External Audit Tender Process
In September 2012, a request for proposal (RFP) was issued to provide the following external audit and audit-related services:
- The audit of Schroders’ parent Company, the Group accounts and those of certain subsidiaries;
- To report, in the Annual Report, whether certain remuneration and governance disclosures were in accordance with applicable legislation and rules/regulations;
- To review the interim financial statements;
- Regulatory reporting in various locations;
- Client asset reporting to the FSA or its successor bodies; and
- Controls reporting in various locations.
The four firms participating in the tender process were required to submit their proposals against the following criteria:
- Organisation and capability – including the firm’s global coverage, experience, scope of service, technical expertise and support, culture and independence assurance;
- Audit approach and delivery – including knowledge of the business, audit planning process, quality of accounting judgements, liaison with and reliance upon Internal Audit, timely resolution of audit issues and transition experience;
- Audit quality – including quality assurance, audit effectiveness, audit reporting, integrity, independence, objectivity, process improvement and added value;
- Resourcing and engagement team – including quality of proposed audit team, skills and personal qualities of audit partners and leadership, team structure, resourcing model and succession, responsiveness; and
- Fees and terms.
The process comprised three stages:
- 28 interviews for each firm with Schroders personnel including the Chairman, Executive Directors, Audit and Risk Committee members and key members of management (both UK and globally);
- Written proposals; and
- A presentation to the Committee and the Chairman, the Chief Executive, the Chief Financial Officer, Bruno Schroder, the General Counsel, the Head of Financial Reporting and the Company Secretary.
All four firms met the criteria for appointment; the Committee concluded, however, that two firms, PwC and KPMG, demonstrated better the resource, expertise, quality control and audit approach to deliver a high-quality audit service to Schroders.
As part of the process to confirm the independence of the audit firm prior to making a recommendation to shareholders, KPMG advised the Company that it did not meet the regulatory requirements for independence for all relevant Group companies. As Schroders’ incumbent auditor, PwC had maintained its independence throughout the process.
Independence is a pre-requisite for an audit appointment and therefore the Committee has recommended that the Board propose to shareholders that PwC be re-appointed as the Company’s auditors for the 2013 audit.