Georgia Healthcare Group PLC Annual Report 2018 Governance Audit Committee Report continued External Audit tender process continued Auditor independence The Audit Committee is responsible for the development, implementation and monitoring of policies and procedures on the use of the external auditor for non-audit services, helping to ensure that the external auditor maintains the necessary degree of independence and objectivity. Our policy on the provision of non-audit services by our external auditors aligns with the current EU Statutory Audit regime and recent amendments to the UK Corporate Governance Code. Any work other than for audit or review of interim statements to be undertaken by the external auditor now requires authorisation by the Audit Committee except in very narrow circumstances. The Group’s Policy on Non-Audit Services was revised and approved in 2018 and can be found on our website at: http://ghg.com.ge/uploads/files/nonaudit-services-policy-6.pdf. The Committee has undertaken a formal assessment of EY’s independence, which included a review of: a report from EY describing their arrangements to identify, report and manage any conflicts of interest, and their policies and procedures for maintaining independence and monitoring compliance with relevant requirements; and the value of non-audit services provided by EY. EY have confirmed that they believe they remained independent throughout the year, within the meaning of the regulations on this matter and in accordance with their professional standards. As indicated in Note 32 of the audited IFRS Financial Statements for 2018, the total fees paid to EY for the year ended 31 December 2018 were GEL 1.3 million of which GEL 0.4 million related to the Group’s 2018 half year interim accounts review. None of these fees related to work other than the audit or review of the interim accounts. Effectiveness of the External Audit process We have an established framework for assessing the effectiveness of the external audit process. This includes: • a review of the audit plan, including the materiality level set by the auditor and the process they have adopted to identify Financial Statement risks and key areas of audit focus; • regular communications between the external auditor and both the Committee and management, including discussion of regular reports prepared by EY; • regular discussions with EY (without management present) and management (without EY present) in order to discuss the external audit process; • a review of the final audit report, noting the conclusions reached by the auditors and the reasoning behind such conclusions; • a review of EY’s 2018 Transparency Report and the annual FRC Audit Quality Inspection Report of EY; and • a formal questionnaire issued to all Committee members and also to the executive management of the Group leading the audit, which includes the quality of the audit and Audit Team, the audit planning approach and execution, the presence and capabilities of the lead audit partner, the Audit Team’s communication with the Committee and management, and the auditor’s independence and objectivity. We are confident that the evaluation process is effective, allowing for an objective assessment against the principal focus areas. After carefully considering the outcome of the above review, we concluded, in conjunction with management, and reported to the Board that in our opinion: • the audit team was sound and reliable, and that the quality of the audit service provided was of a high standard; • EY continued to remain independent and objective; • EY was effectively able to challenge management when required; and • that productive discussions were held with the Committee throughout the audit planning, execution and year-end processes. The Committee has recommended to the Board that EY be re-appointed under a new External Audit contract and the Directors will be proposing the re-appointment and the determination of EY’s remuneration at the 2019 AGM. Whistleblowing, conflicts of interest, anti-bribery and anti-corruption policies and procedures The Committee also monitors regularly the Group’s compliance with the corporate governance policies and procedures in relation to anti-bribery and anti-corruption, conflicts of interest and whistleblowing. During 2018, the Committee approved updates to the Company’s Whistleblowing Policy and Anti-Bribery and Anti-Corruption Policy to be in line with both recommendations under the revised UK Corporate Governance Code and in line with general good practice. The Audit Committee ensures that there are effective procedures relating to whistleblowing. The Company has adopted a Whistleblowing Policy which allows staff to confidentially raise any concerns about business practices through an independent whistleblowing hotline. Having updated the Company’s Whistleblowing Policy during 2018, we are confident that the whistleblowing arrangements remain effective and proportionate, and that there is an appropriate mechanism for follow-up actions to be identified from any concerns raised through the Whistleblowing Policy and acted upon. We are particularly pleased with the work by management in 2018 to raise awareness of the Policy across the Group, including awareness of the ways in which the Policy should be used and the protections available to individuals raising concerns under the Policy. From 1 January 2019, responsibility for the Company’s whistleblowing arrangements, including overseeing how the Policy is implemented, will sit at Board level, in accordance with both the importance that the Board attaches to robust whistleblowing arrangements and developing good corporate governance practice. For further details of our whistleblowing arrangements, please see the Resources and Responsibilities section of this report. We have also developed a Conflicts Authorisation Policy through which we assess actual and potential conflicts of interest and assist the Board in its review of the permissibility of such conflicts. The Audit Committee also keeps under review the Group’s Anti-Bribery and Anti-Corruption Policy and procedures and receives reports from management on a regular basis in relation to any actual or potential wrongdoing. 80