01 02 Governance 03 04 Further, Ingeborg Oie was appointed to the Committee in September 2018 and Dr Brown’s appointment concluded on 31 December 2018. Ms Oie brings additional recent and relevant financial experience to the Committee, including as a country Chief Financial Officer of a FTSE 100 company, a CFA charter holder and is CIMA exams complete. The biographies of the Audit Committee members are set out on pages 72 and 73. The Audit Committee works to a planned programme of activities focused on key events in the annual financial reporting cycle and standing items that it considers regularly under its Terms of Reference. The latest review took account of the 2018 UK Corporate Governance Code. It also reacts to relevant business developments as and when they occur. Our meetings are regularly attended by the Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, the Head of Internal Audit and other members of senior management. The formal meetings are also attended by representatives of the Company’s external auditor, Ernst & Young LLP (“EY”). During the year, we also regularly held separate private meetings with the Head of Internal Audit and the external auditor. The sessions with the external auditor, which are not attended by management, allow us to discuss any issues of concern in more detail directly with the Audit Teams. From time to time, other members of management are invited to attend meetings in order to provide a deeper level of insight into any key issues and developments. Meetings of the Audit Committee take place ri relevance to the Board. Mr Morrison attends the AGM to respond to any shareholder questions that may be raised on the Audit Committee’s activities. Continuing education and training The whole Board also received training on the new UK Corporate Governance Code 2018 and associated guidance, and the proposed changes to the previous version, affecting the Audit Committee. Audit Committee activities in 2018 Financial reporting A principal responsibility of the Audit Committee is to consider the significant areas of complexity, management judgement and estimations that have been applied in the preparation of the Financial Statements. The Committee received detailed reports from the external auditor in respect of key areas of audit focus during the year. The Committee and the external auditor, without management present, discussed the key areas of audit focus, the suitability of the accounting policies which have been adopted and whether management’s key reporting estimates and judgements were appropriate. Taking into account the external auditor’s assessment of risk, but also using our own independent knowledge of the Group, we reviewed and challenged the actions, estimates and judgements of management in relation to the Financial Statements. As part of its role the Committee also dedicates time to ensuring that the Group’s Alternative Performance Measures are reported in a consistent and transparent way, in accordance with ESMA guidance. The significant risks, financial judgements and accounting issues considered by the Audit Committee in relation to the Financial Statements are addressed below. Matter considered Action taken Revenue recognition Engagement with EY; assurances from management; focus management compensation on long-vesting shares Valuation of properties Assure regular engagement of independent valuer; engage with EY; reports from management Goodwill impairment Engagement with EY and reports from management Provision for ongoing litigation Engagement with EY and reports from management Adoption of IFRS 9 and IFRS 16 Engagement with EY; reports from management; modelling of impact of adoption of standards Risk management and internal control systems The Audit Committee recognises that a strong and effective system of risk management and internal control plays a crucial role in a good system of corporate governance. The Committee derives assurance on the adequacy of its risk management and internal control systems from the following internal and external sources: 1.Risk management systems; 2.Internal Audit; and 3.External Audit. Although the Board assumes the ultimate responsibility for the Group’s risk management and internal control framework, its work is supported by the work of both the Audit Committee and the Clinical Quality and Safety Committee. As described earlier in this Report, this includes reports from and regular discussions with the Group executives with whom the Committee members regularly meet. 1.Risk management systems In relation to risk management and internal financial control, the Committee assists the Board in fulfilling its responsibilities for ensuring there are adequate and effective controls in place within the Group’s financial reporting lines and within its operations. As we reported in last year’s Annual Report, the Group established a centralised risk department in 2017, which reports to both the Executive Risk Committee and to the Audit Committee; and Clinical Quality and Safety Committees. The decision to centralise the risk function was taken with a view to ensuring a cohesive and coherent approach in the way that due diligence activities are undertaken across the Group’s clinics and head office, and the way in which risk management policies are implemented across the Group. 77