Peachtree 2013 Annual Report Download - page 68

Internal audit
The Committee monitored and reviewed the scope and results of
internal audit’s activities as well as its effectiveness throughout the year.
The annual internal audit plan is approved by the Committee at the
beginning of the financial year, with any subsequent changes to the plan
requiring Committee approval. The nature and scope of internal audit’s
work is reviewed and approved and the results of audits are assessed
alongside management’s responses. Issues within audit reports which
are graded weak are considered in detail by the Committee along with
the appropriateness of mitigation plans to resolve issues identified.
At each meeting, the Committee received reports from the Group Risk
and Assurance Director, in her role as Head of Internal Audit, in order
to ascertain progress in completing the internal audit plan and to review
the results of audits.
An internal audit charter is in place which outlines the objectives,
authority, scope and responsibilities of internal audit. Performance
against this charter, along with the effectiveness of internal audit,
is reviewed by the Committee on an annual basis.
External audit effectiveness and independence
The Committee discussed and approved the scope of and the fees
for the external audit plan. In addition, the Committee considered
external audit’s assessment of the significant risks in the Group’s
financial statements, which for this year were goodwill and revenue
recognition. Throughout the year, the Committee tracked these risks
and associated work undertaken by external audit has been evaluated.
The Committee monitored the conduct and effectiveness of external
audit. To do this, the Committee reviewed:
– Experience and expertise of the auditors;
– The fulfilment of the agreed audit plan and any variations from
this plan;
– The robustness and perceptiveness of the external auditors
in their handling of key accounting and audit judgements; and
– The content of the external auditors’ report.
In order to ensure the independence of the external auditors, the
Committee received a formal statement of independence from the
external auditors. In addition, the Committee ensured compliance with
Sage’s Auditor Independence Policy, the requirements of which are:
– The external auditors may not undertake certain prohibited services,
which include acquisition due diligence, internal audit services and legal
and actuarial advice;
– The Committee must approve any individual non-audit services above
a specific fee value; and
– The ratio of audit fees to non-audit fees must be within Sage’s
pre-determined ratio.
The Committee believes that it receives particular benefit from certain
non-audit services provided by the external auditors due to their wide
and detailed knowledge of Sage. Discretion is therefore used, subject to
the controls set out above, in obtaining such services from the external
auditors, although other large accountancy practices are also used
as and when appropriate. During the year, non-audit services obtained
from the external auditors included tax compliance and advice and
support relating to corporate restructuring.
2013
£m
2012
£m
Total audit fees 2.0 2.0
Non-audit fees:
Tax compliance services 0.6 0.6
Tax advisory services 0.4 0.1
Other non-audit services 0.3 0.1
Total non-audit fees 1.3 0.8
Total fees 3.3 2.8
External audit appointment
The Committee reviews and makes recommendations with regard
to the reappointment of the external auditors. In making these
recommendations, the Committee considers auditor effectiveness
and independence, partner rotation and any other factors which may
impact the external auditor’s reappointment.
The external auditors are required to rotate the audit partner every
five years. The most recent change for Sage occurred in the year
to 30 September 2010 and, therefore, partner rotation is due in the
year ending 30 September 2015.
The current external auditors, PricewaterhouseCoopers LLP, were first
appointed in 1988 and the external audit has not been formally tendered
since then. A formal re-proposal of the audit approach did, however,
take place in 2010 at the time of the last partner rotation.
Having completed the activities outlined, the Committee remains
confident that the effectiveness and independence of the external
auditors is not impaired in any way. There are no contractual restrictions
on the choice of external auditor and therefore a resolution proposing
the reappointment of PricewaterhouseCoopers LLP as external auditors
will be put to the shareholders at the 2014 Annual General Meeting.
The Committee will continue to assess the effectiveness and
independence of the external auditors. In doing so, the Committee
will consider a formal tender process in accordance with the provisions
of the UK Corporate Governance Code 2012. We will comply with the
Competition Commission Order relating to the statutory audit market
for FTSE 350 companies, which is expected to come into effect from
1 October 2014. Under the transitional arrangements, the Committee
expects a formal tender process to be held no later than two years from
the end of the current audit engagement partner rotation period. As
partner rotation is due in the year ended 30 September 2015, a tender
process is expected to be held no later than 2017.
Nomination Committee
Donald Brydon, Chairman of the Board, is Chair of the Nomination
Committee. Other members of the Committee are independent Non-
executive Directors Ruth Markland, Jonathan Howell and Neil Berkett.
Committee objectives and responsibilities
The objective of the Committee is to review the composition of the
Board and to plan for its progressive refreshing, with regard to balance
and structure. The Committee also considers issues of succession.
The Committee is responsible for a number of matters relating to the
composition of the Board and its committees. In particular it is
responsible for:
– Reviewing the structure of the Board;
– Evaluating the balance of skills, knowledge, experience and diversity
of the Board;
– Advising the Board on any areas where further recruitment may be
appropriate; and
– Succession planning for key executives at Board level and below.
Corporate governance report continued
66 The Sage Group plc | Annual Report & Accounts 2013