Audit Board Terms of Reference

The Terms of Reference of the Audit Board are as set out below.

1. Purpose and responsibilities

• 1.1. The Audit Board is established  with reference to the provisions and principles of the Audit Firm Governance Code to assist the Executive in the furtherance of its responsibilities set out in overview in clause 13.2 of the LLP Agreement and in more detail in Part C and Schedule 2 of the Governance Handbook.  The initial Audit Board is not formally a component of the LLP’s governance arrangements and will have advisory responsibilities rather than formal responsibilities and powers.
• 1.2. The Audit Board is responsible for advising (and, within that advisory context, providing challenge to) the Audit Executive Committee and, in turn, the Executive on how their Audit Strategy:
  • a. Ensures that the people within the audit practice are “focussed above all on the delivery of high-quality audits in the public interest”; and
  • b. Establishes and promotes a culture supportive of the public interest.
• 1.3. It is accepted that not all of the provisions below will be in place from the first Audit Board meeting however the Executive and Non-Executives wish to make a start as quickly as possible.
• 1.4. The Audit Board is independent of the Public Interest Committee (PIC), but recognising that Firmwide Independent Non-Executives (INEs) will be members of both, there should be knowledge sharing between the Audit Board and the PIC to provide assurance and enable the two governance bodies to operate efficiently.
• 1.5. The Audit Board Terms of Reference will be published on the firm’s webpage.
• 1.6 The firm’s Transparency Report will include a report from the Chair of the Audit Board with effect from the 31 August 2023 year end.
• 1.7 The following sections set out the key elements of the Audit Board’s role; at all stages it is acting in an advisory capacity.

2. Promoting audit quality and safeguarding the public interest

• 2.1 In its role of advising on the promotion of audit quality the Audit Board will consider the audit practice’s actions to ensure the consistent delivery of high-quality audits in the public interest, this will include but is not limited to:
  • a. Audit strategy – consider the audit strategy of the firm in the context of ensuring that (i) the people within the audit practice are focussed above all on delivering of high-quality audits in the public interest; and (ii) establishing and promoting a culture supportive of the public interest;
  • b. Partner promotion and remuneration – consider whether the firm’s procedures in respect of partner promotion and remuneration support the delivery of high quality audits;
  • c. Audit quality indicators – consider the appropriateness of the indicators selected and targets set by the audit practice, and the actual results and audit practice’s responses to these results;
  • d. Audit quality plans and actions – consider the appropriateness of the audit quality plans and the progress and impact of actions to address;
  • e. Actions to support quality in PIE audits – consider the firm’s response to ensuring quality in PIE audits;
  • f. Training plans and delivery – consider whether the plans and delivery are appropriate to support audit quality and the development of the technical skills and knowledge of the audit people;
  • g. Culture – consider the effectiveness of the firm’s systems and initiatives for promoting and improving audit quality with a culture that delivers quality; and
  • h. Whistleblowing – consider the firm’s arrangements for an effective whistleblowing policy and procedure, and issues raised under this process.
• 2.2. Over a period of up to two years, the Audit Board to consider and advise the Executive on optimising the Audit Board’s terms of reference and operational processes to transition to broader adoption of the FRC’s relevant principles (Business Case Paper (frc.org.uk)). The Executive will follow the procedures set out in clauses 12.6 and 69 of the LLP Agreement in relation to any necessary constitutional amendments arising from this.

3. Composition of the Audit Board

• 3.1. The Audit Board will consist of the following members:
  • a. four Audit Non-Executives (ANEs), which may include two INEs who are members of the Public Interest Committee. ANEs be either INEs or doubly independent ANEs (DIANEs) who are not members of any other governance committee of the firm;
  • b. the UK Head of Audit;
  • c. the UK Head of Audit Quality; and
  • d. the Head of Audit Operations.
• 3.2. The Audit Board will have the following attendees:
  • a. the UK CEO; and
  • b. a further member of the Executive.
• 3.3. The Audit Board may invite attendees to meetings on a regular or ad hoc basis to contribute on all or specific agenda items.
• 3.4. The attendees referenced in 3.2 and 3.3 will not be members of the Audit Board.
• 3.5. In respect of the composition of the Audit Board:
  • a. the Chair of the Audit Board will be an ANE, and this ANE will not chair any governance body within Mazars;
  • b. the majority of the Audit Board will be ANEs;
  • c. at least one ANE will not be an INE of any other governance body within Mazars (DIANE);
  • d. at least one ANE will have experience of audit at an appropriate level of seniority, either as a former auditor or consumer of audit services.

4. Appointments, resignation and independence of ANEs

Appointment

• 4.1. Those ANEs appointed to the Audit Board will be subject to a formal, rigorous and transparent procedure, including meeting with the FRC for new appointments, when appropriate.
• 4.2. ANEs appointed to the Board will generally have a maximum tenure of nine years.

