JUST GROUP PLC Annual Report and Accounts 2019
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AUDIT Committee REPORT continued
INDEPENDENCE AND NON-AUDIT SERVICES The Group has a policy in relation to the provision of non-audit services by our external auditor. All non-audit services provided by KPMG are subject to review and approval by the Committee. 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 £1.26m (2018: £1.01m). The value of non-audit services provided by KPMG during the year amounted to £1.13m (2018: £2.03m), comprising: Transaction-related services 0.1 The ratio of non-audit services to audit services was 0.9:1. Non-audit services of £0.8m were provided during 2019 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. Non-audit services in respect of transaction services of £0.1m were provided in relation to the Group’s capital raising activities during the year. These non-audit services are considered to be closely related to the work performed by KPMG as auditor of the Group and therefore the auditor is the appropriate firm to carry out the services. Non-audit services for 2019 were considerably lower than the previous year. During 2018 there was an exceptional level of corporate activity in the capital markets where KPMG provided reporting accountant and other services relating primarily to the presentation and validation of historic financial information. As part of the evaluation of the objectivity and independence of the external audit, the Committee has received and reviewed written confirmation that KPMG 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 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 4 to the consolidated financial statements. EFFECTIVENESS AND REAPPOINTMENT OF EXTERNAL AUDITOR The Committee considered the quality and effectiveness of the external audit process. The review of the performance was completed as part of an on-going process of review throughout the year with the Audit Committee seeking assurance and understanding of the auditor’s approach to the audit. Private meetings were also held with the external auditor and the Chair of the Committee as necessary outside the Audit Committee meetings. Following the auditor’s performance review, the Board approved the reappointment of KPMG for the year ended 31 December 2019 and a resolution put to the shareholders at the 2019 Annual General Meeting was subsequently approved. The Committee has approved KPMG’s remuneration and terms of engagement for 2019 and remains satisfied with KPMG’s work and that KPMG continues to remain independent and objective. £m Audit-related assurance services (audit of regulatory returns) 0.8 0.2 Audit-related assurance services (other services)
AUDIT TENDER As set out in the Committee’s report last year, the Committee intended to review the tenure of the auditor in 2019. KPMG has been the Group’s auditor since the financial year ended 31 December 2016 following a tender process undertaken in 2016 after the merger with Partnership Assurance Group, when that firm was reappointed. Prior to that KPMG was the auditor of Just Retirement Limited. The proposed change of auditor ensures our compliance with the rules regarding auditor rotation. The timing of the change will also enable auditor continuity during our preparation and implementation of IFRS 17, currently scheduled for 2022. The Committee led a full tender process in respect of external audit services in compliance with the legislation and had regard to the FRC guidance on audit tenders. The existing external audit firm, KPMG, did not participate in the tender process. We approached a range of firms, including the other “big four” firms and certain mid-tier firms, to express their interest; and meetings with the Chair of the Audit Committee and key executives were offered to all participants at this stage. Interested firms were subsequently requested to complete a detailed Request for Proposal (“RFP”). The firms were judged against objective criteria determined in advance of the process including around independence, industry expertise (including actuarial expertise), audit quality, planned use of technology and an understanding of the Group. The findings and conclusions of published inspection reports on the audit firms were also reviewed. Following a presentation to the Committee, the Committee considered that the submission and team from PwC met the predefined criteria, had the necessary expertise and would offer a quality external audit for the Group. The Committee therefore recommended to the Board that PwC be appointed as the Company’s auditor for the year ending 31 December 2020 and the Board approved the appointment, subject to shareholder approval. The recommendation was free from the influence of any third party. The Committee confirms that there are no contractual obligations which restrict the choice of external auditor. The Committee noted that PwC previously provided internal audit services to the Group’s internal audit team (who were not involved in the tender process) and IFRS 17 and tax services, and that in order for the independence criteria to be met that PwC would stand down from this engagement by 31 December 2019. PwC was satisfied that it could act independently as external auditor in line with the FRC’s Revised Ethical Standard and this was set out in its RFP. Subject to shareholder approval at the AGM, it is proposed that PwC will be appointed as the Company’s auditor with effect from the audit for the financial year ending 31 December 2020. To ensure a smooth transition from KPMG, PwC has shadowed KPMG during the audit of the financial year ended 31 December 2019. The Group will continue to use professional firms other than its auditors for non-audit services so that relationships are enhanced with those firms capable of performing the role of external auditor. The Committee will seek, with management, to ensure that there are no contractual obligations which restrict the Committee’s future choice of auditor.
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