Barclays 2015 Annual Report Download - page 52

50 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Governance: Directors’ report
What we did in 2015
Board Audit Committee report
Non-audit services
In order to safeguard the auditor’s independence and objectivity,
Barclays has in place a policy setting out the circumstances in which the
auditor may be engaged to provide services other than those covered by
the Group audit. The Group Policy on the Provision of Services by the
Group Statutory Auditor (the Policy) applies to all Barclays’ subsidiaries
and other material entities over which Barclays has significant influence.
The core principle of the Policy is that non-audit services (other than
those legally required to be carried out by the Group’s auditor) should
only be performed by the auditor in certain, controlled circumstances.
The Policy sets out those types of services that are strictly prohibited
and those that are allowable in principle. Any service types that do not
fall within either list are considered by the Committee Chairman on a
case by case basis, supported by a risk assessment provided by
management.
The Committee has pre-approved all allowable services up to £100,000,
or £25,000 for tax advisory services, however, all proposed work,
regardless of the fees, must be sponsored by a senior executive and
recorded on a centralised online system, with a detailed explanation of
the clear commercial benefit arising from engaging the auditor over
other potential service providers. The audit firm engagement partner
must also confirm that the engagement has been approved in
accordance with the auditor’s own internal ethical standards and does
not pose any threat to the auditor’s independence or objectivity.
All requests to engage the auditor are assessed by independent
management before work can commence. Requests for allowable
service types in respect of which the fees are expected to meet or
exceed the above thresholds must be approved by the Chairman of the
Committee before work is permitted to begin. Services where the fees
are expected to be £250,000 or higher must be approved by the
Committee as a whole. All expenses and disbursements must be included
in the fees calculation.
During 2015, all engagements where expected fees met or exceeded the
above thresholds were evaluated by either the Committee Chairman or
the Committee as a whole who, before confirming any approval, assured
themselves that there was justifiable reason for engaging the auditor
and that its independence and objectivity would not be threatened. Two
requests were declined in 2015 (2014: two). On a quarterly basis, the
Committee scrutinised details of individually approved and pre-approved
services undertaken by the auditor in order to satisfy itself that they
posed no risk to the auditor’s independence, either in isolation or on an
aggregated basis. A breakdown of the fees paid to the auditor for
non-audit work can be found in Note 42 on page 338, with non-audit
fees representing 23.5% (2014: 25.7%) of the audit fee. Significant
categories of engagement undertaken in 2015 included:
 attest and assurance services required by regulators in connection
with reviews of internal controls including reviews of the suitability of
design and operating effectiveness of controls related to custody of
securities and funds within Barclays Wealth Americas
 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
 transaction support on secured funding transactions, including the
provision of audits required by the Bank of England and the issue of
comfort letters
 provision of advice and market insight in respect of regulatory
requirements relating to remuneration structure, incentive funding
and risk adjustment and remuneration reporting.
Independence of KPMG
Following the appointment of KPMG as Barclays’ auditor with effect from
1 January 2017, the Committee was concerned to ensure that KPMG
obtained independence from Barclays during 2016, enabling it to
familiarise itself with Barclays and receive a structured, formal handover
from PwC. In order to ensure KPMG’s independence, and to allow the
Committee to assess whether any non-audit work being conducted by
KPMG in the meantime is appropriate, both in terms of type and scale,
Barclays is in the process of exiting any current relationships or
assignments that may prevent KPMG obtaining independent status and
has implemented procedures to manage the types of relationships and
assignments that KPMG provides going forward. In particular, KPMG is
not permitted to provide any service that may continue beyond
mid-2016 if it has potential to cause independence issues. Since October
2015, the Committee has required all new engagements to be
considered in light of the Policy and is maintaining oversight of them on
the same basis as for the current auditor. The Committee has reserved
the right to decline any proposed engagement with KPMG.
The fees paid to KPMG for non-audit work during 2015 were £38m.
Significant categories of engagement undertaken in 2015 included:
 international tax compliance services for expatriate employees of
Barclays, including expatriate tax returns, tax counselling, tax
equalisation, international social security and other employment tax
issues
 independent approved person review (s.166) of interest rate swaps to
small businesses, covering the sale of interest rate hedging products
to retail customers
 the building of an internal lean self-sufficiency capability to support
end-to-end value stream improvements of core business processes
within Group Operations and Technology
 assistance in the establishment and running of the programme
management office associated with the African brand migration
project
 support in the implementation of the Group conduct risk programme
 support with the development of the anti-money laundering
programme and the provision of related advice
 support for Barclaycard in the assessment and restructuring of its
pricing model
 review and remediation of know your customer documentation
requirements for Barclays politically exposed persons and special
focus clients in the US, UK, Switzerland, Monaco, India, Singapore and
Hong Kong
 support for the development and embedding of the Basel II-compliant
models in Spain.
The Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order 2014
Barclays intends to comply with the requirements of The Statutory Audit
Services for Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee Responsibilities)
Order 2014, which relates to the frequency and governance of tenders
for the appointment of the external auditor and the setting of a policy on
the provision of non-audit services.
Board Audit Committee allocation of time (%)
2015 2014
61
2
3
4
5
1Control Issues 18 24
2Business control environment 16 10
3Financial results 27 42
4Internal audit matters 78
5External audit matters (including external
audit tender)
26 11
6Other (including governance and compliance) 65