policy on auditor independence - Wolters Kluwer

Wolters Kluwer
POLICY ON AUDITOR INDEPENDENCE
0. INTRODUCTION
Wolters Kluwer nv has always maintained a <strong>policy</strong> of strict separation between the auditing and
non-audit-related functions of its audit firm. This <strong>policy</strong> has now been further formalized and
strengthened with self-imposed regulations.
Wolters Kluwer nv, including its majority owned subsidiaries (hereinafter: WK), has adopted a
<strong>policy</strong> of appointing, compensating and oversight of the audit firm performing services for
which independence is required i.e. audit services and audit related services as outlined below
(hereinafter: External Audit Firm). References to the External Audit Firm include all its
organizational departments, divisions, parents, subsidiaries and associated entities wherever
located.
1. APPOINTMENT OF EXTERNAL AUDIT FIRM
The External Audit Firm will be appointed for a maximum period of four years by the General
Meeting of Shareholders. The Audit Committee of the Supervisory Board of WK (hereinafter:
Audit Committee) may recommend and accordingly advise the Supervisory Board on the
appointment of the External Audit Firm at interim periods. Engagement letters between WK and
the External Audit Firm will contain an assignment for one year only, in order to keep the
flexibility to appoint an(other) External Audit Firm before the lapse of a four-year period.
On an annual basis, the Audit Committee will assess the following criteria with regard to the
External Audit Firm:
• Auditor Independence.
• Quality of the audit service.
• Audit budget.
The Chairman of the Audit Committee will advise the Supervisory Board on the outcome of this
assessment. Every four years, the Audit Committee will conduct a thorough assessment of the
functioning of the external auditor. The Supervisory Board will inform the Shareholders on the
outcome of this review at the next annual General Meeting and submit a proposal to the General
Meeting of Shareholders on the (re-) appointment of the external auditor.
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2. EXTERNAL AUDIT FIRM SERVICES
2.1 General Policy
The External Audit Firm must remain independent of WK both in fact as well as in appearance.
External Audit Firm Independence will be impaired where the External Audit Firm provides
services which:
• Create conflicting interests between the External Audit Firm and WK.
• Result in the External Audit Firm functioning in the role of management.
• Place the External Audit Firm in the position of auditing its own work.
• Place the External Audit Firm in the position of being an advocate for WK.
2.2 Permitted Services
Consistent with the General Policy, and subject to the pre-approval requirements of the Audit
Committee, the External Audit Firm of WK may provide the following services:
• Audit services
Audit services are services, which are a necessary part of the audit process, services that are
normally provided by the External Audit Firm in connection with statutory or regulatory filings
or engagements, and services that generally only the External Audit Firm in its role as external
auditor reasonably can provide.
Audit services include services that provide assurance on the fair presentation of financial
statements and encompass the following specific services:
a. Performing an audit of WK’s consolidated annual financial statements (incl. Statutory
audits).
b. Issuing an audit opinion on comfort letters, consents and assistance with and review of
filings for regulatory and supervisory purposes, including documents issued in connection
with securities offerings.
c. Reviewing WK’s interim financial statements.
d. Accounting consultations and tax services rendered in connection with the audit and review
of WK’s financial statements.
e. Attest services required by statute or regulation, including issuing attestations to
management’s report on WK’s internal controls for financial reporting.
f. Auditing electronic data processing, IT systems and IT security.
• Audit-related services
Audit-related services are assurance and related services that are reasonably related to the
performance of audit services and assurance services or other work traditionally provided to WK
by the External Audit Firm in its role as external auditor.
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Audit-related services include:
a. Accounting consultations and audits of businesses to be sold or acquired.
b. Employee benefits plan audits.
c. Opinion/audit services not required by statute or regulation.
d. Reviews of internal controls and advice on accounting and control policies and procedures.
e. Consultations concerning financial accounting and reporting standards not relating to the
audit of WK’s financial statements.
f. Sustainability reviews and audits.
• Permitted Non-audit services
The External Audit Firm is permitted to provide WK with any non-audit service that is not
otherwise prohibited (as outlined below).
Permitted Non-Audit services include:
a. Tax services such as tax compliance, tax planning and tax advisory services.
b. Advisory services.
Tax compliance generally involves preparation of original and amended tax returns, claims for
refund and tax payment-planning services. Tax planning and advisory include a diverse range of
services including assistance with tax audits and appeals, tax advisory related to mergers and
acquisitions, employee benefit plans and requests for rulings or technical advice from tax
authorities.
