BT 2016 Annual Report Download - page 114

BT Group plc
Annual Report 2016
120
External audit
We:
• considered and approved the auditors’ group audit plan – this
followed discussion with the auditors on the scope of the work
to be undertaken as well as their consideration of risk informing
their plan;
• reviewed reports on external audit findings; and
• considered and approved the letter of representation issued to
the external auditors.
The committee and the external auditors have discussed the issues
addressed by the committee during the year and the areas of
particular audit focus, as described in the Independent Auditors’
Report on pages 158 to 163.
Management reported to the committee that they were not aware
of any material misstatement and the auditors also reported the
misstatements they had found in the course of their work. The
committee confirmed that these unadjusted misstatements were
not material to the financial statements.
PricewaterhouseCoopers (PwC) have audited EE for the purposes
of the consolidated financial statements at 31 March 2016 and
will be appointed as statutory auditors of EE Limited and
its subsidiaries.
Audit tender
PwC and its predecessor firms have been BT’s auditors since
BT listed on the London Stock Exchange in 1984. Their
reappointment has not been subject to a tender in that time.
The external auditors are required to rotate the lead partner every
five years and other partners who are responsible for group and
subsidiary audits must change at least every seven years. Paul
Barkus will rotate after this year‑end audit and Richard Hughes will
take over as lead partner.
The committee considers its recommendations to the Board on
the appointment and reappointment of auditors annually, and
specifically has responsibility for establishing formal and transparent
arrangements with PwC. The committee has reviewed the
timetable for tendering, taking into account all relevant regulation
and guidance and having regard to the following:
• the group is undergoing a period of significant business change
through the integration of EE, our organisational restructuring
and transformation programmes. A measured rotation timetable
maintains stability in the independent oversight provided by
the external auditors and maximises eciency and eectiveness
while the business fully implements the changes; and
• BT draws on expertise from other accounting firms and therefore
a rotation of external audit services will require careful planning
of transition periods to ensure that all services are fully contracted
throughout the rotation process and that the incoming auditor is
independent.
In light of the above, the committee proposes to tender the audit
no later than 2019 with the new auditors appointed no later than
for the financial year commencing on 1 April 2020. However,
the committee keeps the external audit arrangements under
annual review and may elect to accelerate the planned
appointment of new auditors if appropriate, for example
for service quality or independence reasons.
The company confirms that it complied with the provisions of the
Competition and Markets Authority’s Order for the financial year
under review.
Auditor eectiveness
We discussed the quality of the audit throughout the year
and consider the performance of our external auditors,
PricewaterhouseCoopers, annually, taking into account feedback
from a survey targeted at various stakeholders across the business
and the committee’s own assessment. The evaluation focuses
on: robustness of the audit process, quality of delivery, reporting
and people and services. The external auditors’ performance was
considered to be on par or improved on the prior year and the
relationship with management is viewed as robust, collaborative
and transparent. We concluded they were independent and
recommended they be re-appointed by the Board.
Independence and objectivity
BT’s agreed policies on what non‑audit services can be provided
by the external auditors and the relevant approval process were
updated during the year. The external auditors are not permitted
to perform any work which they may be later required to audit or
which might aect their objectivity and independence or create a
conict of interests. There are internal procedures in place for the
approval of work given to the external auditors.
We monitored compliance with the agreed policies and the
level of non-audit fees paid to the auditors in order to satisfy
ourselves that the types of services being provided and the fees
incurred were appropriate. You can see details of non‑audit
services carried out by the external auditors in note 7 to the
consolidated financial statements. In this context audit‑related
assurance services are considered to pose a low threat to auditor
independence and therefore the proportion of other non-audit
services to total services is considered the most suitable measure
of the non-audit services provided. These represented 26% of the
total fees (2014/15: 33%). In the past two years, the Reporting
Accountants work performed by the external auditors in relation
to the acquisition of EE and its subsidiaries has increased the non-
audit fees compared to prior years. Additionally in 2015/16, the
EE acquisition has resulted in incremental audit fees. Further details
of the non‑audit services that are prohibited and allowed under
the policy can be found in the corporate governance section of the
BT website.
The committee is satisfied that the overall levels of audit and
non-audit fees are not material relative to the income of the
external auditors as a whole and therefore that the objectivity
and independence of the external auditors was not compromised.