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Report of the Audit Committee

Internal controls

The Committee has an ongoing process for reviewing the effectiveness of the system of internal controls. During 2008/09 it considered reports from the Head of Corporate Risk and Internal Control summarising the work planned and undertaken, recommending improvements and describing actions taken by management.

Internal audit

During 2008/09, the Committee reviewed and agreed the risk-based audit plan and resources required. It also evaluated the performance of internal audit from the quality of reports and recommendations from the Head of Corporate Risk and Internal Control.

Risk Group

The Committee reviewed the reports produced by the risk management process during the year. It discussed with management how they will continue to deliver high-quality oversight and risk evaluation against the background of the current economic conditions. As part of the management restructuring, responsibility for risk management passed to the Head of Corporate Risk and Internal Control.

External audit

The Committee reviewed the external audit strategy and the findings of the external auditor from its review of the interim announcement and its audit of the annual financial statements. The Committee also reviewed the scope and cost of the external audit and the non-audit work carried out by the auditor.

Whistleblowing

The confidential helpline run by Safecall, which allows employees to raise concerns, is working well and confidence in it is growing. The Committee received regular reports on the confidential reporting system to ensure that the Company’s whistleblowing processes are working appropriately.

Auditor independence

The Committee reviews the work undertaken by the external auditor and each year assesses its independence and objectivity. In doing so, it takes into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non-audit services. The Committee monitors the auditor’s compliance with relevant regulatory, ethical and professional guidance on the rotation of partners, as well as assessing annually its qualifications, expertise, resources and the effectiveness of the audit process, including a report from the external auditor on its own internal quality procedures.

Audit Committee effectiveness

The Committee prepares and reviews with the Board an annual performance evaluation of the Committee. The findings of the review ensure that the Committee is satisfied that it is operating effectively, and meeting all applicable legal and regulatory requirements.

Other issues

Details of the fees paid to the external auditor during 2008/09 can be found in note 7 to the financial statements.

The terms of reference of the Committee are reviewed at least annually and any changes are recommended to the Board. As mentioned above, they were changed during the year.

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