Directors' Report: Governance - British American Tobacco

www.bat.com/annualreport2009
Key activities of the Audit Committee in 2009
The Audit Committee met five times during 2009, including
immediately before the Company’s full year results were
published. In addition to its standing items of business and
periodic reports from the Head of Audit and Business Risk, the
Head of Group Security and the Group’s regional audit and CSR
committees and corporate audit committee, the specific items
considered by the Audit Committee during 2009 included:
■ a twice yearly review of the Group risk register and
consideration of specific key risks;
■ a review of information technology security procedures
and controls;
■ governance and risk management in relation to major
projects and programmes;
■ compliance with the Group’s Standards of Business Conduct
and records management procedures;
■ a review of the treatment of adjusting items in financial
reporting;
■ a review of the internal audit planning framework and
consideration of the annual internal audit works plan;
■ the form and content of the Company’s Interim Management
Statements, following the Board’s decision in 2009 to cease
quarterly reporting; and
■ the annual review of the independence of the Company’s
external auditors and consideration of the forthcoming
replacement of the lead external audit partner by rotation
(see below).
The Audit Committee reviewed its effectiveness in 2009 as part of
the Board evaluation process. The Committee concluded that it is
operating effectively and, in particular, that it had benefited from
the changes introduced late in 2008 which reduced the size of the
Committee. In addition, the revised process for assessing Group risks
has allowed for specific risks to be considered in much greater detail
than previously. The Committee also recommended to the Board that
the broad issue of the Group’s attitude to risk be considered separately
by the Board at least once a year.
Financial reporting
The Board is satisfied that it has met its obligation to present a
balanced and understandable assessment of the Company’s position
and prospects in the Directors’ report and financial statements
and in periodic reports, reports to regulators and price-sensitive
Directors’ report: Governance
British American Tobacco Annual Report 2009
announcements. A summary of the Directors’ responsibilities for the
financial statements and their statement concerning relevant audit
information is included at the end of this Governance section.
Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position are set out
in the Performance and strategy section and the Regional review.
The financial position of the Group, its cash flows, liquidity position,
facilities and borrowing position are described in the Financial review.
The key Group risk factors include an analysis of financial risk and the
Group’s approach to financial risk management and notes 21 and 24
in the Notes on the accounts provide further detail on the Group’s
borrowings and management of financial risks.
The Group has at the date of the report, sufficient existing financing
available for its estimated requirements for at least the next 12 months.
This, together with its proven ability to generate cash from trading
activities, the performance of the Group’s Global Drive Brands, its
leading market positions in a number of countries and its broad
geographical spread, as well as numerous contracts with established
customers and suppliers across different geographic areas and industries,
provides the Directors with the confidence that the Group is well placed
to manage its business risks successfully in the context of current
financial conditions and the general outlook in the global economy.
After reviewing the Group’s annual budget, plans and financing
arrangements, the Directors consider that the Group has adequate
resources to continue operating for the foreseeable future. The financial
statements have therefore been prepared on a going concern basis.
External auditors
The Audit Committee assesses annually the qualification, expertise
and resources, and independence of the external auditors and the
effectiveness of the audit process. The Committee’s assessment is
informed by an external audit satisfaction survey completed by
members of senior management, which it reviews in detail.
PricewaterhouseCoopers LLP have been the Company’s auditors since
it listed on the London Stock Exchange in September 1998. The Audit
Committee considers that the relationship with the auditors is working
well and remains satisfied with their effectiveness. Accordingly, it has
not considered it necessary to require the firm to tender for the audit
work. There are no contractual obligations restricting the Company’s
choice of external auditor. The external auditors are required to rotate
the audit partners responsible for the Group and subsidiary audits
every five years and the current lead audit partner has been in place
for five years. The Audit Committee, having considered the position,
has determined that he will be replaced by rotation after completion
of the 2009 Annual Report.
71
From the Chairman
Performance
and strategy Regional review Financial review Governance
Group financial
statements
Parent Company
financial statements
Shareholder
information