GOVERNANCE REPORT
75
The policy ensures that the Group benefits from the cumulative knowledge and experience of its auditor while ensuring at the same time that the auditor maintains the same degree of objectivity and independence. During the year, the value of audit services to the Group was £2.2m (2019: £1.26m), which included first year audit costs. The value of non-audit services during the year amounted to £1.1m (2019: £1.13m), comprising:
INTERNAL AUDIT The Committee receives an annual plan from the Director of Group Internal Audit, regular updates on internal audit work carried out during the year and the internal audit end of year report. In 2020, the Committee: • continued to oversee the Internal Audit function with the Director of Group Internal Audit reporting directly to the Committee Chair; • oversaw the engagement of EY to work with the Internal Audit team on the combined internal audit assurance work to complete the audit plan for 2020; • reviewed and approved the rolling 12 month internal audit plan ensuring the alignment to the key risks of the business; • reviewed results from audits performed, including any unsatisfactory audit findings and related actions plans; • reviewed open audit actions and monitored progress against them; • conducted an assessment of the Internal Audit function; • considered and approved the implementation of an updated rating system for findings identified by the Group’s internal assurance providers; • reviewed and approved the Internal Audit Charter, which is available to view on the Group’s website; and • reviewed and approved the Internal Audit calendar for 2021. Monitoring and review of the scope, extent and effectiveness of the activity of the Group Internal Audit team is an agenda item at each regular Committee meeting. The Committee considers and approves the Internal Audit plan annually and looks to ensure its alignment with the external audit and the Group’s risk management approach. Reports from the Director of Group Internal Audit include updates on audit activities, progress of the Internal Audit plan, the results of any unsatisfactory audits and the action plans to address these areas. The Committee regularly considers the resource requirements of the Internal Audit team and remains satisfied that it has the appropriate resources and the relevant skills and experience to fulfil its role effectively. The Committee held private discussions with the Director of Group Internal Audit as necessary during the year. The Committee Chair also meets with the Director of Group Internal Audit regularly outside the formal Committee process and is accountable for the setting and appraisal of his objectives and performance with input from the Group Chief Executive Officer. An External Quality Assessment (“EQA”) of Internal Audit is carried out every three to five years, with the last one being undertaken at the end of 2019. The EQA was completed by an independent firmwhich assessed the function against the Chartered Institute of Internal Auditors’ standards with an overall rating of Generally Conforms. This is the highest rating that can be achieved. The function remains on its journey of continuous improvement with the full sponsorship of the Committee. WHISTLEBLOWING The Committee receives regular whistleblowing updates. During the year, no incidents of whistleblowing were reported. The whistleblowing framework was revisited and enhancements were made to the process. The Group has in place an external confidential dedicated telephone hotline for employees to use and whistleblowing training was provided to employees during the year. The Chair of the Committee is the Group’s whistleblowing champion and is responsible for ensuring and overseeing the integrity, independence, autonomy and effectiveness of the Group’s policies and procedures on whistleblowing including the Group whistleblowing policy which is reviewed annually.
£m
Audit-related assurance services (audit of regulatory returns)
0.6 0.2
Audit-related assurance services (other services)
Other assurance services 0.1 The ratio of non-audit services to audit services fees was 1:2.4. Non-audit services of £0.6mwere provided during 2020 in relation to the audit of the Group’s Solvency II regulatory returns and a further £0.2m of non-audit services were provided in relation to the review of the Group’s interim report and IFRS 17 assurance. Other assurance services of £0.1mwere provided in relation to the Group’s debt issuance during the year. Non-audit services for 2020 were similar to the previous year. These non-audit services are considered to be closely related to the work performed by the external auditor of the Group and the Committee determined that the services provided would not impact the independence of the external auditor. As part of the evaluation of the objectivity and independence of the external auditor, the Committee has received and reviewed written confirmation that PwC has performed their own assessment of independence within the meaning of all UK regulatory and professional requirements and of the objectivity of the audit engagement partner and audit staff and have also concluded that the independence is not impaired by the nature of the non-audit engagements undertaken during the year, the level of non-audit fees charged or any other facts or circumstances. The level of non-audit services offered reflects the external auditor’s knowledge and understanding of the Group. The Group has also appointed other accountancy firms to provide certain non-audit services in connection with internal audit, governance, tax and regulatory advice, and with regard to the implementation of IFRS 17. An analysis of auditor remuneration is shown in note 5 to the consolidated financial statements. The Committee has approved PwC’s remuneration and terms of engagement for 2020 and remains satisfied with PwC’s work and that PwC continues to remain independent and objective. RISK MANAGEMENT AND INTERNAL CONTROL The Board has overall responsibility for establishing and maintaining the Group’s systems of internal control and for undertaking an annual review of the control systems in place. The Group operates a three lines of defence model. The first line of defence is line management who devise and operate the controls over the business. The second line functions are Risk Management, Compliance and Actuarial Assurance, which oversee the first line, ensure that the system of controls are sufficient and are operated appropriately, and also measure and report on risk to the Group Risk and Compliance Committee. The third line is Internal Audit, who provide independent assurance to the Board and its committees that the first and second lines are operating appropriately. The Group’s internal control systems comprise the following key features: • establishment of clear and detailed terms of reference for the Board and each of its committees; • a clear organisational structure, with documented delegation of authority from the Board to senior management; • a Group policy framework, which sets out risk management and control standards for the Group’s operations; and • defined procedures for the approval of major transactions and capital allocation. The Committee keeps under review the adequacy and effectiveness of the Group’s internal controls. It is the view of the Committee that the Group’s system of risk management and internal controls is currently appropriate to the Group’s needs.
On behalf of the Audit Committee
Paul Bishop Chair, Audit Committee 15 March 2021
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