Deloitte LLP who undertook the external audit have stood down as Auditorss following the Annual General Meeting on 12 May 2016, in which shareholders approved the appointment of PricewaterhouseCoopers LLP ("PwC") as Auditorss. As in previous years, the Committee maintained regular contact with the Auditorss throughout the year. The Committee regularly reviews the work of the external Auditorss and undertook an assessment of the Auditorss’ performance and independence and in doing so examined the following issues during the year:
Audit quality and technical capabilities
The Committee formally reviewed the quality of the audit and capabilities of the team during the year and concluded that the existing team conducted an effective audit. The Committee feeds back its comments on the Auditorss’ performance as part of the regular meetings with them that occur without management present. The Committee evaluation process includes an assessment of the work of the Auditorss, which was rated positively. The FRC’s audit quality review team reviewed Deloitte’s audit of Hikma’s 2014 financial statements as part of their 2015 annual inspection of audit firms. The Chair of the Audit Committee received a full report of the findings of this review and discussed them with Deloitte. The Committee noted that there were no significant areas for improvement identified with the report. The Auditorss ensure that experienced specialists assist management and present to the Committee where there are issues of a more complex nature, such as international taxation. The Committee believes that there is a strong, appropriate and open relationship between the audit team leadership, the Audit Committee and management.
The Committee regularly reviews the independence safeguards of the Auditorss. The Auditorss are not allowed to undertake work that involves promoting Hikma, installing systems, making management decisions, supporting litigation or tasks that would involve review or reliance upon their audit work. The Committee aims to minimise non-audit work and authorises such activities only where the appointment is in the best interests of the Group and:
- The independence of the Auditorss is maintained both in terms of the type of work undertaken and the overall level of the non-audit fee
- The services of other major providers is limited due to issues such as conflicts of interest
Fees paid in respect of audit, audit-related and non-audit services are outlined in Note 6 to the consolidated financial statements in our Annual Report and in the chart below. Audit-related services are services carried out by the external audit team by virtue of the role and principally include assurance-related work.
Deloitte LLP were appointed as Auditors when the original Hikma holding company was incorporated in 1977. Since that point there have been three senior audit partners, with the current senior audit partner due to complete his term in March 2016. As a result of this and the regulatory changes, the Audit Committee decided it would be prudent to undertake a tender exercise during 2015.
The tender process was led by the Audit Committee Chair and a Steering Committee was established comprising the Audit Committee Chair, Mr Breffni Byrne, Dr Pamela Kirby, the Chief Financial Officer, the Group Financial Controller and the Company Secretary.
Given the size, complexity and geographical scope of the Company, several major global accounting firms were invited to take part in the tender.
The tender process and the Committee’s involvement in the process are outlined below:
Conclusion and rationale
Detailed evaluation criteria and a scoring matrix were used to assist the Steering Committee in making its decision. The Committee considered that Deloitte had been invaluable in assisting the development of the Company from incorporation to listing and to the present day. The Committee balanced this against the advantages of having a new audit firm as the Company further matured. PwC had communicated a clear desire to take on the audit, developed excellent relationships with management and had a clear plan to help the Company on the next step of its journey. Accordingly, having taken appropriate references into consideration, the Committee recommended the appointment of PwC and a resolution proposing PwC as Hikma’s Auditors was appoved by the shareholders at the 2016 Annual General Meeting. There are no contractual provisions that restrict the Committee’s choice of Auditors and Hikma does not indemnify its external Auditors. Should shareholders wish to discuss the change of Auditors, the Chair of the Audit Committee will make himself available.