Review of the Audit Committee

Report by Paul Spencer
Chairman of the Audit Committee

Dear share owner

During 2008, Bud Morten, Jeffrey Rosen and Colin Day were my colleagues on the committee. Tim Shriver joined the committee on 12 February 2009 and Bud Morten stepped down at the same date.

We held eight meetings this year, which were also attended (by invitation for all or part of any meeting) by the external auditors, the Company’s chairman, the Group finance director, the director of internal audit, the Group chief counsel and the Company Secretary. Preparatory meetings were also held with the internal and external auditors as well as members of the Company’s senior management. The committee received presentations from the heads of Treasury and Legal. The committee also received reports from the Disclosure Committee in relation to the Disclosure Committee’s review and work on financial reports. The Board received regular reports on all matters of particular significance arising at the committee meetings.

The committee’s terms of reference, which are reviewed with the Board annually and were updated at the time of the Scheme of Arrangement in October 2008, are available for inspection on the Company’s website at and are on display prior to and at all general meetings of the Company.

During the year, the committee and its members were formally assessed by the chairman of the Company for their technical suitability to be members of the committee and also for the committee’s overall effectiveness. The Board has designated me as the committee’s financial expert for Sarbanes-Oxley Act (SOX) purposes and as having recent and relevant financial experience for the purposes of the Combined Code.

The committee has once again overseen the progress towards compliance with Section 404 of SOX for 2008, through regular status reports submitted by the internal and external auditors.

The committee received and reviewed regular reports on both our Right to Speak helpline, which is made available to our people to enable them to communicate confidentially on matters of concern and the actions taken in response to those calls.

The committee has established a policy regarding non-audit services that may be provided by the external auditors, which prohibits certain categories of work in line with relevant guidance on independence, such as ethical standards issued by the Auditing Practices Board and SOX. Other categories of work may be provided by the auditors if it is appropriate for them to do so. The provision of such services and associated fees are either pre-approved by the committee, or for certain categories of work, are delegated to the director of internal audit for pre-approval. All fees are summarised periodically for the committee to assess the aggregate value of non-audit fees against audit fees. The level of fees for 2008 is shown in note 3 on page 152.

Other work carried out by the committee in 2008 included:

  • monitoring the integrity of the Company’s financial statements and reviewing significant financial reporting judgements;
  • reviewing internal financial control and internal audit activities;
  • assisting the Board in meeting its responsibilities in respect of reviewing and reporting on the systems and key elements of risk management as they affect the Group;
  • the review and appointment of the external auditors and approval of their remuneration and terms of engagement;
  • monitoring the external auditors’ independence, objectivity and effectiveness;
  • reviewing the Group Treasury policy with particular focus on debtors, funding and the continued ability of the Group to adopt the going concern basis in preparing financial statements;
  • reviewing reports on any material litigation involving Group companies;
  • reviewing any significant mergers and acquisitions and debt financing by the Group including the acquisition of Taylor Nelson Sofres plc in the preliminary stages before a full Board review;
  • reviewing the Group’s pension obligations;
  • monitoring the accounting and legal reporting requirements, including all relevant regulations of the UK Listing Authority, the SEC and NASDAQ and the Jersey Financial Services Commission with which the Company must comply;
  • in conjunction with Paul Richardson, the director responsible for corporate responsibility in 2008, ensuring systems are in place to monitor social, environmental and ethical issues which may affect the Group (other than issues which fall within the remit of the Compensation Committee) and receiving reports on new initiatives being implemented by the Group to reduce carbon emissions; and
  • maintaining established procedures for the confidential receipt and treatment of concerns raised by our people.

I would like to thank my colleagues on the committee, the head office executives and the external advisors for their help in what has been a particularly turbulent year. I would also like to give special thanks to Bud Morten. His knowledge, wise comments and probing questions, coupled with his support to me, have been invaluable to the committee and the Company.

Paul Spencer
14 April 2009