PricewaterhouseCoopers were appointed as auditors of the company on 8 February 1999, subsequently becoming PricewaterhouseCoopers LLP (PwC) in 2003.
The company has in place a formal policy on auditor independence and non-audit services, with which the external auditors are required to comply, to ensure that the independence of the auditors is not impaired by the nature of non-audit work. The policy stipulates work which is permitted or not permitted to be performed by the auditors, and provides for appropriate approval and oversight processes. As a further safeguard, PwC confirm in a formal report to the audit committee that processes to ensure compliance with this policy are in place and that these processes are monitored regularly. This report includes a statement that, in their opinion, PwC believe that the nature of their non-audit services has not impaired the audit of the company. Note 3 to the 2012 consolidated financial statements has a breakdown of non-audit services provided to the group by the auditors for the year under review.
In December 2010, the FRC issued revised Guidance on Audit Committees as part of the new UK Corporate Governance Code and, as a consequence, the audit committee reviewed and revised the group’s policy on auditor independence and non-audit services. A new policy was adopted with effect from 1 April 2011 which classifies all non-audit services into audit related services (being those services which are effectively required by law or regulation), and other non-audit services, and provides that engagements for other non-audit services are subject to formal pre-approval limits, either by the full audit committee or by the chairman of the audit committee, depending on the quantum, and that all requests for approval be accompanied by a detailed justification as to why the appointment of the external auditors to provide the services is in the best interests of the company, and how auditor independence is proposed to be safeguarded in connection with the provision of those services.
The audit committee has also implemented a formal system for the review of the effectiveness of the external auditors. This process involves the external auditors presenting to the committee their proposed audit strategy followed by the output of their initial discussions with management. The external auditors present the output of their detailed year-end work. In making its assessment of external auditor effectiveness, the committee reviews the audit engagement letters before signature by management, reviews the external auditors’ summary of group and subsidiary issues and management’s response to the summary, and conducts an overall review of the effectiveness of the external audit process and the external auditors. Following the review, the committee makes a recommendation to the board on the reappointment of the external auditors by the shareholders. The committee has not adopted a policy on tendering frequency since it prefers to conduct an annual assessment of the auditors’ effectiveness. There are no contractual obligations restricting the company’s choice of external auditor.