Anglo American Annual Report 2012

GOVERNANCE AUDIT COMMITTEE REPORTAUDITCOMMITTEEREPORTENSURING INDEPENDENCE OFTHE EXTERNAL AUDITORSAnglo American’s policy on auditors’independence is consistent with theethical standards published by theAudit Practices Board.A key factor that may impair auditors’independence is a lack of control overnon-audit services provided by theexternal auditors. In essence, theexternal auditors’ independence isdeemed to be impaired if the auditorsprovide a service that:• Results in the auditors acting as amanager or employee of the Group• Puts the auditors in the role ofadvocate for the Group or• Creates a mutuality of interestbetween the auditors and the Group.Anglo American addresses thisissue through three primarymeasures, namely:• Disclosure of the extent and natureof non-audit services• The prohibition of selected services –this includes the undertaking ofinternal audit services• Prior approval by the Audit Committeechairman of non-audit services wherethe cost of the proposed assignmentis likely to exceed $50,000.Anglo American’s policy on theprovision of non-audit services isregularly reviewed and was updatedduring 2012. The definition ofprohibited non-audit servicescorresponds with the EuropeanCommission’s recommendations onauditors’ independence and with theEthical Standards issued by the AuditPractices Board in the UK.Other safeguards• The external auditors are requiredto adhere to a rotation policy basedon best practice and professionalstandards in the United Kingdom.The standard period for rotation ofthe audit engagement partner is fiveyears and, for any key audit partner,seven years. The audit engagementpartner was appointed in 2010 inaccordance with this requirement.• Any partner designated as a key auditpartner of Anglo American shall notbe employed by Anglo American ina key management position unlessa period of at least two years haselapsed since the conclusion of thelast relevant audit.• The external auditors are requiredto assess periodically, whether in theirprofessional judgement, they areindependent of the Group.• The Audit Committee ensures thatthe scope of the auditors’ work issufficient and that the auditors arefairly remunerated.• The Audit Committee has primaryresponsibility for makingrecommendations to the Board onthe appointment, re-appointmentand removal of the external auditors.• The Audit Committee has theauthority to engage independentcounsel and other advisers asthey determine necessary in orderto resolve issues on auditors’independence.• An annual assessment is undertakenof the auditors’ effectiveness,independence and objectivity. Theeffectiveness assessment involvesa review, with the senior financemanagers in each of the businessunits and relevant corporate functions,of the audit process, including theplanning, execution and reportingactivities along with an assessmentof the quality, quantity and leadershipof each of the external audit teamsinvolved in the audit. Anyimprovement opportunities identifiedare discussed with the externalauditors. The independence andobjectivity assessment is conductedby a review of compliance with thepolicies in place in the Group andwithin the external auditors tomaintain independence andobjectivity. The results of the revieware shared with the Audit Committee.Conclusions of the AuditCommittee for 2012The Audit Committee has satisfieditself that the UK professional andregulatory requirements for auditpartner rotation and employmentof former employees of the externalauditors have been complied with.The Audit Committee consideredinformation pertaining to the balancebetween fees for audit and non-auditwork for the Group in 2012 andconcluded that the nature and extentof the non-audit fees do not presenta threat to the external auditors’independence. Details of fees paidare provided on page 152.Furthermore, after reviewing a reportfrom the external auditors on all theirrelationships with Anglo Americanthat might reasonably have abearing on the external auditors’independence and a review conductedby management, the Committee hasconcluded that the external auditors’independence was not impaired.The Audit Committee held meetingswith the external auditors without thepresence of management on twooccasions and the chairman ofthe Audit Committee held regularmeetings with the audit engagementpartner during the year.104 Anglo American plc Annual Report 2012