Overview and structure

The Audit Committee assists the Board in the execution of its responsibilities for corporate governance and internal control, and has adopted terms of reference modelled on those set out in the Code. The Group Finance Director and certain senior financial executives as appropriate, together with representatives from the internal and external audit teams, attend each meeting. It is a requirement that at least one Audit Committee member has suitable financial experience and Ian Harley, who is a qualified accountant, has been identified as meeting this requirement. A copy of the Audit Committee’s terms of reference is available on the Company’s website. The Audit Committee has delegated authority from the Board for ensuring adherence to the Code provisions and related guidance.

Responsibilities

The responsibilities of the Audit Committee include:
• monitoring the integrity of the financial statements and reviewing significant accounting policies, judgements and estimates contained within them;
• reviewing the effectiveness of the internal control and risk management systems, including control over financial reporting;
• reviewing the effectiveness of the internal audit function, including the business risk register;
• reviewing the Group’s policies and practices concerning business conduct, ethics and integrity and whistle‑blowing; and
• overseeing all aspects of the relationship with the external auditors, including their appointment, the audit process, the supply of non-audit services and monitoring their effectiveness and independence.
The Audit Committee met 3 times in 2011 and a full report of its activities and of findings and recommendations from each meeting is given to the Board.

During the year ended 31 December 2011, the Audit Committee formally reviewed and recommended the draft Annual Report (including the statements on internal control and the work of the Committee) and associated business review, and interim results announcements made by the Company. This aspect of its work focused on key accounting policies and estimates and judgements, including significant or unusual transactions or changes to these. In doing so the Audit Committee reviewed the reports of management and the controls assurance (internal audit) provider and took into account the views of the external auditors.

Internal Control structure and Internal Audit

The Audit Committee also reviewed the Group’s internal control structure, approved the scope of work and fees for the controls assurance provider and debated whether the internal audit function should be brought in-house. It concluded that due to the complexity of the Group’s business and the international nature of the aviation business, the internal audit function was best served by continuing to be outsourced to Deloitte LLP, given their global spread and resources.

Findings from the internal audit programme (on financial and key non-financial risks) and areas identified for improvement are reviewed by the Committee and prioritised for action by management. The Audit Committee reviews follow-up reports from management to ensure that any weaknesses identified in internal audit reports submitted to it are fully addressed and that improved procedures are adopted.

Risk and the Risk Register

The Audit Committee also reviewed the work of management on updating the Group’s Business Risk Register, which involved assessing key risks at Group and divisional level according to their significance, likelihood and impact, as well as the Company’s exposure to and management of these risks. After taking into account reports from the controls assurance provider, the Audit Committee was satisfied that management had appropriate risk management strategies and systems in place to address the Group’s key business risks.

Group Audit

The Audit Committee also reviewed and approved the audit plan, as well as the findings of the external auditors from its audit of the annual financial statements. It also assessed the effectiveness of the external auditors and of the audit process through meetings and interviews with management and key finance staff.

In 2009 the Group moved the audit role to Ernst & Young following a tendering process, and the contract was awarded on the basis of cost, expertise and ability to audit the Group’s worldwide activities. The Audit Committee was satisfied then, and remains satisfied, that in accepting the position of Statutory Auditor Ernst & Young are able to remain independent and objective.

As part of its review of the effectiveness of the external auditors, the Audit Committee keeps under review their objectivity and independence, and the nature and extent of the non-audit services which they provide. These services have historically consisted mainly of acquisition-related due diligence, where their knowledge of the Group’s business processes and controls makes them best placed to undertake this work cost-effectively on the Group’s behalf. The external auditors also deal with the Group’s tax affairs. The work undertaken for the Group by the audit team is handled by a different partner from the tax and other non-audit services, and is managed out of a separate office.

All non-audit work is put out to tender, and non-audit fees paid to Ernst & Young are reported regularly to the Group Finance Director, who reports any significant payments or awards of work to the Audit Committee. The Audit Committee believes that the level and scope of these non-audit services does not impair the objectivity of the Company’s auditors.

During 2011, audit fees amounted to approximately £0.5m, whilst non-audit fees to Ernst & Young amounted to approximately £0.7m. The Audit Committee regularly reviews the remuneration received by the Company’s auditors for audit services, audit-related services and non-audit work. These reviews are to ensure a balance of objectivity, value for money and compliance with their duties. The outcome of these reviews was that performance of the relevant non-audit work by our auditors was the most cost-effective way of conducting our business and that no conflicts of interest existed between such audit and non-audit work. These reviews enable the Audit Committee to confirm that we continue to receive an efficient, effective and independent audit service.