Barclays 2015 Annual Report Download - page 51

home.barclays/annualreport Barclays PLC Annual Report 2015 I 49
Area of focus Matter addressed Role of the Committee Conclusion/action taken
External audit The work and performance of
PwC, including the maintenance
of audit quality during the period
of transition to a new auditor.
 Convened a separate session with the key
members of the PwC audit team to
discuss the 2015 audit plan and agree
areas of focus.
 Assessed regular reports from PwC on
the progress of the 2015 audit and any
material issues identified.
 Debated the draft audit opinion ahead of
2015 year end.
The Committee was also briefed by PwC
on critical accounting estimates, where
significant judgement is needed.
The Committee approved the audit plan
and the main areas of focus, including
impairment, valuations, conduct redress
provisions, litigation and regulation and
IT systems and controls. The Committee
asked PwC to comment on the Group’s
reconciliations processes and how they
compared to other financial institutions.
Read more about the Committee’s
role in assessing the performance,
effectiveness and independence of
the external auditor and the quality
of the external audit below.
The external audit tender, which
was conducted during 2015, and
the arrangements for the
transition to a new auditor.
 Received regular updates from the Audit
Tender Oversight Sub-Committee on the
progress of the audit tender.
 Convened a special meeting to evaluate
final presentations from the three audit
firms who responded to the request for
proposal.
 Assessed and endorsed the proposed
process to ensure that KPMG was
independent by 1 July 2016.
The Committee decided to look further
at potential reputation risk before
making a recommendation to the
Board. Having done so, it concluded on
two firms for recommendation to the
Board for consideration, indicating its
preferred option of KPMG. In July 2015,
Barclays announced the appointment of
KPMG as its statutory auditor with
effect from the 2017 financial year.
Read more about the external audit
tender and the processes in place to
ensure KPMG’s independence below.
The Committee also covered the following matters:
 ensured it was updated on the implementation of IFRS 9, including
the work under way to develop the Group’s approach, project status,
resourcing and employee training. The Committee requested, and
received, a specific briefing session on IFRS 9, covering the key
assumptions and judgements that will be required
 debated the Group’s plan for recovery and resolution and the process
by which it was developed, including assessing the forward-looking
trigger indicators
 tracked progress of plans to ensure an attestation could be made to
the Group’s regulators with regard to financial crime controls
 assessed status reports on the Group’s controls around client assets
and encouraged management to ensure that complexity, and the
associated compliance costs, was taken into account when deciding
which products to be offered
 evaluated regular reports on regulatory issues
 approved revisions to its terms of reference and recommended them
to the Board for approval
 approved a revised Group Retail Impairment Policy.
Assessing external auditor effectiveness, auditor objectivity and
independence and non-audit services
The Committee is responsible for assessing the effectiveness, objectivity
and independence of the Group’s auditor, PwC. This responsibility was
discharged throughout the year at formal committee meetings, during
private meetings with PwC and via discussions with key executive
stakeholders. In addition to the matters noted above, during 2015, the
Committee:
 approved the terms of the audit engagement letter and associated
fees, on behalf of the Board, having scrutinised the results of Barclays’
formal evaluation of PwC. More information on the formal evaluation
is provided below
 appraised PwC’s approach to key accounting judgements and how they
were communicated and agreed with management and the Committee
 recognising that PwC, and its predecessor firms, has been Barclays’
external auditor since 1896 and that it had been more than 10 years
since the external audit was last tendered, conducted an external
audit tender, identified KPMG as the preferred candidate for
appointment as Barclays’ new auditor and made a recommendation to
the Board. Details of the audit tender process, which was overseen by
the Audit Tender Oversight Sub-Committee, can be found on page 51
 discussed and agreed revisions to the Group Policy on the Provision of
Services by the Group Statutory Auditor and regularly analysed
reports from management on the services that PwC provided to
Barclays. Following the appointment of KPMG as auditor from
1 January 2017, the Committee also commenced oversight of new
non-audit service engagements with KPMG in recognition of the
potential threats to independence. Read more about non-audit
services below
 instructed Barclays Internal Audit to undertake a review of a sample of
non-audit services provided by PwC to ensure that the final
deliverables aligned to the scope of work approved by the Committee.
No concerns were identified by this review
 evaluated and approved revisions to the Group Policy on Employment
of Employees from the Statutory Auditor and ensured compliance
with the policy by regularly assessing reports from management
detailing any appointments made
 analysed the results of the inspection of PwC by the Financial Reporting
Council’s Audit Quality Review Team and confirmed support for the
actions PwC proposed to take to address areas identified for improvement
 assessed the draft report to the PRA prepared by PwC regarding its
detailed audit work on specific topics, in particular, impairment.
PwC’s performance, independence and objectivity during 2015 were
formally assessed at the beginning of 2016. A questionnaire
incorporating best practice recommendations from a number of
professional and governance bodies, and taking account of key findings
from the 2014 review, was completed by key stakeholders across the
Group. The questionnaire was designed to evaluate PwC’s audit process
in its entirety and addressed matters including the quality of planning
and communication, technical knowledge, the level of scrutiny and
challenge applied and PwC’s understanding of the business. The
subsequent report provided empirical data on which the Committee
assessed PwC. It also reflected specific comments made by respondents,
giving the Committee a valuable insight into management’s views. The
Committee was particularly interested in assessing whether audit quality
was being maintained throughout the period of transition to a new
auditor. The results of the evaluation confirmed that both PwC and the
audit process were effective. Having considered the results of the
evaluation, the Committee recommended to the Board and to
shareholders that PwC should be reappointed as the Group’s auditors at
the AGM on 28 April 2016, noting that this would be PwC’s final year as
Group auditor.
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