Experian 2016 Annual Report Download - page 82

External auditor
Tenure and tendering
PricewaterhouseCoopers LLP has been
the Company’s auditor since the Group
was demerged from the former GUS plc
in October 2006.
During the year, in line with UK
competition regulation and the
recommendations of the UK Corporate
Governance Code, the Audit Committee
undertook a tender for the external audit.
The Committee formed a working group
led by Deirdre Mahlan, as Chairman of
the Audit Committee, and comprising
other executive and non-executive Board
members, including Lloyd Pitchford
(Chief Financial Officer), as well as the
Group Financial Controller. The working
group was supported by members of
the finance, procurement and corporate
secretariat management teams. The
process involved a number of working
group meetings, sessions with relevant
Group personnel to allow the tendering
firms an opportunity to understand
the Group’s operations and corporate
functions, interviews with suggested
lead partners and presentations to
Board members.
The result was that the working group
made a recommendation to the Audit
Committee, which was approved by
the Board and is subject to approval by
shareholders at the Company’s 2016
Annual General Meeting, that KPMG be
appointed as the new external auditor.
The appointment of KPMG will take
effect for the financial year ending
31 March 2017, and the transition
process is being led by the Group’s
finance team and is well advanced.
There are currently no contractual
obligations restricting the Company’s
choice of external auditor (either
PricewaterhouseCoopers or KPMG),
and the Company confirms that it has
complied (on a voluntary basis as a
non-UK incorporated company) with the
provisions of the UK Competition and
Markets Authority Order (Mandatory Use
of Competitive Tender Processes and
Audit Committee responsibilities) for the
financial year under review.
Effectiveness, independence
and appointment
Notwithstanding the tender process
that was being run at the same time,
the Audit Committee reviewed the
effectiveness of the audit process during
the year. This process involves the
Audit Committee reviewing the annual
audit plan each September. Then, in
March and May, it receives detailed
updates on the audit’s progress, which
include details of the external auditor’s
actions, such as the audit procedures
undertaken, the audit’s coverage, the
locations visited and the status of any
significant findings. These updates
give the Committee an insight into the
audit process.
Finally, at the September meeting, the
Committee receives an evaluation report
on the external auditor. This year, tailored
questionnaires were issued to the non-
executive directors, executive directors
and senior finance leadership. These
included questions on the robustness of
the audit, quality of audit delivery and the
quality of people and service. The overall
results were favourable, particularly in
respect of the quality of the service, and
the Committee concluded, based on this
feedback and information it obtained
during the course of its other work, that
the external auditor had performed
effectively. As part of the evaluation, the
FRC’s Guidance on Audit Committees
was reviewed to ensure that the external
auditor was following best practice. The
Committee concluded that the Group
and the auditor had complied with
the guidance.
Independence is an important element
of the external audit. To ensure auditor
objectivity and independence, the
Committee reviews potential threats
to independence and the associated
safeguards. The safeguards that
PricewaterhouseCoopers had in place
during the year included ensuring
appropriate responsibility for the taking
of significant judgments and decisions,
ensuring that appropriate pre-approval
for non-audit services is in place and
consideration of the potential impact
of non-audit services on audit services.
Other areas in which potential threats
and safeguards were reviewed by the
Committee included: assessment of
potential issues in relation to personal
relationships; employment of external
audit staff by the Group; business
relationships; services provided by the
Group; ensuring no contingent fees; the
level of fees; rotation of the lead audit
engagement partner, and the use of
separate teams, where appropriate. The
Committee concluded that the external
auditor had maintained independence
throughout the year, and it is expected
that similar safeguards will be in place
with KPMG.
Non-audit services
PricewaterhouseCoopers has provided
a range of other services to Experian
where its depth of knowledge of the
Group supports the provision of the
services. It is anticipated that KPMG will
also provide such services, subject to
the Group’s policy in this area. To ensure
auditor objectivity and independence,
the Company has a policy in relation to
providing such services. The Committee
updated the policy during the year,
to take effect from 1 April 2016 (see
following page). It includes financial
limits above which any proposed non-
audit services must be pre-approved,
depending on the amount proposed to
be spent.
The Committee receives half-yearly
reports detailing non-audit assignments
carried out by the external auditor,
together with the related fees. Under
the new policy, non-audit fees paid to
KPMG will be capped at 50% of the fees
for audit services, except in exceptional
circumstances. Audit Committee or
Audit Committee Chairman pre-approval
will be required in that situation.
PricewaterhouseCoopers will operate
under the Group’s former policy until
conclusion of its term as external
auditor. An analysis of fees paid to the
external auditor for the year ended
31 March 2016 is set out in note 12 to
the Group financial statements.
Corporate governance report continued
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80 Governance •Corporate governance report