Barclays 2005 Annual Report Download - page 30

Barclays PLC
Annual Report 2005
28
Corporate governance
Corporate governance report
During the year we approved a new policy governing the
employment of former employees of the external auditor. Under
this policy, no former employee of the external auditor may be
appointed to a financial oversight role and certain other
appointments are required to go through an internal review
and approval process before proceeding.
For the year ended 31st December 2005, we have concluded that
the external auditor remains independent and is effective. We have
recommended to the Board that they propose the reappointment of
the external auditors to shareholders at the 2006 AGM.
Relationship with internal audit and monitoring control issues
We are tasked with monitoring the effectiveness of the internal
audit function. The Director of Internal Audit, who has a functional
reporting line to the Committee, provides regular reports to us and
attends each Committee meeting. The Director of Internal Audit
has unrestricted access to me, as Chairman of the Committee, and
I receive a monthly report from him, which includes key performance
indicators and a trend analysis of internal audit findings.
At each Committee meeting, we review the progress of the internal
audit plan and, each year, we consider and agree the internal audit
plan for the following year. We also regularly review the level of
resources allocated to the internal audit function to ensure that the
internal audit plan for the year can be delivered. The effectiveness of
the Internal Audit function is reviewed annually and we have
concluded that it continues to operate effectively.
We receive and review regular reports on control issues of Group level
significance, including details of any remediation action being taken.
We also receive in-depth reports from the Group’s main business
areas on their control environment.
Financial Reporting
We review the Group’s annual and interim financial statements,
including reviewing the effectiveness of the Group’s disclosure
controls and procedures and systems of internal control.
For the disclosures made in the 2005 Annual Report, we have
reviewed the report of the Disclosure Committee and the Turnbull
attestations made by all Business Heads, and have concluded
and reported to the Board for its approval that the Group has
maintained effective disclosure controls and procedures and that
management has continued to operate an effective system of
internal control.
Regulatory Compliance
We review arrangements established by management for
compliance with the requirements of the Group’s regulators.
We receive a semi-annual report on compliance.
Whistleblowing
We receive reports on the effectiveness of the Group’s
whistleblowing arrangements, as well as reports on specific
instances of whistleblowing.
Work of the Committee during 2005
In addition to the regular items discussed by the Committee,
which I have described above, we also received regular reports
on the progress of two major regulatory projects, namely the
implementation of International Financial Reporting Standards, in
respect of which we also received an in-depth briefing, and the
implementation of s404 of the US Sarbanes-Oxley Act of 2002.
Board Risk Committee
Chairman: Sir Richard Broadbent
Members: Dr Danie Cronjé, Sir Andrew Likierman, Stephen Russell
Secretary: Lawrence Dickinson, Company Secretary
The Committee met five times in 2005, under the Chairmanship of
Stephen Russell. Sir Richard Broadbent succeeded Stephen Russell as
Chairman of the Committee from 1st January 2006. Dr Danie Cronjé
was appointed to the Committee on 1st December 2005.
The purpose of the Committee is to approve the Group’s overall risk
appetite, setting limits for individual types of risk, including credit,
market and operational risk. The Committee also approves material
changes to the overall risk appetite and monitors the Group’s risk
profile, including risk trends and concentrations, loan impairment
experience against budget and key performance indicators for risk.
A key role of the Committee is also to obtain assurance that the
principal risks facing the Group have been properly identified and are
being appropriately managed. The Committee also monitors the risks
associated with the Group’s principal pension schemes.
In order to assess the effectiveness of the Group’s risk control framework,
the Committee regularly reviews the Group’s risk measurement
systems and receives reports from management confirming that they
have reviewed the Group’s risk control standards. The Committee is
also responsible for approving certain policy statements required by
the Financial Services Authority. An overview of the Group’s risk
management and control framework can be found on page 50.
Attendance at Board and Board Committee Meetings
All Directors are expected to attend each Board meeting and each
meeting of Committees of which they are members, unless there
are exceptional circumstances that prevent them from doing so.
The Chairman and executive Directors attend Committee meetings
as requested or as required by each Committee’s terms of reference.
The attendance of Directors at meetings of the Board and of Board
Committees of which they were members during 2005 is shown on
page 29. Where a Director was appointed to the Board or to a
Committee during the year, their attendance shown is only for those
We also spent time this year reviewing the control environment at
Absa Group Limited, in which Barclays has acquired a majority stake.
We considered and agreed on behalf of the Board the governance
arrangements for the Group’s interaction with Absa and will monitor
the effectiveness of this framework going forward. Our internal audit
function carried out a review of Barclays readiness to complete the
transaction, including governance and oversight of the acquisition, as
well as a review of the control environment at Absa after completion.
In my capacity as Chairman of the Committee, I attended a meeting
of the Absa Audit and Compliance Committee in October and the
Chairman of Absa’s Committee will attend this Committee’s meeting
in April 2006. Going forward, we will continue to receive reports on
the effectiveness of the Absa control environment.
Signed on behalf of the Board Audit Committee
Stephen Russell
Chairman, Board Audit Committee
9th March 2006