7817 Annual Report 2009.qxd - Shire

Shire plc Annual Report and Accounts 200947services. If the proposed services to be provided by the external auditors fall within a category of pre-approved services and additionally the feefor those services is below pre-approved annual and transactional limits, such services may be provided by the external auditors without specific,individual approval of these services by the ACR Committee, provided that management does not need to exercise any discretion in determiningwhether a proposed service falls within one of the pre-approved categories. In all cases, the ACR Committee is notified of any pre-approved servicethat is provided by the external auditors.Any non-prohibited service proposed to be provided by the external auditors which is either not a pre-approved service, or is a pre-approved servicefor which fees are above the annual or transactional limits, must be approved in advance by the ACR Chairman, who will consider whether theindependence, skills and experience of the external auditors make it a suitable supplier of the proposed service.ACR Committee activitiesThe ACR Committee met on five occasions in 2009. The members of the ACR Committee attended all meetings they were eligible to attend. At theinvitation of the Chairman of the ACR Committee, the Chief Financial Officer, the Group Financial Controller, the Chief Executive Officer, the ChiefCompliance and Risk Officer, the Vice President of Internal Audit, the Group’s external auditors and the Chairman of the Board attended meetings.The ACR Committee held a number of separate private meetings with each of the Group’s external auditors, the Vice President of Internal Audit andthe Chief Compliance and Risk Officer during the course of the year without any executive member of the Board or other member of managementpresent. The purpose of these meetings was to facilitate open discussions between the ACR Committee members and, separately, the Vice Presidentof Internal Audit, the Chief Compliance and Risk Officer and the Group’s external auditors.During 2009, the business reviewed by the ACR Committee included the following:1 Financial statements— the financial disclosures contained in the Group’s full year and quarterly results announcements;— various accounting matters, including but not limited to: the application of the Group’s critical accounting policies and accounting standards in thecontext of the financial statement disclosures; the accounting for sales rebates for ADDERALL XR following the launch of authorised genericversions; accounting for the amendment to the in-licensing agreement and launch sales of INTUNIV; accounting for the termination of the Women’sHealth contract with Duramed Pharmaceuticals Inc.; accounting for leases at the new Lexington campus; the accounting implications of thetransition of manufacturing from Owings Mills; the accounting for various acquisitions, in-licences and disposals during the year; accounting for theco-promotion agreement with GSK; and the accounting for various tax matters including Massachusetts state tax law changes;— review of questions raised by the SEC concerning Shire’s 2008 Form 10-K filing, and 2009 Form 10-Q filings and approval of Shire’s responses.The SEC was satisfied with Shire’s responses; and— quarterly reports from the external auditors were received by the ACR Committee and discussed. The reports addressed the following key areas:— external auditors responsibility and independence;— significant accounting estimates and judgements made by management;— significant accounting policies and one-off transactions.2 Internal financial control and risk management systems— consideration of the key risks faced by the Group and review of the Group’s plan to mitigate such risks;— review of the Group’s annual internal audit plan, compliance with Section 404 of the Sarbanes-Oxley Act 2002 and the effectiveness of the Group’ssystem of internal controls over financial reporting;— review of the policy for treasury management and of any proposed changes to that policy which are being recommended to the Board;— quarterly reports on treasury investments, foreign exchange hedging;— annual review of the Group’s tax strategy and assessment of fiscal risk;— quarterly reports on the results of the Group’s internal audit program;— semi-annual review of the Group’s corporate risk schedule;— review of the insurance renewal program for 2009/10; and— monitoring of the Group’s whistle-blowing policy.3 External auditorsDuring 2009 the ACR Committee reviewed the performance of the external auditors following the completion of the 2008 audit process, which resultedin the ACR Committee resolving to recommend that the Group submit a resolution to the 2009 Annual General Meeting to re-appoint Deloitte LLPas the Group’s external auditors. At its February 2010 meeting, the ACR Committee conducted a formal review of the performance of the externalauditors and the effectiveness of the audit process in connection with the 2009 financial year audit.Throughout the year, the ACR Committee has kept the objectivity and independence of the external auditors under review and has obtained reportsfrom the Group’s external auditors describing all relationships between the external auditors and the Group. The ACR Committee has remainedsatisfied that neither the level of non-audit services nor the nature of the work performed by the external auditors has in any way impaired theirobjectivity and independence. Details of the fees paid to the external auditors are disclosed in Note 35 to the consolidated financial statements.The external auditors are required to rotate the audit partners responsible for the engagement every five years. There are no contractual obligationsthat restrict Shire’s choice of external auditors.David KapplerChairman of the Audit, Compliance & Risk Committee