Barclays 2013 Annual Report Download - page 68

Corporate governance report
Board Audit Committee continued
External audit tender
The Committee is very mindful of investor sentiment regarding
external audit firm tendering and rotation and of course the
changes to the Code in 2012 recommending that the external audit
is tendered at least every ten years. In addition, 2014 is likely to see
new regulation in this area both from the UK Competition
Commission (implementing its decision to mandate tendering at
least every ten years) and the European Union (requiring audit firm
rotation at least every 20 years). The Committee has therefore spent
time in 2013 and the early part of 2014 discussing a potential tender
for the external audit. The lead audit partner was not present during
the Committee’s discussion of the options for a tender of the
external audit.
PwC, and its predecessor firms, has been Barclays’ auditor since
1896, and it is more than ten years since the external audit was last
tendered. The lead audit partner rotates every five years and
Andrew Ratcliffe, the current lead audit partner, has been in post
since 2010 and will rotate at the conclusion of the audit for 2014.
Transitional guidance issued by the FRC, if applied to Barclays,
would suggest a tender for the 2015 audit. The Competition
Commission’s transitional guidance is not yet available, but is likely
to mandate a tender slightly later than this. In addition the European
Union’s proposed transitional rules would require Barclays to
replace PwC within 6 years of the Regulation coming into force.
The Committee has also had regard to the complexity and scale of
the Barclays external audit and is particularly conscious of the
degree of change impacting the business, including the Finance
function, as a result of the Transform programme and the additional
strain that both an audit tender and a change of audit firm would
involve. In addition, the Committee noted that both the Group
Finance Director and the Committee Chairman are new in role, the
latter having previously been a senior partner in one of the audit
firms likely to tender.
Weighing up all these factors, and with the Committee Chairman
having recently spoken to a number of key investors, the Committee
has recommended to the Board that, depending on the final rules
from the Competition Commission and the European Union, a
tender of the external audit should start in 2015 or 2016 with
respect to the 2017 or 2018 audit and that PwC should not be
invited to tender.
 Held private sessions with the lead audit partner and the Chief
Internal Auditor and latterly solely with the lead audit partner, in
order to discuss any matters directly with the lead audit partner in
the absence of management;
 Considered the Audit Quality Inspection Report on PwC for
2012/2013, issued by the FRC in May 2013 in order to be satisfied
that the general quality of the audit work conducted by PwC is of a
high standard and that any prior year findings have been acted upon;
 Questioned PwC on the actions it has continued to take to address
matters raised in recent regulatory reviews. The Committee was
reassured that appropriate steps have been taken; and
 Considered a report from PwC on the arrangements it has in place to
maintain its independence and objectivity.
The Committee also re-evaluated the performance and effectiveness of
the auditor and the external audit process. A survey of key
management across the Group was conducted following the
conclusion of the 2012 year-end audit. A further survey was carried out
in late 2013/early 2014 and will be supplemented by a further test of
stakeholder opinion (including non-executive Directors) following the
conclusion of the 2013 year-end audit. These surveys are designed to
establish internal perceptions of PwC’s objectivity and independence;
PwC’s knowledge of the business, its risks and culture; the
effectiveness of working relationships, particularly with Internal Audit;
the level of insight and value added; and the levels of challenge and
professional scepticism demonstrated. The results were presented to
the Committee and debated without the lead audit partner present.
From this and the Committee’s direct experience from its interactions
with PwC, the Committee concluded that it continued to be satisfied
with the performance of PwC and that PwC continues to display the
necessary attributes of objectivity and independence. The results of the
survey, which included feedback on individual members of the audit
team, were subsequently shared with the lead audit partner so that any
areas for improvement could be followed up.
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66 Barclays PLC Annual Report 2013