Barclays 2006 Annual Report Download - page 126

We also continued to monitor the independence of the external
auditors. We have in place a policy on the provision of non-audit
services by the external auditors and we received regular reports
throughout the year on the nature and amount of the non-audit
services provided. Under the policy, we have agreed which services
the external auditors are allowed to carry out on behalf of the Group
and which ones they are prohibited from doing. Prohibited services
include bookkeeping or other services related to the Group’s
accounting records or financial statements, financial information
systems design and implementation, internal audit outsourcing,
management functions or other secondments, human resource
functions, legal and expert services and tax services that involve
advocacy. Any allowable non-audit services require the pre-approval
of the Committee or a member of the Committee before they can be
carried out. For these allowable services, the Committee has pre-
approved all assignments where the expected fee does not exceed
£100,000, or £10,000 in the case of certain taxation services,
although such assignments must be reported to the next meeting of
the Committee. Any assignment where the expected fee is above the
relevant threshold requires specific approval from the Committee.
Where any service requires approval from the Committee,
management must give details of the other potential providers that
were considered. A breakdown of the fees paid to the external
auditors during the year is set out on page 171.
For the year ended 31st December 2006, we concluded that the
external auditors remain independent and are effective. We have
therefore recommended to the Board that it proposes the
reappointment of the external auditors to shareholders at the
2007 AGM.
Relationship with internal audit and monitoring control issues
As part of our task of monitoring the effectiveness of the internal
audit function, the Director of Internal Audit, who has a functional
reporting line to the Committee, attended six Committee meetings in
2006. I received a monthly report from the Director of Internal Audit,
which covered key performance indicators and a trend analysis of
internal audit findings. At four Committee meetings in 2006, we
reviewed the progress of the internal audit plan and in December we
held a separate meeting to consider and agree the internal audit plan
for 2007.
Throughout the year, we regularly reviewed the level of resources
allocated to the internal audit function to ensure that the internal
audit plan could be delivered as part of our overall monitoring of the
effectiveness of the internal audit function.
During the year, we reviewed regular reports on control issues of
Group level significance, including details of any remediation action
being taken. We also received a number of in-depth reports from
some of the Group’s main business areas and functions on their
control environment, with presentations from Absa, UK Retail
Banking, Barclaycard, Barclays Wealth and the Chief Information
Office. Our aim is to review in detail the control environment at each
of the Group’s main businesses and operations over a rolling two-year
period. In addition, in 2006 we undertook a wider overall review of the
Group’s Control Environment, including consideration of key trends
over the past three years.
Financial Reporting
We reviewed the Group’s annual and interim financial statements
and trading updates, including reviewing the effectiveness of the
Group’s disclosure controls and procedures and systems of internal
control as appropriate.
Board Risk Committee
Number of
meetings Number of
eligible to meetings
attend attended
Member in 2006 in 2006
Sir Richard Broadbent (Chairman) 4 4
Dr Danie Cronjé 4 4
Sir Andrew Likierman 4 4
Stephen Russell 4 4
The Committee met four times in 2006 and the table sets out
Committee members’ attendance.
The role of the Committee is to review and to recommend to the Board
the Group’s overall risk appetite, setting limits for individual types of risk,
including credit and market risk. The Committee also considers material
changes to 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. The Committee also
seeks assurance that the principal risks facing the Group have been
properly identified and are being appropriately managed. 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
We also monitored throughout the year the Group’s preparations for
reporting under s404 of the US Sarbanes-Oxley Act of 2002, under
which the external auditors need to attest to the effectiveness of
the Group’s systems of internal controls over financial reporting.
We received a progress report at each of our meetings on the status
of the Group’s preparations for s404.
For the disclosures made in the 2006 Annual Report, we 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 and Whistleblowing Procedures
We reviewed the arrangements established by management for
compliance with the requirements of the Group’s regulators,
receiving a semi-annual report on compliance issues. In particular
this year we have spent time reviewing the Group’s controls over
fraud and financial crime and are responsible for reviewing the
fraud risk control framework annually. We also reviewed the
Group’s sanctions compliance arrangements during the year.
We received regular reports on the effectiveness of the Group’s
whistleblowing arrangements, as well as reports on any specific
instances of whistleblowing. We are responsible for reviewing the
Group’s whistleblowing process annually.
Committee Effectiveness
In late 2006, we carried out a review of our effectiveness as part of
the overall Board Effectiveness Review. The review concluded that
the Committee continues to operate effectively.
Signed on behalf of the Board Audit Committee
Stephen Russell
Chairman, Board Audit Committee
8th March 2007
Corporate governance
Corporate governance report
Barclays PLC
Annual Report 2006
122