SABMiller has a well-established policy on independence and audit effectiveness that sets out: the responsibilities of the audit committee in the selection of auditors to be proposed for appointment or reappointment and for agreement on the terms of their engagement, scope and remuneration; the auditor independence requirements and the policy on the provision of non-audit services; the rotation of audit partners and staff; and the conduct of the relationship between the auditors and the audit committee.
The auditors are precluded from engaging in non-audit services that would compromise their independence or violate any professional requirements or regulations affecting their appointment as auditors. The auditors may, however, provide non-audit services which do not interfere with their independence, and where their skills and experience make them a logical supplier, subject to pre-approval by the audit committee. The policy stipulates the types of work which are not permitted to be performed by the auditors and those which may be permitted in appropriate circumstances. The group’s procedures require that any non-audit services proposed to be provided by the auditors be supported by a justification as to why the appointment of the external auditors to provide the services is in the best interests of the group, and how auditor independence would be safeguarded in the specific context of the proposed services.
The external auditors, PricewaterhouseCoopers LLP, have confirmed to the audit committee their independence and compliance with the SABMiller policy on auditor independence. The external auditors are required to rotate the lead audit partner responsible for the audit engagement every five years, unless there are unusual extenuating circumstances when a further year may be considered. The lead audit engagement partner, Richard Hughes, has now completed three years.
The audit committee conducted its annual review of the performance of the external auditors and the effectiveness of the external audit process for the year ended 31 March 2014. The review was based on a survey of key stakeholders across the group, consideration of public regulatory reports on PricewaterhouseCoopers member firms, and the quality of the auditors’ reporting to and interaction with the audit committee. Based on this review, the audit committee was satisfied with the performance of the auditors and the effectiveness of the audit process.
PricewaterhouseCoopers, later becoming PricewaterhouseCoopers LLP in 2003, were appointed as the company’s external auditors in 1999 when the company moved its headquarters to London and listed on the London Stock Exchange. The audit committee has monitored recent regulatory developments in the UK and the European Union regarding the length of audit tenure, audit tendering and audit firm rotation and the provision of non-audit services by auditors. The European Union has now directed member states to adopt legislation within the next two years requiring that companies change their external auditors at least every 10 years, or every 20 years if an audit tender is held after 10 years, subject to transitional rules, and restricting further the non-audit services that may be provided. Specific UK regulations, including any additional requirements of the Competition and Markets Authority and transitional rules, are not yet finalised. In the light of this and the continued objectivity, independence and effectiveness of the PricewaterhouseCoopers LLP audit, the audit committee recommended to the board that a resolution for the reappointment of the external auditors for the financial year ending 31 March 2015 be proposed at the 2014 annual general meeting.
The audit committee will determine the timing of a future audit tender taking into account any final guidance on transitional arrangements and the practical considerations of managing the significant non-audit services currently provided to SABMiller by other audit firms as part of the cost and efficiency programme so that a tender process is not unduly restricted in choice or disruptive to the associated elements of the programme. SABMiller does not indemnify its external auditors and there are no contractual obligations restricting the choice of external auditors.