Annual Report 2010 in PDF - BBA Aviation

Guidance on Audit Committees. The Audit Committee has conf rmed
that during the year it had formal and transparent arrangements for
considering fnancial reporting and internal control principles and
maintaining an appropriate relationship with the Company’s auditors.
One of the safeguards to ensure auditor objectivity and
independence is the Group’s policy on the provision of non-audit
services by its external auditors. The Committee is aware that the
Accounting Practices Board has issued further guidance in this area to
take efect from 30 April 2011 and the Company’s policy will be
reviewed again in the light of the new guidance. At present the policy
prohibits the Group’s external auditors from carrying out certain
additional services for the Group including book-keeping, internal
audit, valuations, actuarial services and fnancial systems design and
implementation. Services which the external auditors may be
permitted to carry out under the current policy include assurance
services such as reporting accountant work and tax services. The
Committee is satisfed that the majority of the tax services supplied by
Deloitte LLP are compliance-related and represent a small proportion
of Group tax fees.
The Company’s policy is not to use the external auditors for
acquisition and due diligence work. However, where the Group
considers it appropriate or where conficts arise, suppliers other than
the preferred supplier may be asked to tender. This would only include
the external auditors in unusual and exceptional circumstances.
Non-audit fees paid or due to the external auditors are regularly
reviewed by the Committee and those paid in 2010 are set out in
note 2 to the Consolidated Financial Statements.
If fees for non-audit projects within the scope of permitted
services are expected to exceed £250,000 in a particular year, then the
Committee Chairman is required to pre-approve each project. In any
event, specifc project approval is required by the Committee
Chairman for any such project where estimated fees exceed £100,000.
Deloitte LLP have confrmed that all non-audit services they
performed during the year were permitted by APB Ethical Standards
and do not impair their independence or objectivity. On the basis of
their own review of the services performed, the requirement of preapproval
and the auditors’ confrmation, the Committee is satisfed
that the non-audit services currently provided by Deloitte LLP do not
impair their independence and objectivity.
b. Systems of Internal Control
Overall responsibility for the Group’s system of internal control and for
reviewing its efectiveness rests with the directors. Management is
accountable to the directors for monitoring this system and for
providing assurance to the directors that it has done so. The system of
internal control is essentially an ongoing process embedded in the
Group’s businesses for identifying, evaluating and managing the
signifcant risks faced by the Group, including social, environmental
and ethical risks. The Group considers that it has adequate information
to identify and assess signifcant risks and opportunities af ecting its
long and short-term value.
This process has been in place for the year ended 31 December
2010 and up to 1 March 2011 and the directors can therefore conf rm
that they have reviewed the efectiveness in accordance with the
internal control requirements of the Code throughout that period.
The Group’s internal system of control is reviewed annually by
the directors and accords with the guidance issued by the Financial
Reporting Council in October 2005: “Internal Control: Revised
Guidance for Directors on the Code”. The system is designed to
manage rather than eliminate the risk of failure to achieve business
objectives. It can provide reasonable but not absolute assurance
against material misstatement or loss, to the extent that is appropriate,
taking account of costs and benefts.
The main features of the Group’s internal control and risk
management systems are listed below.
1. The risks identifed through a detailed written self-assessment
process carried out by division and by function are recorded on a
risk register together with the mitigations in place. This covers a
range of diferent types of risks, such as:
– business;
– f nancial;
– compliance;
– operational; and
– other categories of risks including health,
safety and environmental risks.
In addition the risks identifed are plotted on risk maps and both
the self-assessments and the risk maps are reviewed by the internal
audit department and by senior management at quarterly
operating review meetings held with each business. The outcome
from these reviews is then discussed twice each year at meetings of
the Executive Management Committee, with the results being
presented to the Audit Committee, which in turn reviews the
efectiveness of the Group’s system of internal control on behalf of
the Board. The Audit Committee receives a report at least twice a
year from the Group Finance Director detailing the risks and the
work undertaken in managing the risks faced by the Group. Based
on this information the Board reviews the risks and conf rms they
are satisfed that the risks are appropriately mitigated. If this is not
the case they request that management take further action.
The process to identify risks and their mitigation has been
supplemented by externally facilitated risk workshops carried out within
a number of operating units and with the Executive Management
Committee and other members of senior management.
2. An organisational structure is in place at both head of ce and
divisional level which clearly defnes responsibilities for operational,
accounting, taxation, treasury, legal, company secretarial and
insurance functions.
3. An internal audit function undertakes a programme of risk-based
reviews of controls and business processes. The role of internal
audit is defned in a Group Internal Audit Charter and this includes
its terms of reference, the standards which it adheres to, the scope
and coverage of its work and its reporting processes. The Audit
Committee receives a report from internal audit at each meeting
which includes opinions on the adequacy and ef ectiveness
of controls by site, a summary of key issues, work schedules
and details of any action required. In accordance with the Code,
the Audit Committee regularly monitors and reviews the
efectiveness of internal audit using outside specialists as well as
self-assessment techniques.
4. A Group Finance Manual details accounting policies and f nancial
controls applicable to all reporting units. The Group accounting
policies are aligned with the latest International Financial Reporting
Standards. Compliance with these policies is reviewed as part of the
internal audit process.
Directors’ Report — 73