Supervisory Board

Matthew Thorogood

Chairman of the Supervisory Board

 

I was delighted to be elected chairman of the Supervisory Board in January this year. Sound governance of our firm is a priority for the partnership and I am committed to looking constantly for ways of improving how our firm is governed. Regular, constructive conversations between the Executive Board and the Supervisory Board and effective reporting to the wider partner group are two things that I regard as critical.

I am pleased to report that through both formal and informal channels, the Supervisory Board and Executive Board keep in constant touch and work closely on matters of concern to both the partnership and individual partners.

A key role of the Supervisory Board is to give guidance to the Executive Board, when appropriate. To help make this happen more effectively, this year we’ve been teaming up Supervisory Board members with Executive Board members for informal input on strategic developments. This is working well and it is clear to me that both Boards take the responsibilities of representing our partners very seriously.

What does the Supervisory Board do?

The principal roles of the Supervisory Board are to hold the firm’s Executive Board to account and to represent the interests of partners, and as such it is a vital part of the firm’s governance structure.

The Supervisory Board is made up of 12 partner members, who are elected for a term of four years by our partners. In addition to the 12 elected members, UK Chairman Ian Powell serves as an ex-officio member, along with two partners who have been elected to the Board of PricewaterhouseCoopers International Limited, the global Board of the PwC Network. The Supervisory Board elects its own Chairman.

Partners use the Supervisory Board as a formal communication channel with the Executive Board. This is achieved by holding regular meetings with partners to get their views on the firm’s overall strategy and any other issues that may be of concern.

The Supervisory Board is also responsible for approving the Annual Report and the choice of auditor, for approving the admission of new partners and for approving transactions and arrangements outside the ordinary course of business. It also has the ability to consult partners on any proposed significant change in the form or direction of the LLP. It has responsibility for managing the process leading to the election of the firm’s Chairman.

There are three sub committees of the Supervisory Board: Partner Affairs, Strategy and Governance and Audit and Risk. The Partner Affairs Committee makes recommendations to the Supervisory Board, which sets the Chairman’s profit share and approves the Chairman’s recommendations for the profit shares of other members of the Executive Board. It is also responsible for making sure that the firm’s policies on partners’ remuneration are being properly and fairly applied.

The Strategy and Governance Committee provides oversight of both the development of the UK firm’s strategy and any material acquisitions or disposals. Its role is also to provide the Supervisory Board with a forward agenda to assist it to effectively commit time to strategic issues facing the firm as well as to routine operational issues.

The Supervisory Board works closely with the firm’s Public Interest Body (PIB). Matthew Thorogood and Pauline Campbell sit, in their capacity as members of the Supervisory Board, on the PIB to make sure that there is effective communication between the two bodies.

Audit and Risk Committee

Role
The Audit and Risk Committee is a committee of the Supervisory Board which has responsibility for reviewing the policies and processes for identifying, assessing and managing risks within the firm.

The Committee monitors and reviews:

  • the effectiveness of the Group’s internal control and risk management systems
  • the firm’s policies and practices concerning compliance, independence, business conduct and ethics including whistle-blowing and the risk of fraud
  • the scope, results and effectiveness of the firm’s internal audit function
  • the effectiveness and independence of the firm’s statutory auditor, Crowe Clark Whitehill LLP (CCW)
  • the reappointment, remuneration and engagement terms of CCW including the policy in relation to, and provision of, non-audit services
  • the planning, conduct and conclusions of the external audit
  • the integrity of the Group’s financial statements and the significant reporting judgements contained in them.

Activities
The Committee met 10 times in the year ended 30 June 2013 (2012: 10 times). The Chief Financial Officer and General Counsel, together with the internal and external auditors, attend the Committee’s meetings by invitation.

Both the internal and external auditors meet privately with the Committee without management presence.

Internal control
The Committee’s review of internal control includes considering reports from the firm’s Risk Council and from the firm’s internal and external auditors. During the year the Committee considered and approved internal audit’s work programme including its risk assessment, proposed audit approach and coverage, and the allocation of resources. The Committee reviewed the results of audits undertaken and considered the adequacy of management’s response to matters raised including the implementation of recommendations. The effectiveness of the firm’s internal audit function was also assessed.

The Committee also considered reports from other parts of the firm charged with governance and the maintenance of internal control including in respect of independence, compliance, ethics, whistle-blowing, fraud, data security, business continuity management and the management of the firm’s own tax affairs.

The Committee also reviewed and considered the statements here in respect of the systems of internal control and concurred with the disclosures made.

External audit effectiveness and reappointment The Committee undertakes an annual review of the qualification, expertise, resources and independence of the external auditors and the effectiveness of the external audit process by:

  • reviewing CCW’s plans for the audit of the Group’s financial statements, the terms of engagement for the audit and the proposed audit fee
  • considering the views of management and the CCW engagement partner on CCW’s independence, objectivity, integrity, audit strategy and its relationship with the Group, obtained by way of interview
  • taking into account information provided by CCW on its independence and quality control.

Having considered a number of factors, including audit effectiveness, business insight, tenure and approach to audit partner rotation, the Committee concluded it was appropriate to reappoint CCW as auditor.

Financial reporting
CCW’s external audit plan identified a number of potential risks and areas of judgement in the consolidated financial statements. CCW explained to the Committee the programme of work it planned to undertake to address these risks and other risks to detect a material misstatement in the financial statements.

Where it thought it would be effective to do so, CCW’s work plan included the evaluation and testing of the Group’s own internal controls and assessment of the work of the firm’s internal audit function. It also explained where it planned to obtain direct external evidence.

The Committee discussed the above matters with CCW on conclusion of its external audit of the financial statements for the year. CCW explained the work it had undertaken and conclusions it had drawn, including in relation to revenue recognition and amounts that were unbilled at the year-end; the carrying value of goodwill and intangibles arising from business combinations; the adequacy and appropriateness of provisions for client claims and property matters; the consistency and appropriateness of assumptions adopted in the valuations of the firm’s defined benefit pension schemes for the purposes of financial reporting; and management’s assessment of the appropriateness of the going concern basis.

Following consideration of the matters presented to it and discussion with both management and CCW, the Committee is satisfied with the judgements and financial reporting disclosures included within the financial statements.