ANNUAL REPORT AND ACCOUNTS 2012 - RSA, Annual Report ...

CORPORATE GOVERNANCE
delegated to a Disclosure Committee. The Disclosure Committee
comprises members of senior management from Finance, Legal, Investor
Relations, Company Secretarial and Risk and is chaired by the Group
General Counsel and Group Company Secretary.
The GAC is satisfied that, during 2012, it has received sufficient,
reliable and timely information from management to enable it to
fulfil its responsibilities.
Evaluation
The evaluation of the GAC, which was conducted by way of a
structured questionnaire, included consideration of the composition
of the Committee, the number and length of meetings held, the time
management of the Committee, the information received by the
Committee and its timeliness and the effectiveness of the Committee’s
reviews of specific areas. The evaluation further considered the
effectiveness of the Group Internal Audit function, the relationship
with the external auditor and with the Board Risk Committee (BRC).
Priorities for focus were identified as refining the relationship between
the GAC and the BRC and a review of the training programme for 2013.
Whistle blowing
The Company’s policy on whistle blowing provides a mechanism for
employees to raise serious concerns in good faith, where they either do
not feel comfortable raising the matter with local management or are
not satisfied with the local management response. The GAC annually
reviews the policy and is satisfied that it meets the criteria set out in
the Code, and is well communicated with good processes in place.
Regulatory compliance
The Board is responsible to the Financial Services Authority (FSA)
for ensuring compliance with the Group’s UK insurance regulatory
obligations. The Board attaches great importance to its regulatory
responsibilities and is committed to dealing with the regulator in an
open, cooperative and transparent manner.
During 2012 the GAC, on behalf of the Board, followed with interest, the
progress of the Financial Services Bill through Parliament. Meetings were
held with representatives of both the Prudential and Conduct Business
Units established by the FSA in anticipation of their legal separation into
two regulatory authorities in April 2013. The GAC also paid close
attention to developing EU regulation, in particular Solvency II.
The FSA conducted private meetings with several members of the
Board and executive management as a part of their ‘close and
continuous’ programme.
In addition, the Group includes a number of regulated entities which
rely on various licences to carry out their business. Accordingly,
maintaining effective relationships with the Group’s regulators across
the world is integral to the success of the Group’s strategy and its
long-term value.
External auditor
Deloitte LLP was appointed as the Group’s external auditor in 2007.
The GAC evaluates the tenure of Deloitte LLP annually and is not
restricted by any contractual obligations in its choice of auditor. The
audit engagement partner responsible for the 2012 audit was assigned
in 2012.
The GAC has developed and embedded a policy and procedures to
govern the provision of audit and non-audit services provided by the
auditor and its associates. A description of the policy and procedures is
available on the Company’s website at www.rsagroup.com. During the
year Deloitte LLP was engaged as an adviser on a number of occasions.
In order to maintain their independence, such appointments are only
made in accordance with the policy. This provides that the external
auditor should not carry out work where the output or
recommendations are then subject to review and reliance upon by the
firm as external auditor. Work may be given to the external auditor
where it is closely allied with the audit function or it is advantageous
to the Group to use its external auditor in view of its knowledge
and experience of the Group. This could include accounting advice,
regulatory returns, tax advice or due diligence work. All non-audit work
over £100,000 must be approved in advance by the Group CFO and
all non-audit work over £250,000 must be approved in advance by
the GAC Chairman on recommendation from the Group CFO. With
reference to the procedures, the GAC is satisfied that there are no
matters that would compromise the independence of the external
auditor or affect the performance of its statutory duties. Details of fees
paid to Deloitte LLP during 2012 for audit and non-audit work are
disclosed in the auditor remuneration table in note 4. There is no
limitation of liability in the terms of appointment of Deloitte LLP
as auditor to the Company.
During the year, the GAC performed a review of the effectiveness,
objectivity and independence of the external auditor. The review
included an assessment of the audit firm, the audit partner and audit
teams, and was conducted by means of a questionnaire, completed by
members of senior management and members of the Group’s finance
team and the GAC. The questionnaire sought opinions on the
importance of certain criteria and the performance of the external
auditor against those criteria. The GAC has concluded that during the
year Deloitte LLP provided a service that was robust and fit for purpose.
However, following the impending appointment of Deloitte LLP to
undertake additional consultancy work in Scandinavia, the Board and
Deloitte LLP felt it appropriate that they resign as the Company’s
external auditor. Rigorous safeguards have been put in place to ensure
the continued independence of Deloitte LLP for the 2012 audit process.
A tender process for the external audit contract has recently concluded
and the GAC has recommended to the Board that a resolution be put
to the 2013 AGM for the appointment of KPMG LLP as external auditor.
The Board has accepted this recommendation.
So far as each Director of the Board is aware, there is no relevant
audit information (as defined in section 418(3) of the Companies Act
2006) of which the Company’s external auditor is unaware, and each
Director has taken all steps necessary as a Director in order to make
himself/herself aware of, and to establish that the external auditor is
aware of, any relevant audit information.
Annual Report and Accounts 2012 | RSA | 53