• to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration
relevant UK professional and regulatory requirements;
• to keep under review the nature and extent of non audit services provided by the external auditors, taking into account LSL’s Auditor
Independence Policy; and
• to report to the Board on how it has discharged its responsibilities.
In carrying out its duties, the Committee takes into account the requirements of the Listing Rules (together with any requirements issued by the FSA),
the Code and the Guidance on Audit Committees issued by the FRC, together with any requirements of the Board, which are all incorporated into the
Audit Committee’s Terms of Reference by reference to them.
The Committee has an established programme of work to ensure that each of its responsibilities are covered adequately during the year. Areas of
Governance
Directors’ Report and Business Review
particular focus during the year have been: the review of goodwill and other intangibles for potential impairment; the appropriateness of provision
for PI claims; accounting for the contingent consideration on acquisitions; and an assessment of the carrying value of LSL’s investment in Zoopla. It
has also overseen a strengthening in the Group’s whistleblowing processes.
Significant issues considered in Relation to the Financial Statements
During 2012, the Audit Committee considered the following significant issues in relation to LSL’s Financial Statements:
a. In accordance with IFRS (as adopted by the EU) financial reporting requirements, the Audit Committee considered the following judgements and
estimates: impairment of tangible assets; going concern; and fair values of assets acquired in business combinations; and
b. New issues which arose during the year included: appropriateness of the provision for PI claims; contingent consideration on acquisitions; and
the valuation of financial assets.
Appointment of External Auditor
During 2012, the Audit Committee reviewed the effectiveness, independence and objectivity of the external auditor, Ernst & Young LLP (Ernst
& Young), on behalf of the Directors and having concluded that Ernst & Young is effective, independent and objective, LSL will recommend to
Shareholders the reappointment of Ernst & Young as its auditor at the forthcoming AGM and seek authority for the Directors to agree the external
auditor’s’ remuneration. Ernst & Young have acted as LSL’s external auditors since 2004 with a tendering exercise undertaken in 2007. Going forward,
in relation to the appointment of the external auditors, LSL has decided to adopt the FRC’s recommendations on audit firm tendering taking place at
least once every ten years and has amended the Audit Committee’s Terms of Reference to reflect the same.
Accordingly, LSL’s plans to conduct an audit firm tendering exercise prior to 2018. This is in line with FRC guidance which permits a deferral of the
tendering exercise where firms have undertaken such an exercise since 2000. The current audit partner is due to retire having completed his five year
term in February 2013 and a new audit partner has been assigned to take over the role. The tender will therefore take place at or prior to the expiry of
the incoming partner’s five year term. The purpose of the audit tendering exercise will be to benchmark the quality and effectiveness of the services
provided by the incumbent auditor against those offered by other firms, with the aim of obtaining the best quality and most effective audit.
Auditor independence Policy
To guard against the objectivity and independence of the external auditors being compromised, the Audit Committee has adopted a policy under which
any non audit related services provided by the external auditors must be approved by the Committee or be within a pre-approved category and a pre-
approved fee limit (Auditor Independence Policy). The Audit Committee is kept regularly informed of the fees paid to the auditor in all capacities.
Under the terms of the Auditor Independence Policy, which takes into account the relevant ethical guidance regarding the provision of non audit
services by external audit firms, the following categories of fee need pre-approval of the Audit Committee:
1. Any fee for specific non audit services which exceed £25,000;
2. Any fee which has a contingent element; and
3. Where the total of the fees for non audit services in any particular year exceeds the audit fee for the year.
This policy does not currently include a list of pre-approved categories and in developing its Auditor Independence Policy, the Audit Committee took
into account the ethical standards and FRC Guidance on Audit Committees (including the FRC’s Guidance on Audit Committees which was updated in
2012). A copy of the Auditor Independence Policy is available at LSL’s website: www.lslps.co.uk.
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