Corporate Governance
Audit Committee
Membership
Anthony Hobson
Audit Committee Chair
The members of the Audit Committee are identified in the table below. The Committee comprises four independent Non-executive Directors and one additional member, John Ormerod, who is neither a Director of HBOS nor an employee of the Group. John brings industry specific expertise and additional experience, resource and perspective to the Committee’s deliberations. The Secretary to the Audit Committee is Lysanne Black, Senior Deputy Company Secretary of HBOS.
The Audit Committee’s structure requires the inclusion of at least one financially qualified member. The Board considers that Anthony Hobson, a Chartered Accountant and until 2001 the Group Finance Director of Legal & General, has the significant, recent and relevant financial experience to satisfy this requirement. In addition, John E Mack and John Ormerod also have recent and relevant financial experience.
The Group provides an induction programme specifically for new Audit Committee members and on-going training to enable them to carry out their duties. The induction programme covers the role of the Audit Committee, its terms of reference, expected time commitments and an introduction to key aspects of the Group’s businesses, including the main business financial dynamics and risks.
Attendance at meetings
In 2007 the Committee met on seven occasions. The Committee invites the Chief Executive, senior executives from the Finance and Risk functions, the Head of Group Internal Audit and the external auditors to attend all of its meetings. Other senior management attend as requested by the Committee to enable it to discharge its duties.
| Audit Committee meetings attended | Eligible to attend |
|
| Current Members | ||
| Anthony Hobson (Chair) | 7 | 7 |
| Coline McConville | 7 | 7 |
| John E Mack (from August 2007) | 2 | 2 |
| Kate Nealon | 6 | 7 |
| John Ormerod | 7 | 7 |
| Former Member | ||
| David Shearer (to April 2007) | 3 | 3 |
Principal activities and duties
The Audit Committee’s activities include receiving and challenging reports from senior management and both the internal and external auditors. The Audit Committee assists the Board in relation to the Group’s external financial and regulatory reporting requirements; its risk and internal control environment and the Group’s compliance with the Combined Code. In particular, in 2007 the Audit Committee:
- considered and approved the accounting policies, principles and practices as presented in the Group’s accounts;
- assessed significant accounting and reporting issues and the key accounting and audit judgements;
- considered the external auditors’ annual Internal Control Report and management’s response;
- monitored the relationship of the Group with its regulators;
- reviewed and advised the Board on the Group’s interim and annual financial statements, the control of financial and business risks (including whistleblowing arrangements), the nature and scope of the work performed by internal and external auditors, the results of this audit work and the responses of management;
- assessed the resources, organisational structure and operational effectiveness of the Group Internal Audit function together with management’s response to the findings;
- reviewed the effectiveness of the Group’s system of internal control, including financial, operational, compliance and risk management on an ongoing basis;
- made a recommendation to the Board (for shareholder approval) in relation to the re-appointment of the external auditors and considered the terms of their engagement;
- reviewed other services provided to the Group by the external auditors, and monitored their independence, concluding that they had maintained their independence throughout the year;
- reviewed management procedures for identifying business risks and controlling their financial impact;
- preventing or detecting fraud; ensuring compliance with regulatory and legal requirements and monitoring the operational effectiveness of policies and systems; and
- considered the activities of the divisional Risk Control Committees (described on the following page)