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MCBRIDE PLC

By Raymond Hall,2014-05-17 02:05
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MCBRIDE PLC

    McBRIDE PLC (“THE COMPANY”)

    POLICY ON THE USE OF THE EXTERNAL AUDITORS FOR NON-AUDIT SERVICES

Introduction

This document details the Company’s policy in relation to the provision of non-audit services by the

    external auditors (“the Auditors”) on behalf of the Company and its subsidiaries (“the Group”) and

    outlines the control processes that are in place to ensure compliance with this Policy.

Purpose

The overriding aims of this Policy are:

(a) to preserve the independence of the Auditors in performing the statutory audit, and

(b) to avoid any conflict of interest by clearly detailing the types of work that the Auditors can and cannot

    undertake.

The Policy specifies the type of non-audit work:-

? for which the Auditors can be engaged without referral to the audit committee;

    ? for which a case-by-case decision is necessary;

    ? from which the Auditors are excluded.

The Policy aims to ensure that in providing non-audit services the Auditors do not:

? Audit their own work;

    ? Make management decisions for the Company or any of its subsidiaries;

    ? Create a mutuality of interest; or

    ? Find themselves in the role of advocate for the Company or any of its subsidiaries.

The Policy also clarifies responsibilities for the agreement of fees payable for non-audit work.

1. Permitted Non Audit Services

    1.1. Certain non-audit services are required by legislation or contract to be undertaken by the Auditors.

    The Executive Directors can therefore employ the Auditors to provide these services without

    reference to the Audit Committee. These include:-

    ? Regulatory returns e.g. to the Financial Services Authority, Inland Revenue, etc

    ? Legal requirements to report on matters such as share issues for non-cash consideration,

    expenditure for grant purposes, etc

    ? Contractual requirements, for example to report to lenders or vendors on net assets, covenant

    requirements etc

    1.2. In addition, there are certain services that are best provided by the Auditors because of their

    existing knowledge of the business, or because the information required is a by-product of the

    audit process. These include:

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    ? Ad hoc advice on general business/compliance issues such as taxation (VAT, ACT, PAYE),

    transfer pricing, Stock Exchange reporting

    ? Advice on tax accounting entries and recent tax developments

    ? Work that is the by-product of the audit process, for example, providing comments on

    weaknesses in the internal control systems, and means of addressing them

    ? Services that the Auditors are not required by law to undertake, but where the information

    largely derives from the audited financial records

    ? Tax compliance, where much of the information derives from the audited financial records

    ? “Short form” or other reports in acquisition or reorganisation situations where completion is

    necessary in a very short time

    2. Non-Audit Work permitted in certain circumstances:

This section details the types of further services that the Auditors, subject to the provisions of this

    section, can provide to the Group but where allocation of the work should be carefully considered on

    a case-by-case basis.

The services detailed below can be provided by a number of firms, and unless the work falls in to one

    of the categories listed in Section 1, the fact that the firm is the Group’s auditor is incidental.

The Executive Directors have the authority to commission the Auditors to undertake non-audit work

    where this is a specific project with a cost not exceeding the lower of ?50,000 of 15% of the estimated

    annual level of the Auditors’ fees at that time. This work should be reported to the Audit Committee

    at its next meeting. If the cost is likely to exceed ?50,000 or 15% of the estimated fee, as appropriate,

    the agreement of the Chairman of the Audit Committee is required before the work is commissioned.

For all work where the fees are expected to be greater than ?100,000, allocation of the work shall

    automatically be subject to a tender process, with the decision of which firm to appoint being made by

    the Audit Committee, unless there are exceptional circumstances, which in the opinion of the Audit

    Committee would mean a tender process is unviable.

If it is not possible to obtain full Audit Committee approval in advance of the need to make a decision

    on the allocation of work referred to in this section, the Group Finance Director shall agree progress

    with the Chairman of the Audit Committee and the decision shall be submitted for ratification at the

    next Board meeting.

In deciding whether to appoint the Auditors to carry out the services detailed in section, the principal

    consideration should be to ensure that the provision of the service does not impair the Auditor’s

    independence or objectivity. If there is perceived to be such a threat then the Audit Committee must

    satisfy itself that there are adequate safeguards in place to ensure that the threat to auditor

    independence is eliminated, or reduced to an acceptable level.

The services to which the provisions of this section shall apply are:-

    2.1 Internal Audit

    Operational internal audit services unrelated to the accounting controls, financial systems or

    financial statements.

