Peachtree 2015 Annual Report Download - page 74

Internal Audit
The Commiee reviewed the scope and monitored the results of
Internal Audit’s activities including the quality and timeliness of
management responses. A high level Internal Audit plan is approved by
the Commiee at the beginning of the financial year, with subsequent
quarterly changes to the detailed plan requiring Commiee approval.
Progress against the plan is monitored throughout the year. Significant
issues identified within Internal Audit reports are considered in detail
by the Commiee along with the appropriateness of mitigation plans
to resolve those issues.
An Internal Audit charter is in place which outlines the vision, objectives,
authority, scope and responsibilities of Internal Audit. Performance
against this charter, and the effectiveness of Internal Audit, is reviewed
by the Commiee on an annual basis. In 2015 an external effectiveness
review was conducted by PwC which evaluated Internal Audit against
leading practices and performed an assessment against global Institute
of Internal Audit standards. This review was presented to the Commiee
and reported that Internal Audit provides a good service to Sage, the
team is well qualified to provide assurance over core controls which is
an important requirement for the business and that the fundamentals of
planning, delivery, reporting and performance management are in place.
Notwithstanding these conclusions, opportunities were identified to
enhance the scope and performance of work in line with its 2016
strategy, which was approved by the Commiee.
The Commiee considers and evaluates the level of Internal Audit
resource to ensure it is appropriate to provide the required level of
assurance over the principal risks, processes and controls throughout
the Group.
External auditor – Ernst & Young LLP (EY)
The Commiee reviews and makes recommendations with regard to the
appointment of the external auditors. In making this recommendation,
the Commiee considers auditor effectiveness and independence,
partner rotation and any other factors which may impact the Commiee’s
judgement regarding the external auditors’ reappointment. Following the
formal tender process conducted in 2014, this has been EY’s first year
as Sage’s external auditor and focus has been placed on assisting
them develop a good understanding of the business. The Commiee
monitored the conduct and effectiveness of external audit during the
year through a review of:
– Experience and expertise of the auditor
– The fulfilment of the agreed external audit plan and any variations
from this plan
– The robustness and perceptiveness of the external auditor
in their handling of key accounting and audit judgements
– Interaction between management and the auditor, including
ensuring thatmanagement dedicates sufficient timeto the
audit process
– Communication with, and support to, the Commiee
– Insights, added value and reports
– The content of external audit reports
– Independence, objectivity and scepticism
Private meetings were held with the external auditor at each Commiee
meeting to provide additional opportunity for open dialogue and
feedback from the Commiee and the auditor without management
being present. In addition to these private meetings the Chairman
meets on a regular basis with the external auditor to facilitate effective
and timely communication. Further, the Commiee received a formal
statement of independence from the auditor.
Following a review and having given consideration to the performance
and independence of the external auditor, the Commiee has
recommended to the Board that a resolution to reappoint EY
be proposed at the 2016 AGM and the Board has accepted and
endorsed this recommendation.
Non-audit services
The Commiee ensured compliance with Sage’s Auditor Independence
Policy, which was updated during 2015 to reflect the relevant EU
Regulation / Directives and FRC consultation paper on UK member
state adoption. The principal requirements of the Auditor Independence
Policy are that the external auditor may not undertake certain
prohibited services, which include but are not limited to:
– tax services
– bookkeeping and preparation of accounting records and
financial statements
– internal audit services
– payroll services
– legal and valuation advice
The Commiee must approve any individual non-audit services above
a specific fee value.
The ratio of audit fees to non-audit fees must be within Sage’s
pre-determined ratio, which is currently that non-audit fees
for the year must not exceed 70% of the average of the external
audit fees billed over the previous three years.
Discretion is used, subject to the controls set out above, in obtaining
non-audit services from the external auditor, although other
accountancy firms are also used when appropriate. In accordance
with the Auditor Independence Policy, a cumulative summary of
non-audit fees paid to the external auditor and Internal Audit third
party providers is presented to the Commiee on a quarterly basis.
The ratio of non-audit fees for the year to the average of the external
audit fees over the previous three years was <1%. A breakdown of total
audit and non-audit fees charged by the auditor for the year under
review is shown in note 3.2 to the financial statements.
Jonathan Howell
Chairman of the Audit and Risk Commiee
2 December 2015
Corporate governance report continued
Audit and Risk Commiee continued
The Sage Group plc | Annual Report & Accounts 2015
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