Audit Committee Chairman
On behalf of the Board, I am pleased to present this year's Audit Committee (the Committee) report. During the year in addition to our regular duties, we focused on revising the non-audit fees policy and the proposed amendments to the risk reporting and viability statement following guidance from the Financial Reporting Council.
For the first time in four years the level of non-audit fees exceeded 50% of the audit fee, which was wholly due to the engagement of PricewaterhouseCoopers LLP (PwC) as the reporting accountant for the circular to shareholders to approve the acquisition of AST Farma B.V. and Le Vet Beheer B.V. (the Acquisition), which completed in February 2018. The time to complete this assignment was extremely short as a result of the vendor requirements which gave the Company a limited period of exclusivity. The Committee consequently considered the proposal by management to use PwC who were best placed to meet the assignment timetable and exceptionally gave their approval for the engagement. In giving their approval the Committee noted that a team independent of the audit team would carry out the work, the absence of any remuneration payable to the audit partner or team as a result of the work, its consistency with the revised ethical standard published by the FRC, and the low level of non-audit fees over the previous three year period. It also made the decision not to use PwC in future for such work. It consequently concluded that this appointment would not adversely impact PwC's independence or integrity as auditor.
The Committee also agreed during the year that in addition to their policy of not using the external auditor where another professional firm can provide the same or similar service they would set an annual cap that non-audit fees would not exceed 30% of the annual audit fee in future years.
It is the Committee's expectation going forward that the result of this policy will be that, excluding the fee paid to the external auditor for their review of the interim accounts, other non audit fees will be minimal and related to work required by legislation of the countries in which the Group operates.
Annual Report 2018
The judgements and factors that the Committee considered in reviewing the Annual Report and Accounts for 2018 (Annual Report 2018) are set out in the Audit Committee Report.
The report also outlines significant accounting matters which received particular focus during the period. It explains why the issues were considered significant and how the Committee satisfied itself on the validity of the judgements made.
The Committee has reviewed the revised viability statement, which now clearly distinguishes the assessment of long term prospects from the viability assessment, with a five year time frame for long term prospects and a three year time frame for viability.
Finally, we specifically reviewed, at the request of the Board, whether the 2018 Annual Report was fair, balanced and understandable and concluded that it was. The basis supporting our conclusion is set out in the Audit Committee Report.
I will be available at the Annual General Meeting to answer any questions about our work.
Audit Committee Chairman
3 September 2018