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2.2 IT Services

     Engagements to design, provide or implement information technology systems that are not

    important to any significant part of the accounting system or to the production of the financial

    statements and do not have significant reliance placed upon them by the auditors.

     Provision of “off the shelf packages”, including basic set-up procedures, setting up the chart

    of accounts and the entry of standard data.

2.3 Valuation Services

     Situations where auditors are designated by legislation or regulation as being eligible to carry

    out a valuation.

     Accounting advice on valuation matters during the audit, and verification of data to be used in

    a valuation performed by others.

2.4 Actuarial Valuation Services

     Services where the Group’s management make all significant judgements including

    assumptions, or the amount is immaterial to the financial statements.

2.5 Litigation Support

     Acting as an expert witness, for example, in matters relating to forensic accounting,

    interpretation of Accounting Standards principles, etc.

2.6 Remuneration Services

     Advice on the split between different elements of remuneration, but not advice on actual

    amounts of remuneration, for directors and senior executives.

     Recruitment services for personnel other than key management or directors.

2.7 Corporate Finance & Transaction Based Services

     Due diligence work in respect of matters which do not have a direct significant and subjective

    impact on subsequently audited accounts.

     Providing assistance in developing corporate strategies, identifying possible sources of capital

    and advice on analysing the accounting effects of proposed transactions.

2.8 Accounting Services

     Provision of accounting services in emergency situations, subject to approval of the Audit

    Committee (irrespective of the fees involved), eg. Disaster recovery claims, etc.

2.9 Overseas Subsidiaries

     Provision of accounting and/or taxation services in connection with the establishment of new

    overseas subsidiaries of the Group.

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2.10 Other Services

     Provision of administration, company secretarial and other incidental services where there is

    no perceived threat to auditor independence and no conflicts of interest arise.

    3. Non Audit Services that cannot be provided by the Auditors

Certain services are recognised as being of a type that cannot be provided by the Auditors without the

    possibility of compromising their independence. The following services therefore should not be

    provided by the Auditors:-

3.1 Internal Audit

     The Auditors cannot be engaged to provide internal audit services if, for the purposes of the

    audit of the financial statements, they would need to place significant reliance on the internal

    audit work or if the audit firm would take a management role as a result of undertaking the

    internal audit work.

3.2 IT Services

     The Auditors cannot be engaged to design, provide or implement information technology

    systems where the systems concerned would be important to any significant part of the

    accounting system or to the production of the financial statements and the Auditors would

    place significant reliance on them as part of the audit of the financial statements; or for the

    purposes of the provision of information technology services, the audit firm would

    undertake part of the role of management.

3.4 Valuation Services

     Services that involve highly subjective judgements and are material to the financial

    statements.

3.5 Taxation Services

     If tax services that are provided on a contingency fee basis and if those fees are material to

    the audit firm (or relevant part thereof) or the outcome of the tax service is dependent on

    uncertain application of laws or on current or future audit judgements relating to a material

    balance.

     If the engagement would involve the audit firm undertaking a management role.

     If the establishment of specific tax planning schemes could lead to conflict of interest on the

    statutory audit.

     The Auditors cannot act as an advocate before a tax tribunal or court, if the issue is material

    to the financial statements; or dependent on a future or contemporary audit judgement.

3.6 Litigation Support

     If the work would involve the estimation of likely outcome of pending legal matter that

    could be material to amounts to be included in disclosures in financial statements and there

    is a significant degree of subjectivity involved.

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3.7 Recruitment & Remuneration Services

     The Auditor cannot be used to provide recruitment services for directors and key

    management positions at the Company or its subsidiaries.

    The Auditor cannot be used to provide advice on the quantum of the remuneration package

    or the measurement criteria on which the quantum is calculated for directors or key

    management.

3.8 Corporate Finance

     Services that would involve the audit firm taking responsibility for dealing in, underwriting

    or promoting shares; or

    Services that would depend on questionable accounting treatment, or on a contingent fee

    basis if material to audit firm, or the outcome involves a future or contemporary audit

    judgement relating to a material balance in the financial statements.

    If engagement would involve the audit firm undertaking a management role.

3.9 Accounting Services

     Maintenance of accounting records or the preparation of financial statements that are then

    subject to audit.

4. General

    4.1 The Audit Committee will ensure that the Auditors annually formally report to the Audit

    Committee and the Board on the safeguards that are in place to maintain their independence

    as auditors and on the internal safeguards that that they have in place to ensure their

    objectivity in carrying out non audit services.

4.2 The Company’s annual report shall explain to shareholders how, if the Auditor provides non-

    audit services, auditor objectivity and independence is safeguarded.

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