Setting new standards - Friends Life

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CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY REPORT DIRECTORS AND MANAGEMENT If the Committee considers it appropriate, the provision of audit services may be formally market-tested through a tender process involving those audit firms judged competent to meet the needs of the Group. The frequency of this market-testing will depend on the needs of the Group and prevailing leading practice. As reported in the Audit and Compliance Committee’s report to shareholders on page 57, a limited tender process was undertaken during the year in conjunction with F&C to agree the appointment of a single group external auditor. This process concluded with the appointment by F&C of KPMG Audit Plc as auditor to F&C in October 2006. Statement of compliance with provisions of the Combined Code The directors consider that the Company has throughout 2006 and to date applied the principles and met the requirements of the Combined Code. Statement of directors’ responsibilities in respect of the Annual Report and Accounts The directors are responsible for preparing the Directors’ Report and the group and parent company financial statements, in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law, the directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). The group financial statements are required by law and IFRS as adopted by the EU to present fairly the financial position and the performance of the Group; the Companies Act 1985 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. The parent company financial statements are required by law to give a true and fair view of the state of affairs of the parent company. In preparing each of the group and parent company financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • for the group financial statements, state whether they have been prepared in accordance with IFRS as adopted by the EU; • for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Future developments The Board believes that the controls in place during 2006 and to date have been appropriate to the needs of the Group. Nevertheless, it continues to be committed to the highest standards of governance and business conduct and will ensure that those controls continue to develop in line with the requirements of the business, the FSA and leading practice. On behalf of the Board Gordon Ellis Company Secretary 19 March 2007 56 Friends Provident Annual Report & Accounts 2006
DIRECTORS’ REPORT CORPORATE GOVERNANCE REPORTS The Audit and Compliance Committee Purpose and terms of reference The Committee provides the Board with independent assurance on the Group’s financial reporting process, internal controls and adherence to policies and procedures. The role, responsibilities and work of the Committee can best be understood by reference to its written terms of reference, which are published on the Company’s website and can be obtained on written request to the Company Secretary at the Company’s registered office. The Committee has again reviewed its terms of reference and its effectiveness, the latter by reference to a self-assessment questionnaire that focused on the behaviours of the Committee and its processes. The results were discussed in November 2006 when the Committee collectively concluded that it was operating effectively. Membership and attendance The members of the Committee are Christopher Jemmett (Chairman), Alison Carnwath, Ray King and Lord MacGregor and their record of attendance during 2006 is set out on page 50. The Board is satisfied that at least one member of the Committee has recent and relevant financial experience, a position that should continue throughout 2007. Committee meetings are normally attended, at the invitation of the Chairman, by the external auditor, the Group Finance Director, the Group Chief Executive and, periodically, the Group Head of Risk, the Director of Governance, the Director of Group Finance and the Head of Internal Audit. Activities and work of the Committee During 2006, the Committee met on five occasions, timed to coincide with the financial reporting and audit cycles of the Company. The Committee has throughout the year monitored the integrity of the financial statements through a review of the quarterly new business results and final and interim report and accounts. In addition, during 2006 the Committee in conjunction with the Audit and Compliance Committee of its Asset Management subsidiary, F&C has met twice to consider the benefits to the Group of the appointment of a single group auditor. A limited tender process was undertaken between the auditors of the Company and of F&C. Following completion of this process, the Audit and Compliance Committee of F&C made a recommendation to the board of F&C to appoint KPMG Audit Plc as auditor of F&C and this appointment took effect in October 2006. The Committee has undertaken a review and implemented changes to ensure that the reporting structures for internal controls and risk are appropriate for the needs of the Company and reflect the widening geographical scope of the Company’s activities and its more extensive range of products. As part of its normal responsibilities, the Committee has dealt with compliance with the relevant parts of the Combined Code, the effectiveness of internal controls and reporting procedures for risk management processes. In particular, the Committee has agreed the annual audit plan with the external auditor and has considered the auditor’s reports and has monitored and followed up management actions in response to the issues raised. The Committee also worked closely with Internal Audit and agreed the annual internal audit plan and reviewed the performance and resourcing of Internal Audit. The Committee also reviewed the Company’s policy on ‘whistleblowing’, the anti-money laundering procedures and the annual compliance plan for the Company’s UK Life and Pensions subsidiaries. The use of the auditors for non-audit work is approved by the Committee or its Chairman within his delegated authority. On an annual basis, the Committee reviews the effectiveness of the external auditor and has made a recommendation to the Board on the reappointment of the auditor. Within the schedule of meetings, the Committee fulfilled its main role and responsibilities and as a consequence can confirm that it has met the requirements of the Combined Code in so far as they relate to the work of audit committees during 2006 and up to the date of this report. For the Board Christopher Jemmett Chairman, Audit and Compliance Committee 19 March 2007 Friends Provident Annual Report & Accounts 2006 57
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Friends Provident plc Pixham End Do
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