Barclays 2014 Annual Report Download - page 49

barclays.com/annualreport Barclays PLC Annual Report 2014 I 47
During 2014, the Chairman of the Committee or the Committee as a
whole, as appropriate, scrutinised all requests referred for approval to
engage PwC for non-audit services, particularly those that concerned
taxation-related services. Two requests for approval were declined
(2013: two). A breakdown of the fees paid to the external auditor for
non-audit work during 2014 may be found in Note 42 on page 338,
with non-audit fees representing 25.7% (2013: 28.5%) of the audit fee.
Significant categories of engagement undertaken in 2014 included:
Q Attest and assurance services required by regulators in connection
with reviews of internal controls including an audit of benchmark
interest rate submissions;
Q Tax compliance services in respect of assignments initiated
pre-January 2011 in connection with Barclays international and
expatriate employees, involving co-ordination and filing of
statutory tax returns, social security applications and additional
compliance filings;
Q Transaction support on secured funding transactions, including the
provision of audits required by the Bank of England and the issue of
comfort letters; and
Q Other services covering the (i) provision of remuneration-related
regulatory advice and support to the Board Remuneration
Committee and Reward teams; and (ii) provision of a feasibility
study and assistance in the design of a prototype for a mobile
technology-based product offering.
The Committee assessed each request to ensure the objectivity and
independence of the external auditor would not be impaired by
providing the services. Each assessment of the request to engage the
external auditor was supported by the information required by the
policy to be provided, as described above. Where appropriate, the
requests also included a risk assessment addressing the degree to
which Barclays anticipated relying on the auditor, details of any
investigation of any possible conflicts of interests and how these had
been addressed and an explanation of why the work required could not
be undertaken by management.
External audit tender
In its 2013 report, the Committee stated it was awaiting the final rules
from the European Union and the Competition Commission (now the
Competition and Markets Authority) before confirming the timetable
for the external audit tender. Since then, new rules published by the
European Union have been reflected in the final order published by the
Competition and Markets Authority, which came into force on
1 January 2015. It is now clear that FTSE 350 companies such as
Barclays must retender the external audit at least every 10 years and
that the audit firm must be rotated at least every 20 years. As PwC, and
its predecessor firms, has been Barclays’ external auditor since 1896,
and it is more than 10 years since the external audit was last tendered,
following further discussion with investors the Committee agreed that
a tender will be conducted in 2015 with a view to rotating the external
audit firm for the 2017 audit onwards. PwC will consequently not be
asked to tender.
The Committee will direct the tender process and, following
engagement with key shareholders, it has agreed a governance
framework, the main features of which are:
Q Given his former, recent position at KPMG and the fact that KPMG
has indicated its intention to tender, Mike Ashley will take no part in
the audit tender process other than providing comments on the
initial design of the tender process;
Q An Audit Tender Oversight Sub-committee has been established,
comprising Tim Breedon (Chairman), Crawford Gillies and Colin
Beggs (the Chairman of the audit committee of Barclays Africa
Group Limited), to:
– Agree the objectives and desired outcomes for the audit tender
process;
– Approve the design of the process;
– Construct and agree a shortlist of firms to be asked to participate;
and
– Oversee the implementation of the process.
Q The Board Audit Committee as a whole (other than Mike Ashley),
with Colin Beggs as a co-opted member, will participate in the
implementation phase, assess the prospective candidates and
recommend to the Board two potential candidates and the preferred
firm to be appointed.
The expected timeline for the external tender process during 2015 is:
January-March Design and issue of the tender document to audit firms
April-June Interviews with shortlisted candidates and agreement
on choice to be presented to the Board and the
preferred firm
July New external auditor to be agreed, to be appointed
with effect from the audit of the 2017 financial year
onwards
This timeline allows for a transition period to deal with any non-audit
services provided to Barclays by the incoming auditor and any other
potential independence conflicts.
A copy of the audit tender document will be made available at
barclays.com/corporategovernance
Board Audit Committee Allocation of Time (%)
61
2
3
4
5
2014 2013
1Control Issues 24 16
2Financial Results 42 40
3Internal Audit matters 88
4External Audit matters 11 11
5Business Control Environment 10 16
6Other (including Governance and Compliance) 58
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