Barclays 2013 Annual Report Download - page 67

Internal control
The Committee is responsible for examining the effectiveness of the
Group’s internal controls. In 2013, the Committee’s main activities in
discharging that responsibility were as follows:
 Discussed, on a regular basis, any control issues of Group-level
significance and the progress of the remediation plans in place to
address them. A particular area of focus for the Committee in 2013
was the pace of delivery of remediation plans and how realistic and
achievable the timetables and milestones are given the number of
change programmes in place across the Group under the Transform
programme. The Committee was particularly concerned where
remediation plans are dependent on technology enhancements, as
the complexity of the IT infrastructure and demands on technology
resources can lead to delays in implementation. The Committee
emphasised to management the need for remediation programmes
to be adequately resourced, with consistent leadership, and to be
focused on implementing robust, automated solutions to strengthen
preventative controls, rather than just short-term manual tactical
fixes. The Committee has urged management to ensure that scarce
resources are prioritised appropriately and will be monitoring this
aspect closely going forward;
 Assessed reports on the control environment in Europe Retail and
Business Banking, UK Retail and Business Banking, Investment Bank,
Africa, Operations & Technology and Wealth, hearing directly from
the heads of those businesses and functions. The Committee’s aim
is to review each business area over an 18 month to 2 year cycle. In
addition to understanding management’s view of any control issues,
the Committee was keen to understand the pace and progress of
cultural change in each business and the tone being set from the top;
 Examined a report from the Chief Internal Auditor on the Internal
Audit function’s assessment of Barclays’ business continuity plans.
The Committee was satisfied with the progress made to achieve a
minimum capability and reviewed management’s plans to reduce
further the risk exposure. It encouraged management to ensure that
these plans were delivered in a timely fashion;
 Evaluated the progress being made on remediation activity relating
to LIBOR, which included an external review as required by the
Commodity Futures Trading Commission’s Order. The Committee
also examined the progress of work to improve the controls around
other benchmarks and market information provided to third parties,
including the introduction of independent reviews of submissions. 11
non-interest rate benchmarking processes were exited in 2013;
 Examined, on a regular basis, the progress being made to implement
specific action plans first introduced in 2011 to enhance the control
environment in Barclays’ US businesses. The Committee noted that
progress was being made but pressed management to ensure that
milestones are achieved and that the demand for IT and Finance
resource is appropriately met;
 Was updated on the number and nature of any whistleblowing
incidents. The intense focus on culture and values has generated an
increase in the number of whistleblowing reports, all of which were
investigated. The Committee noted that there was scope for
improving the whistleblowing process; and
 Continued to assess on a regular basis the progress being made to
address key regulatory compliance control issues, including client
assets, know your customer and customer due diligence, anti money
laundering, financial crime and fraud. The Committee’s focus was on
ensuring that the governance and controls are appropriate and
challenging the pace of the remediation programmes to ensure that
all key milestones are met.
Further details of the Group’s system of internal control and risk
management, including the main features of the internal control and
risk management systems in relation to the financial reporting process,
are included in the Directors’ Report on pages 80 and 81 and in the Risk
Management Report on pages 377 to 422.
Internal audit
The Committee is responsible for monitoring the performance and
effectiveness of the internal audit function. In 2013 the Committee
discharged that responsibility as follows:
 Approved the Internal Audit Charter, which is attached to the
Committee’s terms of reference;
 Discussed and approved changes to the Internal Audit methodology;
 Agreed the internal audit plan for 2013, including budget and
resources, and assessed the plan on a regular basis, including any
changes proposed to the scope of work and the level of resourcing
available, satisfying itself that these remained appropriate;
 Discussed regular reports from the Chief Internal Auditor, which set
out the Internal Audit function’s view of the control environment and
performance against any key indicators. In particular, where the Chief
Internal Auditor’s view of the control environment differed from
management’s self assessment, the Committee probed for more detail
in order to understand the underlying reasons for the difference and
whether management’s risk and control assessments were robust. In
future, in addition to an assessment of the control environment,
Internal Audit’s assessment of each business will also include an
assessment of management’s own identification of control issues;
 Tracked the progress of the Transform workstream on governance
and controls, which was led by the Chief Internal Auditor and which
aims to introduce a clearer risk management framework with greater
clarity of management responsibility;
 Debated the findings of an external evaluation of the performance of
the Internal Audit function, which confirmed that the Internal Audit
function is effective and respected by senior management. The Chief
Internal Auditor was not present for this discussion; and
 Held private sessions with the Chief Internal Auditor and the lead
audit partner and latterly solely with the Chief Internal Auditor, in the
absence of management, to enable the Chief Internal Auditor to raise
any issues directly.
Assessing external audit effectiveness, appointing the auditor and
safeguarding auditor objectivity and independence
The Committee is responsible for monitoring the performance,
objectivity and independence of the external auditor,
PricewaterhouseCoopers (PwC). In 2013 the Committee’s main
activities in discharging that responsibility were as follows:
 Agreed the audit plan with PwC, ensuring materiality and scope were
appropriate and agreeing the particular areas of audit focus. This
included ensuring that there were appropriate levels of synergy with
the Internal Audit plan;
 Discussed PwC’s approach to materiality following publication of the
FRC’s report in December 2013 on the guidelines used by the major
audit firms and, in particular, considered the criteria which had led
them to conclude on their overall materiality;
 Settled the terms of the engagement letter and approved, on behalf
of the Board, the fees payable for the audit;
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