AUDIT COMMITTEE INSTITUTE Audit committee conference Eco Da

AUDIT COMMITTEE INSTITUTE Audit committee conference Eco. Da 2009 © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms © 2009 KPMG LLP, a UK limited liability partnership, is subsidiary of KPMG Europe LLP and member firmand of the network of independent member affiliated with KPMG International, a Swiss cooperative. Alla rights reserved. This document isaconfidential its. KPMG circulation and use are restricted. firms affiliated KPMG with KPMG a Swiss rights reserved. This document is confidential its circulation and use are restricted. and. International, the KPMG logo arecooperative. registered. All trademarks of KPMG International, a Swissand cooperative. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 0

About the Audit Committee Institute KPMG’s Audit Committee Institute (ACI) was founded to help audit committee members enhance their awareness, commitment, and ability to implement effective audit committee processes ACI’s exist in around 30 countries; over 40, 000 members worldwide In the UK, active membership includes audit committee members from the majority of the FTSE 100 UK ACI initiatives include: • Over 40 breakfasts seminars and workshops each year – all focused on audit committee issues. An ideal opportunity to network with other audit committee members • Comprehensive Quarterly update publications • Ad hoc publications on subjects like internal audit, business codes and recession related risks • Regular aide memoire e. g. Ten to dos for audit committee members in 2009 • Checklists, specimen documents and other tools to make the audit committee role easier • Regular surveys of audit committee practices • A hotline for audit committee members • A website www. kpmg. co. uk/aci © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 1

Agenda l Introduction - Background to the 8 th Company Law Directive l Before the 8 th Company Law Directive - Wide spread use of Corporate governance codes - Barriers to adoption l The 8 th Company Law Directive - Requirements - Composition - Risk management © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 2

Introduction EU Governance initiatives l Group of Company Law Experts l Recommendations on independent directors and remuneration l 4 th and 7 th EU Company Law Directives l 8 th EU Company Law Directive © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 3

Before the 8 th Company Law Directive l Codes across Europe l Similar recommendations - Independence - Financial expertise - Oversight over the financial reporting process – including financial reporting controls and the preparation and audit of accounts l Barriers to adoption © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 4

8 th Company Law Directive – requirements (1) l Each public-interest entity shall have an audit committee composed of: - non-executive board members; and/or - supervisory board members; and/or - members appointed by the general meeting of shareholders l At least one member of the audit committee shall be independent and shall have competence in accounting and/or auditing l The functions assigned to the audit committee may be carried out by: - The board (or supervisory board) provided that any executive chairman is not the chairman for the audit committee deliberations - a body performing equivalent functions to an audit committee, established and functioning according to provisions in place in a the relevant Member State © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 5

8 th Company Law Directive – requirements (2) The audit committee shall, inter alia: l monitor the financial reporting process; l monitor the effectiveness of the company's internal control, internal audit where applicable, and risk management systems; l monitor the statutory audit of the annual and consolidated accounts; l review and monitor the independence of the statutory auditor or audit firm, and in particular the provision of additional services to the audited entity; l make the recommendation upon which the proposal to appointment the statutory auditor is based. © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 6

8 th Company Law Directive – requirements (3) l The statutory auditor shall report to the audit committee on key matters arising from the statutory audit, and in particular on material weaknesses in internal control in relation to the financial reporting process l Member States may exempt certain entities from the obligation to have an audit committee: - subsidiary undertakings (if an audit committee or similar exists at group level) - certain investment undertakings - certain entities acting solely as issuers of asset-backed securities - certain credit institutions © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 7

AUDIT COMMITTEE INSTITUTE Audit committee conference Eco. Da 2009 © 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms © 2009 KPMG LLP, a UK limited liability partnership, is subsidiary of KPMG Europe LLP and member firmand of the network of independent member affiliated with KPMG International, a Swiss cooperative. Alla rights reserved. This document isaconfidential its. KPMG circulation and use are restricted. firms affiliated KPMG with KPMG a Swiss rights reserved. This document is confidential its circulation and use are restricted. and. International, the KPMG logo arecooperative. registered. All trademarks of KPMG International, a Swissand cooperative. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 8