QinetiQ Annual Report 2017

62 Corporate governance QinetiQ Group plc Annual Report and Accounts 2017
Code Principle C – Accountability continued
Report of the Audit Committee continued
The transition to a
new CFO and external
auditor was identified
as a key priority for
the Committee in
the coming year...
d) Audit Committee effectiveness review:
The Committee’s September meeting considered
the processes to be followed for the various
governance reviews. With regard to the Audit Committee
effectiveness review, as reported on page 50, the most
recent external effectiveness evaluation of the Board
and its Committees took place during 2016 and it
was agreed therefore that for 2017, the evaluation
of the effectiveness of the Committee would be taken
alongside the Board effectiveness review and carried
out by way of an externally provided questionnairebased
process.
The following actions had been noted from the 2016
effectiveness review:
––
A review of risk management and reporting
processes, led by the Chairs of the Audit Committee
and the Risk & CSR Committee;
––
An update on the processes for the risk management
and controls of the US business; and
––
To continue with Committee training to keep
appraised of legislative evolution and best practice.
These items were covered during the year under review.
Details of the risk review can be found in the Report of
the Risk & CSR Committee on page 66. The processes
for risk management and control of the US business
were covered in reports from the internal audit function,
and the Committee received updates from the external
auditor in respect of financial matters.
As detailed on page 51, the 2017 Board and Committee
effectiveness reviews were carried out by way of
an externally-provided questionnaire. The Audit
Committee questionnaire covered time management
and composition, Committee processes and support,
the work of the Committee and priorities for change.
The outcome of the review was considered at the
Committee’s March meeting. The effectiveness of the
Committee continued to be rated highly. It was agreed
that the Committee should continue with its process
and discussion of items, with importance placed on
focus and discipline. The transition to a new CFO and
external auditor was identified as a key priority for the
Committee in the coming year, along with obtaining
more insight into any issues created by the ongoing
transformation programme, improving the insight
provided and ensuring that the reporting focuses
the Committee on the key issues.
e) External Audit
Review of the effectiveness of the external audit process
The Committee’s September meeting considered
the approach for monitoring the effectiveness and
independence of the external audit process in the light
of the requirements of the Code and Financial Reporting
Council guidance. In terms of timing, in previous years,
the external audit had still been under way when the
effectiveness questionnaire had been issued, with
the results of the review being considered at the
Committee’s May meeting. As this timetable gave little
opportunity for the external auditor to respond or correct
any issues within the audit cycle, the Committee
decided to change the timetable and to undertake the
review around June time, by way of a questionnairebased
process, and to report the findings at the
September Audit Committee meeting. This would
provide an opportunity for any improvements to be put
in place in time for the year-end audit. For the purpose
of the 2017 year-end, an update was provided at the
Committee’s May meeting on the actions arising
from the 2016 effectiveness review.
The 2016 review had been undertaken by way
of questionnaire and had included the views of
management and employees who were involved in
supporting the external audit work, feedback from
the CFO and Group Financial Controller and an open
Committee discussion without the external auditor
being present.
At the May 2017 meeting, a report was received detailing
the improvement actions implemented during the 2017
financial year external audit process which had arisen
from the detailed 2016 review questionnaire referred
to above, as well as the output from an effectiveness
review meeting held between KPMG, Group Finance
and Group Internal Audit earlier in the 2017 financial year.
Review by the FRC’s Audit Quality Review Team
During the year, the audit of the financial statements
of the Group for the year ended 31 March 2016 was
subject to a review by the Financial Reporting Council’s
(‘FRC’) Audit Quality Review Team (‘AQRT’). The
Committee did not consider any of the review findings
to have a significant impact on KPMG’s audit approach.