A policy is in place outlining the circumstances in which the external auditor is permitted to provide non-audit services to RBS. This policy is regularly reviewed and approved by the Group Audit Committee. In order to engage the external auditor for permitted non-audit service engagements, permission must be granted on a case-by-case basis by either the Chairman of the Committee (if the estimated fee is below £100,000) or the all the Committee members (if the estimated fee is £100,000 or more). A tender must be undertaken for all significant engagements.
The Group Audit Committee reviews and monitors the independence and objectivity of the External Auditor when it approves non-audit work, taking into consideration relevant legislation, ethical guidance and the level of non-audit services relative to audit services. The approval process is rigorously applied to prevent the External Auditor from functioning as management, auditing their own work, or serving in an advocacy role.
As an additional governance control all engagements have to be approved by the Financial Controller and Supply Chain Services prior to submission to the Committee Chairman or members. Where the engagement is tax related, approval must also be obtained from the Director of RBS Tax. The process is overseen and managed by the Chief Governance Officer and Board Counsel and her team.
Details of permitted and prohibited services are provided below:
Permitted services include:
- capital raising, including consents, comfort letters, reviews of registration statements and similar services in respect of documents that incorporate or include the audited financial statements of the Group;
- accounting opinions, including accounting consultations and support related to generally accepted accounting principles and financial reporting matters relating to the financial statements of the Group and its subsidiaries;
- any reports that, according to law or regulation in the relevant jurisdiction, must be (and may only be) rendered by the External Auditor;
- reports providing assurance to third parties over certain of the Group’s internal controls prepared under US Statement of Auditing Standards 70 “Service Organisations” or similar auditing standards in other jurisdictions; and
reports and letters providing assurance to the Group in relation to a third party company where the Group is acting as equity/ debt underwriter in a transaction, in the ordinary course of business.
Prohibited services include:
- bookkeeping or other services related to the accounting records or financial statements;
- financial information systems design and implementation;
- appraisal or valuation services, fairness opinions or contribution-in-kind reports;
- actuarial services;
- internal audit outsourcing services;
- management functions or human resources;
- broker or dealer, investment adviser, or investment banking services;
- legal services and expert services unrelated to the audit; and
- other services determined to be impermissible by the US Public Company Accounting Oversight Board.