HSBC 2015 Annual Report Download - page 266

Report of the Directors: Corporate Governance (continued)
Board committees
HSBC HOLDINGS PLC
264
Internal Audit
The GAC approved Internal Audit’s annual plan, resource
and budget, and considered the performance of the Group
Head of Internal Audit. As this role reports to the Chairman
of GAC, frequent meetings were held during the year. The
GAC regularly met with the Group Head of Internal Audit
without the presence of management.
The GAC annually assesses the performance and
effectiveness of the Global Internal Audit function. The
GAC’s effectiveness review encompassed the scope of the
function’s work and the adequacy of the skills of its team.
The GAC considered that the Global Internal Audit function
remained effective. The Global Internal Audit Charter is
available on the HSBC website at www.hsbc.com/investor-
relations/governance/internal-control.
During the year, work was undertaken to streamline Global
Internal Audit reporting across committees and to ensure
key thematic issues were appropriately highlighted.
These items included, for example, entity level controls
remediation, financial crime compliance project execution
and systems and data security. Enhancement was also
made to the management information in relation to audit
conclusions and the tracking-to-resolution of outstanding
audit recommendations. This enhancement better aligned
audit recommendations to the individual accountabilities of
senior managers.
Additional resources were granted to internal audit during
the year to increase assurance to all the Board committees
on the execution of critical projects.
External audit
Following a competitive tender process undertaken in
2013, PricewaterhouseCoopers LLP (‘PwC’) was formally
appointed as the Group’s external auditors at the 2015
AGM. The GAC met privately with the external auditor
whilst the GAC Chairman maintained regular contact with
the audit partner throughout the year.
The GAC reviewed PwC’s audit approach and strategy for
2015.
The fees paid to PwC for the year ended 31 December 2015
amounted to $98.4m of which $35m was payable in respect
of non-audit services. Non-audit services accounted for
35.6% of the total fees payable. All non-audit services
provided by PwC during 2015 were pre-approved by the
GAC in accordance with the audit independence policy. The
policy provides a framework for confirming that services do
not create a mutual or conflicting interest and to not place
PwC in the position of auditing their own work.
A further breakdown of the fees paid to the auditors for
each of the last three financial years can be found in Note 7
on the Financial Statements.
The GAC considered PwC to be independent and PwC,
in accordance with professional ethical standards, has
provided the GAC with written confirmation of its
independence for the duration of the financial year
ended 31 December 2015.
The GAC has therefore recommended to the Board that
PwC be re-appointed as the auditors. Resolutions concerning
the re-appointment of PwC and their audit fee for 2016 will
be proposed to shareholders at the 2016 AGM.
Whistleblowing
The GAC and the Conduct & Values Committee are
responsible for reviewing the Group’s whistleblowing
procedures. The GAC received regular updates on concerns
raised under these procedures which related to accounting,
internal accounting controls or auditing matters, as well as
management actions taken in response.
Ongoing development
Throughout the year, the GAC received presentations
on a range of topics including IFRSs financial accounting
developments, new reporting requirements and briefings
on developments in the regulatory environment.
Committee effectiveness
The effectiveness of the GAC was evaluated as part of
the overall performance evaluation of the Board.
Governance structure for the oversight of financial reporting
Authority Membership Responsibilities include:
Board Executive and non-executive Directors • Financial reporting
• Appointing senior financial officers
Disclosure Committee The Group’s Finance Director, Chief Risk
Officer, Chief Legal Officer, Chief Accounting
Officer, Company Secretary, Chief Operating
Officer, Head of Investor Relations, Head of
Communications and Head of Strategy and
Planning
• Reviewing the Group’s material communications with
investors
• Assisting the Group Chief Executive and Group Finance
Director to discharge their obligations relating to financial
reporting under the Securities Exchange Act of 1934
• Monitoring and reviewing the effectiveness of controls and
procedures established to ensure that information is disclosed
appropriately and on a timely basis
• Reporting findings and making recommendations to the Group
Chief Executive, Group Finance Director and the GAC
Major operating
subsidiaries audit
committees (or
equivalent)
Independent non-executive directors and/or
HSBC Group employees with no line of
functional responsibility for the activities of
relevant subsidiary or global business, as
appropriate
• Providing twice yearly assurance to the GAC on financial
statements and internal controls over financial reporting of
relevant subsidiaries or businesses, as requested
• Regular reporting to the GAC in connection with any material
issues regarding controls over financial reporting