Barclays 2012 Annual Report Download - page 56

the remediation work that is under way to address them. We also
received an update on cyber-security threats and the defences
Barclays has in place against cyber attacks;
 The control environment in the Investment Bank was regularly
reviewed, including reviewing the specific action plans that are
in place to enhance the control environment and in particular,
to enhance the Compliance function. We will continue to review
this important workstream in 2013;
 We received regular updates on compliance matters. These
included updates on the actions being taken to comply with the
Deferred Prosecution Agreement (DPA) entered into as part of the
settlement with US authorities following an investigation into
Barclays compliance with US sanctions and US Dollar payment
practices: all of the actions required by the DPA were completed in
2012. Further details of Barclays compliance with the DPA may be
found in the Risk management – Supervision & Regulation section
of the Annual Report;
 We also received a number of updates on Anti-Bribery and
Corruption, Anti-Money Laundering and Client Assets compliance;
 We were updated on the arrangements Barclays has in place for
employees to raise concerns and received reports on any incidents
reported and investigated. There was a small increase in the
number of reports and concerns raised by employees following
the LIBOR announcement, although no new material issues were
raised. We continue to regard employee reports as a valuable
source of information that helps identify fraud, inappropriate
behaviour and control weaknesses; and
 We received an update on the likely direction to be taken by the
Conduct Business Unit of the FSA in respect of the governance of
conduct risk and will be considering this further in 2013.
Further details of the Group’s system of internal control and risk
management, including the main features of our internal control
and risk management systems in relation to the financial reporting
process, are included in the Directors’ Report on pages 64-66 and
in the Risk management section on pages 313-343.
Oversight of Internal Audit and External Audit
Internal Audit
To fulfil our responsibility to monitor the effectiveness of the internal
audit function, we received regular reports from the Chief Internal
Auditor, setting out the Internal Audit function’s view of the control
environment and performance against any key indicators. We also
regularly reviewed the Internal Audit Plan, any changes proposed and
the level of resourcing available to the Internal Audit function.
A new Chief Internal Auditor was appointed in early 2012 and during
the year provided the Committee with his views on the resourcing and
effectiveness of the Internal Audit function. 2012 has seen a change in
methodology in order to improve the effectiveness of internal audit by
focusing audit resources on high-risk auditable entities. In particular,
the audit coverage of the Investment Bank has been increased. Given
the change in audit methodology, we reviewed and approved the
annual Internal Audit plan for 2013 in early 2013.
The Chief Internal Auditor updated the Committee on the work that
Internal Audit will carry out as a result of the LIBOR settlement, in
order to meet the requirements of the Commodity Futures Trading
Commission (CFTC) Order. Regular audits of the LIBOR-setting
process will be carried out on a six-monthly basis and a third party
audit will also be conducted. We received the first of these reports
in late 2012.
Internal Audit’s self-assessment of conformance, which we reviewed
in the fourth quarter of 2012, evidenced that the function generally
conforms to the standards set by the Institute of Internal Auditors.
During 2013, an external assessment of the performance of the Internal
Audit function will be conducted and the results will be reported to
the Committee.
External Audit
It is our responsibility to monitor the performance, objectivity and
independence of the external auditor. Each year, we agree the audit
plan with the auditor to ensure that the coverage is focused and that
there is appropriate overlap with the work of Internal Audit. We also
agree the terms of the engagement letter and approve, on behalf of the
Board, the fees payable for the audit.
To discharge our responsibility to assess the performance and
effectiveness of the auditor, we carried out a survey in the fourth
quarter of 2012, seeking views from key stakeholders across the Group.
The survey gathered views on the performance and effectiveness of
PricewaterhouseCoopers (PwC). The results were reported to the
Committee in early 2013 to help inform the Committee’s deliberations
on the auditor’s performance and whether the auditor should be
recommended for re-appointment. A more detailed follow-up survey
will be conducted at the end of the first quarter of 2013 following
completion of the year-end audit.
PwC and its predecessor firms has been Barclays auditor for many
years, since 1896, although the lead audit partner now rotates every
five years. Based on the 2012 survey results and the Committee’s own
interactions with PwC, the Committee concluded that it continues
to be fully satisfied with the performance of PwC and that PwC
continues to be objective and independent. The auditor’s objectivity
and independence is supported by Barclays policy on non-audit
services provided by the auditor, which is described on page 55.
PwC also provides specific assurance to the Committee on the
arrangements it has in place to maintain its independence and
objectivity. The Committee has therefore recommended to the Board
and to shareholders that PwC should be re appointed as the Group’s
auditors at the AGM on 25 April 2013. The Committee recognises
however that the length of tenure of auditors is under increasing
scrutiny and is therefore considering, in light of the new requirement
in the Code that the external audit contract is put out to tender at
least every ten years, how and when a tender process might be
implemented, particularly given the transitional provisions suggested
by the Financial Reporting Council (FRC). A recommended course of
action will be proposed to the Board during 2013.
Corporate governance report
Accountability continued
Board Audit Committee Chairman’s Report continued
barclays.com/annualreport54 I Barclays PLC Annual Report 2012