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, approval must be granted on a case-by-case in accordance with the policy. A tender must be undertaken for all engagements where the fee is expected to be over £100,000.
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 relevant member of the RBS Executive Committee and Deputy Chief Financial Officer. The process is overseen and managed by the Chief Governance Officer and Board Counsel and her team.
There are certain services which are prohibited from being carried out by the external auditor and these are provided below:
Prohibited services include:
- bookkeeping or other services related to the accounting records or financial statements;
- design and implementation of financial information systems, controls or risk management procedures;
- appraisal or valuation services, fairness opinions or contribution-in-kind reports;
- actuarial and valuation services involving the determination of amounts recorded in the financial statements and related accounts;
- outsourcing arrangements, including internal audit outsourcing services;
- services that involve playing any part in management or decision making;
- certain prohibited human resource services, including recruitment, remuneration, cost control or organisational design services;
- payroll services;
- management functions or human resources, including payroll services;
- broker or dealer, investment adviser, investment banking services;
- services linked to the financing, capital structure and allocation, and investment strategy of RBS, except providing assurance services in relation to the financial statements, such as the issuing of comfort letters in connection with prospectuses issued by RBS;
- legal services and court appointment or advocacy services (referred to in the United States as “expert services”) unrelated to the audit;
- taxation services relating to:
- preparation of tax forms;
- payroll tax;
- customs duties;
- identification of public subsidies and tax incentives unless support in respect of such services is required by law;
- calculation of direct and indirect tax and deferred tax;
- provision of tax advice;
- certain tax services including US Immigration Services, Co-sourcing Services, Payroll Services and Individual Tax Compliance Services where the individual is in a Financial Reporting Oversight role;
- promoting, dealing in, or underwriting shares in RBS;
- insolvency appointments for RBS entities;
- internal control testing; and
- any other services determined to be impermissible by the US Public Company Accounting Oversight Board.