bank-r-and-a

Recommendations

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Overview Strategic report Corporate governance Risk management Financial statements Other information Audit Committee report continued Principal responsibilities of the Audit Committee Key areas discussed and reviewed by the Committee in 2013 include Financial and Narrative reporting • Review the content of the Annual Report and Accounts and advise the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Bank’s performance, business model and strategy • Monitor the integrity of the financial statements of the Bank • Review and challenge where necessary: –– the consistency of, and any changes to, significant accounting policies both on a year on year basis and across the Bank; –– the methods used to account for significant or unusual transactions where different approaches are possible; –– whether the Bank has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor; and –– the clarity and completeness of disclosure in the Bank’s financial reports and the context in which statements are made. • Reviewing and reporting to the Board on significant financial reporting issues and judgements, including matters communicated to it by the auditor • Advised the Board that the Annual Report and Accounts, taken as a whole, are fair, balanced, and understandable • Going Concern basis of preparation of the accounts • Discussed all financial results in 2013 • Revisions to presentation of Annual Report and Accounts and Compliance with the UK Corporate Code • Impact of future financial reporting standards • The Committee considered work on Financial Policies and procedures in 2013 as part of the LME Prospectus • Annual Report sections on Corporate Governance • Key judgements in finalising the financial statements for the half year, audited accounts for the LME Prospectus and Annual Report and Accounts for the year to December 2013 • Key judgements discussed as part of the 2013 accounts process are detailed on pages 147 to 153 Internal controls and risk management systems • Review the adequacy and effectiveness of the Bank’s internal financial controls and internal control and risk management systems and statements in the Annual Report concerning internal controls and risk management • Changes to Audit Committee’s Terms of Reference • The Committee considered a report on the effectiveness of the Bank’s system of internal control. The review covered all material controls, including financial, operational and compliance controls and risk management systems • The Committee considered reports of fraudulent activity and other major breakdowns in controls The Co-operative Bank plc Annual report and accounts 2013 45
Overview Strategic report Corporate governance Risk management Financial statements Other information Audit Committee report continued Principal responsibilities of the Audit Committee Key areas discussed and reviewed by the Committee in 2013 include Internal Audit • Approve the appointment or termination of appointment of the Director of Internal Audit • Review and approve the charter of the internal audit function and ensure the function has the necessary resources and access to information to enable it to fulfil its mandate, and is equipped to perform in accordance with appropriate professional standards for internal auditors • Ensure the Director of Internal Audit has direct access to the Board Chairman and to the Committee Chair, and is accountable to the Committee • Review and assess the annual internal audit work plan and the reasons for any significant change or delay to this plan • Receive reports on the results of the internal auditor’s work • Review and monitor management’s responsiveness to the internal auditor’s findings and recommendations • Meet with the Director of Internal Audit at least once a year without the presence of management • Monitor and review the effectiveness of the Bank’s internal audit function, in the context of the Bank’s overall risk management system • External Quality Assessment (EQA) completed • Internal Audit transition to a new Target Operating Model based on the Chartered Institute of Internal Auditors (CIIA) guidance on Effective Internal Audit in Financial Services • Gap analysis against newly issued guidance from the CIIA • Quarterly review and challenge of the IA plan • Review of quarterly audit activity reports covering key thematic risks and high risk audits • The Committee receives all red rated internal audit reports and invites management to present findings and remedial action • Implementation status reports on audit recommendations External Audit • Consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re‐appointment and removal of the external auditor • Ensure that at least once every ten years the audit services contract is put out to tender and oversee the selection process • If an auditor resigns, investigate the issues leading to this and decide whether any action is required • Oversee the relationship with the external auditors and review the findings of the audit with the external auditor • Review any representation letter(s) requested by the external auditor before they are signed by management • Review the management letter and management’s response to the auditor’s major findings and recommendations • Develop and implement policy on the supply of non-audit services by the external auditor • External auditor effectiveness and independence • In line with good Corporate Governance considered the appointment of external auditors to the Bank with a view to putting the audit out to tender in 2014 • The Committee engages fully with the external auditors on all of the key judgements • Review of management representation letters to the external auditors • External auditor management letter containing observations arising from the annual and interim audits leading to recommendations for control or financial reporting improvement • Reviewed the external audit strategy including policy on non audit fees 46 The Co-operative Bank plc Annual report and accounts 2013
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