Directors' Report: Governance - British American Tobacco

The Audit Committee has an established policy aimed at safeguarding
and supporting the external auditors’ independence and objectivity.
Pursuant to this policy, it keeps under review the ratio of audit fees to
non-audit fees charged by the external auditors to ensure that neither
their independence nor their objectivity is put at risk. A breakdown of
non-audit fees charged by the external auditors is disclosed in note
3(d) in the Notes on the accounts. The Committee also takes steps
to ensure that the external auditors do not audit their own work.
The Audit Committee has completed its assessment of the external
auditors for the financial period under review. It remains confident
that the objectivity and independence of the external auditors are not
in any way impaired by reason of the non-audit services which they
provide to the Group. Moreover, the Committee is satisfied that their
selection for such work is based upon an assessment of their abilities,
taking into account their existing knowledge of the Group, with the
majority of such work being awarded through a competitive tendering
process. Having satisfied itself as to their qualification, expertise,
resources and independence and the effectiveness of the audit process,
it has recommended to the Board, for approval by shareholders, the
reappointment of PricewaterhouseCoopers LLP as the Company’s
external auditors and approved their fees and terms of engagement.
Resolutions will be proposed at the Annual General Meeting on
28 April 2010 to reappoint PricewaterhouseCoopers LLP as the
Company’s auditors and to authorise the Directors to agree their
remuneration for the 2010 audit.
Political contributions
The Audit Committee is responsible for reviewing donations made
for political purposes throughout the Group. No donation was made
in 2009 to any political party registered in the UK under the Political
Parties, Elections and Referendums Act 2000. The aggregate figure for
contributions made to non-EU political parties in 2009 was £76,969
(2008: £69,041). In 2009, this figure comprised solely of contributions
made by the Group’s subsidiary in Australia.
Standards of Business Conduct
The Audit Committee is responsible for monitoring compliance with
the Company’s Standards of Business Conduct, which underpin the
Company’s commitment to good corporate behaviour. The Standards
of Business Conduct have been in place for many years, and require all
staff to act with high standards of business integrity, to comply with all
applicable laws and regulations and to ensure that business standards
are never compromised for the sake of results. They were expanded
and updated with effect from 1 January 2008 and continue to be kept
under review in order to ensure that they remain at the forefront of
best business practice. Every Group company and every employee
worldwide is expected to live up to them and guidance on them is
communicated regularly throughout the Group, including through
training and awareness programmes. The Standards of Business Conduct
are available from the Company Secretary and on www.bat.com.
CORPORATE GOVERNANCE
STATEMENT CONTINUED
Confidential reporting procedures
The Standards of Business Conduct also set out the Group’s
whistleblowing policy, which enables staff, in confidence, to raise
concerns about possible improprieties in financial and other matters
and to do so without fear of reprisal, provided that such concerns are
not raised in bad faith. The policy is supplemented by local procedures
throughout the Group and at the Group’s London headquarters, which
provide staff with additional guidance and enable them to report matters
in a language with which they are comfortable. The Audit Committee
receives regular reports on whistleblowing incidents. It remains satisfied
that the policy and the procedures in place incorporate arrangements
for the proportionate and independent investigation of matters raised
and for the appropriate follow-up action.
Internal control
The Board is responsible for the overall system of internal control
for the Company and its subsidiaries, and for reviewing the system’s
effectiveness. With the support of the Audit Committee, it carries
out such a review annually, covering all material controls including
financial, operational and compliance controls and risk management
systems, and reports to shareholders that it has done so.
Overview
The Company maintains a sound system of internal control with a view
to safeguarding shareholders’ investment and the Company’s assets.
It is designed to identify, evaluate and manage risks that may impede
the achievement of the Company’s business objectives rather than to
eliminate these risks and can therefore provide only reasonable, not
absolute, assurance against material misstatement or loss. A description
of the key risk factors that may affect the Group’s business is provided
in the section on Performance and strategy.
The main features of the risk management processes and system
of internal control operated within the Group are described below.
They do not cover the Group’s associate undertakings. They have
been in place throughout the year under review and up to date.
Audit and CSR committee framework
The Group’s audit and CSR committee framework underpins the
Board’s Audit and CSR Committees. It provides a flexible channel
for the structured flow of information throughout the organisation,
with committees at various levels covering key individual markets,
areas and the Group’s regions, each referring matters to the next
level as appropriate. This framework ensures that significant financial,
social, environmental and reputational risks faced by the Company
and its subsidiaries are appropriately managed, and that any failings
or weaknesses are identified so that remedial action may be taken
where necessary.
The Group’s regional audit and CSR committees (which are each
chaired by an Executive Director) focus on risks and the control
environment within each region and are in turn supported by area
72 British American Tobacco Annual Report 2009 Directors’ report: Governance