Terms of Reference for the Audit and Risk Committee

1. Appointment and membership

The Audit and Risk Committee (the “Committee”) is appointed by the Supervisory Board of PricewaterhouseCoopers LLP from the members of the Board.

A quorum shall be four members for any meeting at which the Committee’s delegated powers are to be exercised and otherwise three members. In the event of difficulty in achieving a quorum, Supervisory Board members who are not members of the Committee may be co-opted as members for individual meetings, provided the majority of the quorum are full members of the Committee.

Supervisory Board members who are not members of the Committee may attend meetings where relevant after first liaising with the Committee Chair.

The Chair of the Committee shall be appointed by the Supervisory Board.

In order to perform his or her role effectively, each Committee member should obtain an understanding of the detailed responsibilities of Committee membership as well as the PwC business, operations and risks. The members of the Committee (to 31 December 2018) are:

Bill MacLeod – Chair
Pauline Campbell
Chris Burns
John Minards
Jim Stidham

The Secretary to the Committee is Philip Patterson.

Claire Stokes attends meetings if Consulting representation is required.

2 Attendance of non-members at meetings

The COO, the Finance Partner, the Chair of the Risk Council, other individuals with oversight responsibility for risk, the Head of Internal Audit, and a representative of the external auditor shall attend meetings at the invitation of the Committee. Other members of management may also be invited to attend meetings.

The Committee shall meet with the external and internal auditor at least once a year without the presence of management. 

3. Frequency of meetings

Meetings shall be held at least four times a year and, where appropriate, will coincide with key dates in the firm’s financial reporting cycle. The external auditor or the Head of Internal Audit or the Chair of the Risk Council may request a meeting if they consider that one is necessary.

4. Delegated Authority

The Committee is authorised by the Supervisory Board to investigate any activity within these terms of reference and, within its scope of responsibilities, to seek any information it requires and to ensure the attendance of management representatives at meetings as appropriate.

The Committee has the authority to obtain outside legal or independent professional advice. The advisers may attend meetings as necessary and the cost of the advisers shall be borne by the firm.

5. The Committee’s Responsibilities

The responsibilities of the Committee are set out in the Appendix to these terms. 

6. Reporting procedures

The minutes of meetings of the Committee shall be circulated to all members of the Supervisory Board. A separate section of the Annual Report or Transparency Report (as appropriate) should describe the work of the Committee in discharging its responsibilities. The report should include:

  • the significant issues that it considered in relation to the financial statements;
  • an explanation of how it has assessed the effectiveness of the external audit process and the approach taken to the appointment, continuation or reappointment of the external auditor, and information on the length of tenure of the current audit firm and when a tender was last conducted; and 
  • if the external auditor provides non-audit services, an explanation of how auditor objectivity and independence is safeguarded. 

The Committee shall, at least once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Supervisory Board for approval.

July 2017

 

APPENDIX

The responsibilities of the Committee shall be:

1. External audit

a. to assess annually the qualification, expertise and resources, and independence of the external auditor, taking account of relevant Ethical Standards and ensuring that key partners are rotated at appropriate intervals;

b. to assess annually the effectiveness of the audit process;

c. to review with management the audit fee and audit engagement letter and to ensure that the provision of non-audit services does not impair the external auditor’s independence or objectivity;

d. to develop and implement a policy on the supply of non-audit services by the external auditor and to agree with management a policy on the employment of former employees of the firm’s external auditor and monitor its implementation;

e. to discuss with the external auditor, before the audit commences, the nature and scope of the audit and to review the auditor’s quality control procedures and steps taken by the auditor to respond to changes in regulatory and other requirements;

f. to make appropriate recommendations, if considered necessary, to the designated members regarding the continuation of the external auditor, to oversee the selection process for new auditors and, if an auditor resigns, to investigate the issues leading to this and decide whether any action is required;

g. to consider the need to include the risk of withdrawal of the external auditor from the market in the Committee’s risk assessment process; and

h. to review the external auditor’s management letter and management’s response.

2. Internal controls and internal audit

a. to review the effectiveness of the firm’s internal control framework;

b. to monitor and review the effectiveness of the internal audit function, to review the internal audit programme and internal auditor’s reports, and to seek such assurance as it may deem appropriate that the function is independent, adequately resourced and has appropriate standing within the firm;

c. to consider with management the appointment of the Head of Internal Audit; and

d. to consider management’s response to any recommendations made by the external auditor or internal audit and review with internal audit and the external auditor any fraudulent or illegal acts, deficiencies in internal control or other similar issue, including reviewing the results of management’s investigation and follow up of any fraudulent acts.

3. Risk and risk management

a. in conjunction with presentations to the main Supervisory Board, to regularly receive reports from management and the Chair of the firm's Risk Council which enable the Committee to assess the risks involved in the firm’s business and to consider the Principal Risks identified by management and how they are controlled and monitored;

b. to participate in the Risk Council process through sending a representative to attend Risk Council, being the process and framework established by the Executive Board for risk identification and management of risk in each segment of the business and to consider the effectiveness of and outputs from this process;

c. to review annually the process for monitoring the firm’s compliance with Network Standards

d. to review the status, monitoring of and procedures for dealing with troublesome practice matters and the insurance arrangements;

e. to review tax compliance and tax planning initiatives of the firm;

f. to review the firm’s procedures for handling allegations from whistleblowers from time to time

g. to review the firm’s procedures concerning the prevention and detection of fraud and financial crime; and

h. to review the firm’s arrangements for regulatory compliance and consider any material findings from regulatory reviews.

4. Annual financial statements

a. to review, and challenge where necessary, the actions and judgements of management in relation to the annual financial statements, paying particular attention to:

i. critical accounting policies and practices, and any changes in them

ii. decisions requiring a major element of judgement

iii. the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed

iv. the clarity of disclosures v. significant adjustments resulting from the audit

vi. the calculation of partners’ distributable profit

vii. the going concern assumption

viii. compliance with accounting standards and related guidance ix. compliance with other legal requirements;

b. to review management’s statement on internal control systems prior to endorsement by the Executive Board, the effectiveness of the firm’s internal control systems and procedures for compliance and whether management has discharged its duty to have an effective internal control system;

c. to review the content of the Risk Council report in the Annual Report;

d. to review the letter of representation prior to management sign off; and

e. to review and to provide advice on whether the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary to assess the company’s performance, business model and strategy.

5. Other matters

a. to review the firm’s annual Transparency and Sustainability Reports;

b. to review mechanisms for informing and updating partners and staff on independence issues, to receive reports on monitoring of independence and the handling of any issues relating to non-compliance and to approve independence penalties;

c. to perform other oversight functions, as requested by the Supervisory Board; and

d. to review and approve any statement to be made by the UK firm pursuant to the Modern Slavery Act 2015.