Audit Committee Report continued Effectiveness Audit tender and lead partner rotation The Audit Committee has an established framework for EY was appointed by the Board of BGEO Group plc assessing the effectiveness of the external audit process. as Group statutory auditor in 2012, and subsequently This includes: re-appointed by shareholders at the 2013 AGM. EY was •a review of the audit plan, including the materiality level appointed as auditors of Bank of Georgia Group PLC in set by the auditor and the process they have adopted 2018 ahead of the Demerger. We believe that appointing to identify financial statement risks and key areas of EY as our auditor (subject to shareholder approval) is in audit focus; the best interests of shareholders given EY’s continued •regular communications between the external auditor independence, objectivity and performance on the audits and both the Committee and management, including they have completed, following assessment of their discussion of regular papers prepared by management effectiveness by the Committee. and EY; •regular discussions with EY (without management The Company complied with the mandatory audit present) and management (without EY present) to processes and the Committee complied with the discuss the external audit process; responsibility provisions set out in terms of the •a review of the final audit report, noting key areas Competition and Markets Authority Statutory Audit of auditor judgement and the reasoning behind the Services Order 2014 (“CMA Order”) relating to (a) putting conclusions reached; the audit services engagement on tender every ten years; •a review of EY’s 2018 Transparency Report and the and (b) strengthening the accountability of the external annual FRC Audit Quality Inspection Report of EY; and auditor to the Committee, including requiring that only the •a formal questionnaire issued to all Committee Committee is permitted to agree to the external auditor’s members and to the executive management of the fees and scope of services; influence the appointment of Group leading the audit which covers among other the audit engagement partner; make recommendations items the quality of the audit and audit team, the audit regarding the appointment of auditors; and authorise the planning approach and execution, the presence and auditors to carry out non-audit services. The Committee capabilities of the lead audit partner, the audit team’s confirms compliance with the provisions of the CMA Order communication with the Committee and management for the year ended 31 December 2018. and the auditor’s independence and objectivity. The Group will be required to put the external audit Following the Audit Committee’s assessment of the contract out to tender no later than 2027 although this external auditor, it formed its own judgement (which date is under review. We continue to review the auditor was consistent with management’s view) and reported appointment and, following the Demerger in 2018, will in to the Board that: 2019 consider the appropriate time to next tender for the •the audit team was sound and reliable, providing provision of audit services to the Company. EY appointed high-quality execution and service; John Headley as BGEO Group PLC’s lead audit partner •the quality of the audit work was of a high standard; responsible for the Group. •EY’s independence and objectivity were affirmed; •EY was able to challenge management on its approach Viability statement to key judgements; and In accordance with the Code, the Directors are required to •appropriate discussions were held with the Audit assess the viability of the Group. In collaboration with the Committee during the audit planning process. Risk Committee, and considering the recommendations of the FRC guidance, we spent time considering the EY was re-appointed by shareholders at the predecessor timeframe over which the viability statement should be company’s 2018 BGEO Group plc AGM and the Committeemade as well as an assessment underlying the period was authorised to set the remuneration of the auditor of coverage, which we agreed should be three years. In by 99.96% and 99.90% votes in favour respectively. The addition to aligning with the period covered by the Group’s Audit Committee has recommended to the Board that strategy and financial forecasts, this three-year period EY be appointed under the current external audit contract seems particularly appropriate for BOGG whose business and EY has expressed its willingness to continue as model continues to evolve in a rapidly developing market auditor of the Group. Separate resolutions proposing like that of Georgia. We considered: the Group’s principal EY’s appointment and determination of EY’s remuneration risks and uncertainties, including those that will threaten by the Committee will be proposed at the 2019 AGM. its business model, future performance and solvency or liquidity; the current financial position of the Group, including future cash flows, allocated capital expenditure and funding requirements; prospects; and downside stress tests involving several different scenarios. 124 Annual Report 2018Bank of Georgia Group PLC