors are in note 31 in the Notes to the consolidated financial
statements on page 136.
The
Audit Committee reviews BT’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 disclosures made by the Chief
Executive and Group Finance Director during the certification
process for the annual report about the design and operation of
internal controls or 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 reviews internal audit and its relationship
with the external auditors, including plans and performance; and
monitors, reviews and reports on risk management processes and
the standards of risk management and internal control, including
the processes and procedures for ensuring that material business
risks, including risks relating to IT security, fraud and related
matters, are properly identified and managed.
It reviews promptly all material reports on the company from the
internal auditors and ensures that appropriate action is taken on
issues arising from such reports, including monitoring
management’s responsiveness to the findings and
recommendations of the internal auditors.
It reviews the processes for dealing with complaints received by
the company regarding accounting, internal accounting controls or
auditing matters and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or
auditing matters (‘whistleblowing’ procedures), ensuring
arrangements are in place for the proportionate, independent
investigation and appropriate follow up of such matters.
During the 2010 financial year, the Committee placed particular
emphasis on reviewing: the effectiveness of internal audit, major
contract management and accounting, the line of business Audit
Committees and the management of risk.
Committee activities
At each of its meetings, the Committee reviews with the Director
Internal Audit and appropriate executives the implementation and
effectiveness of key operational and functional change and
remedial programmes. The Committee also sets time aside at each
meeting to seek the views of the internal and external auditors in
the absence of management.
During the year the
Audit Committee business included
consideration of the following:
April:
BT Global Services contract performance
review of the internal control requirements under the Combined
Code and Sarbanes-Oxley
draft Annual Report and Form 20-F.
May:
review of going concern
review of external audit and non-audit fees
Introduction
The Audit Committee is chaired by Phil Hodkinson. The other
members are Clay Brendish, Patricia Hewitt and Carl Symon. They
are all independent non-executive directors. They were all
members of the Committee throughout the 2010 financial year.
Appointments are for a period of up to three years, which may be
extended for two further three year periods, provided the director
remains independent. The Board considers that the Committee’s
members have broad commercial knowledge and extensive
business leadership experience, having held between them various
prior roles in major business, Government, financial management,
treasury and financial function supervision and that this constitutes
a broad and suitable mix of business, financial management and IT
experience. The Board has reviewed membership of the Committee
and is satisfied that it includes a member in the person of Phil
Hodkinson who has recent and relevant financial experience
required for the provisions of the Code and is an ‘audit committee
financial expert’ for the purposes of the US Sarbanes-Oxley Act.
The Committee meets typically five times each financial year: in
April, May, July, November and February and the Chairman of the
Committee reports on the discussions at the next Board meeting.
The Group Finance Director, Company Secretary, Director Internal
Audit and Director Group Financial Control although not members
of the
Audit Committee , will attend meetings with the agreement
of the Chairman of the
Audit Committee . The external auditors will
normally attend meetings, although they will not be present when
the Committee discusses their performance and/or remuneration.
The papers and minutes of the
Audit Committee meetings are
also sent to directors who are not members of the Committee.
Committee role
The Committee’s terms of reference are available from the Company
Secretary and are posted on our website at www.bt.com/committees
The Committee recommends the appointment and reappointment
of the external auditors and considers their resignation or dismissal,
recommending to the Board appropriate action to appoint new
auditors. PricewaterhouseCoopers have been the company’s
auditors for many years. Having reviewed the independence and
effectiveness of the external auditors, the Committee has not
considered it necessary to date to require them to tender for the
audit. The external auditors are required to rotate the lead partner
every five years, and other partners every seven years, that are
responsible for the group and subsidiary audits. The partner
currently responsible for BT’s audit is completing his first year. The
Committee discusses with the auditors the scope of their audits
before they commence, reviews the results and considers the
formal reports of the auditors and reports the results of those
reviews to the Board. The Committee reviews the auditors’
performance each year by gathering feedback from Committee
members and senior management, and by considering reports on
the audit firm’s own internal quality control procedures and
assessment of independence. No contractual obligations exist that
restrict the group’s choice of external audit firm.
As a result of regulatory or similar requirements, it may be
necessary to employ the 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 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 processes to implement them
were reviewed and appropriately modified in the light of the
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE DIRECTORS