2.3 Prohibited Services
The External Audit Firm is prohibited from providing to WK the following categories of nonaudit
services at any point during the audit and professional engagement period:
a. Bookkeeping or other services related to the accounting records or financial statements of
WK.
b. Financial information systems design and implementation.
c. Appraisal or valuation services, fairness opinions, or contribution-in-kind reports.
d. Actuarial services.
e. Internal audit outsourcing services.
f. Management functions.
g. Executive recruiting and resource services.
h. Broker - dealer services.
i. Legal services.
j. Expert services unrelated to the audit.
k. Forensic audit services.
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l. Due diligence activities of businesses to be sold or acquired.
3. AUDIT COMMITTEE PRE-APPROVAL OF SERVICES
The Audit Committee is responsible for preparing policies and procedures related to the preapproval
of all audit, audit-related and permitted non-audit services provided by the External
Audit Firm to WK.
Engagements to render to WK any audit, audit-related or permitted non-audit services must be
entered into pursuant to the pre-approval policies and procedures prepared by the Audit
Committee or be specifically pre-approved by the Supervisory Board on an engagement by
engagement basis.
Pre-approval policies and procedures prepared by the Audit Committee must be detailed as to
the particular service and be designed to safeguard the continued independence of the External
Audit Firm. The Audit Committee must be informed of each service provided pursuant to the
pre-approval policies and procedures.
The Supervisory Board may delegate pre-approval authority to the Audit Committee or one or
more of its members. The member(s) to whom such authority is delegated must report, for
informational purposes only, any pre-approved decisions to the Audit Committee at the next
scheduled meeting.
4. RESTRICTIONS ON AUDIT PARTNER COMPENSATION
The independence of the External Audit Firm will be impaired if, at any point during the audit
and professional engagement period any audit partner earns or receives compensation based on
the audit partner procuring engagements with WK to provide any services other than audit,
review or attest services.
5. EXTERNAL AUDIT FIRM COMMUNICATION WITH THE AUDIT COMMITTEE
The External Audit Firm shall ensure that the Audit Committee is kept informed of material
matters relating to the WK audit, in particular the External Audit Firm must make timely reports
to the Audit Committee regarding:
1) All critical accounting policies and practices to be used.
2) All alternative treatments within Generally Accepted Accounting Principles for policies and
practices related to material items that have been discussed with management of WK,
including:
i. Ramifications of the use of such alternative disclosures and treatments.
ii. The treatment preferred by the External Audit Firm.
3) Other material written communications between the External Audit Firm and the
management of WK, such as any management letter or schedule of unadjusted differences.
6. ROTATION OF KEY AUDIT PARTNERS
WK requires the External Audit Firm to adhere to a rotation <strong>policy</strong> that is widely accepted and
provides an appropriate balance between continuity (effectiveness and efficiency, e.g. audit
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quality and audit costs), risk management, independence and credibility. This
implies a rotation of key audit partners in accordance with applicable domestic and international
rules.
7. HIRING ARRANGEMENTS
WK and the External Audit Firm agree on a restricted hiring <strong>policy</strong>:
• WK will not hire, in a financial reporting oversight role, a former member of the WK audit
engagement team until two years have elapsed from the time that the person was a member
of the WK audit engagement team. A financial reporting oversight role is a role in which a
person is in a position to or does exercise influence over the contents of the financial
statements or anyone who prepares them.
• The External Audit Firm will not hire senior management from WK for involvement in the
WK audit within two years after termination of their employment agreement with WK.
8. RESPONSIBILITY OF THE EXTERNAL AUDIT FIRM
The External Audit Firm will maintain a quality control system that provides reasonable
assurance that the independence of the firm, its partners, and employees will not be impaired.
The External Audit Firm will report annually to the Audit Committee on all aspects concerning
independence and confirm its independence in writing. Furthermore, the External Audit Firm
will annually report to the Audit Committee on the External Audit Firm’s system of audit quality
controls in general and on the audit quality control measures for the audit of WK in particular.
9. RESPONSIBILITY OF THE AUDIT COMMITTEE
Each year the Audit Committee will formally evaluate the independence of the External Audit
Firm, document its position on this matter, and address any changes to this Policy or situation as
needed. Furthermore, the Audit Committee of the Supervisory Board will evaluate the audit
quality control measures in respect of the external audit of WK, document its position and
address any changes if so deemed necessary. Finally, the Audit Committee will evaluate the
appropriateness of the annual audit budget in relation to perceived audit risk, market conditions
and the results of recent audits.
10. DISCLOSURE OF FEES
WK will disclose the audit and non-audit fees incurred for professional services provided by the
principal External Audit Firm for the last two fiscal years.
In this disclosure the total fee note of the principal External Audit Firm will be broken down into
the following categories:
1. Audit Fees.
2. Audit Related Fees.
3. Tax Fees.
4. All Other Non-Audit Fees.
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