Independence

• 4.3. Each ANE shall be required to satisfy the following independence criteria as at the date of their appointment and shall be required to notify the UK CEO and/or the Ethics Partner of any change in their personal circumstances with regard to those criteria or which may otherwise be relevant to the ANE’s independence:
  • a. the ANE has declared any conflicts in accordance with any requirements of the LLP notified to the ANE;
  • b. the ANE is unrelated to any member firm of the CARL Group;
  • c. the ANE is unrelated to any individual employee, member, partner, shareholder, director or officer of, or consultant to, any member firm of the CARL Group;
  • d. the ANE is not, and will not become, an executive director or member of the audit committee in any of the LLP’s (or, where relevant, any Associated Firm's) audit clients and not have any significant shareholdings or other interests in them unless permitted by the LLP's own share dealing code or disclosed to the Head of Quality;
  • e. the ANE is not, and will not be, in any other executive officer position or a member of an advisory board or council or equivalent of a competing organisation to the LLP (or any Associated Firm); and
  • f. any other independence criteria which may be set out in the letter confirming the ANE's terms of appointment as an INE.
• 4.4. Each ANE shall:
  • a. report any conflicts of interest to the UK CEO and/or the Ethics Partner as soon as they become apparent;
  • b. abstain from any related decisions where they arise; and
  • c. comply with relevant legal and regulatory requirements (such as insider dealing legislation in relation to information that the ANE may become aware of through the ANE's involvement with the LLP or any Associated Firm).

Resignation and disagreement

• 4.5. In the event of an ANE resigning their appointment, the relevant ANE shall offer their reason for resigning to the UK CEO and the UK Governance Council Chair.
• 4.6. Within the context of the advisory nature of the Audit Board as set out in section 1 “Purpose and Responsibilities”, the Audit Board will report potential and actual significant disagreements between itself and the Audit Executive Committee and/or the Executive to the Chair of the Governance Council;  the Chair of the Governance Council will investigate and conclude as appropriate.
• 4.7. An ANE shall have a right to report a fundamental disagreement regarding the LLP or the Business (or, to the extent relevant, any Associated Firm or the business of any Associated Firm) to the Executive and UK Chair of Governance Council.  An ANE may resign their appointment due to a Fundamental Disagreement and may report such resignation to the FRC.

5. Meetings of the Audit Board

Calling and number of meetings

• 5.1. The Audit Board shall meet at least four times a year.. Additional meetings will be arranged, as required. Additional meetings may be called by the Chair of the Audit Board at any time to consider any matters within these Terms of Reference.
• 5.2. The ANEs will also meet as a separate group at least once a year to discuss matters relating to their roles as ANEs.

Virtual meetings

• 5.3. Meetings may be held by telephone, videoconference or other electronic system whereby those in attendance can all hear and speak to each other. A member participating by telephone, videoconference or other electronic means shall be deemed to be present in person at the meeting and shall be entitled to be counted towards the quorum.

Minutes

• 5.4. Minutes shall be prepared of all Audit Board meetings. The draft minutes will be circulated to the Audit Board Chair for review and comment and then the Audit Board for review and approval.
• 5.5. Approved minutes will be shared with the Executive, Audit Executive Committee, Governance Council and Public Interest Committee.

Quorum

• 5.6. Any four members of the Audit Board may form a quorum as long as the ANEs make up the majority of attendees. Where a quorum is present, the Audit Board is able to exercise all the rights of the full Audit Board.
• 5.7. Where the appointed Chair of the Audit Board is not present at the meeting, the members of the Audit Board may appoint an Acting Chair from among the ANEs for the duration of that meeting. For the duration of the meeting the Acting Chair will have the same powers as the appointed Chair of the Audit Board.

6. Rights of Audit Non Executives (ANEs)

• 6.1. As set out in paragraph 1.7 at all stages the members of the Audit Board are acting in an advisory capacity. Within that context:
• 6.2. ANEs appointed to the Audit Board will have a contract setting out their rights and duties.
• 6.3. In order to fulfil their role as ANEs, the firm should supply all ANEs (individually and collectively) with the following:
  • a. Access to appropriate induction into the firm, training and development;
  • b. Access to the information which the Audit Board members regard as necessary and is reasonable to perform their role and responsibilities;
  • c. Appropriate insurance and indemnity cover; and
  • d. The right to obtain independent professional advice in respect of their duties as Audit Board members, subject to prior agreement with the UK CEO. Such agreement will not be unreasonably withheld.
• 6.4. ANEs should maintain an open dialogue, consult on matters of Audit Board interest and share information with each other and with the firm’s Public Interest Committee Independent Non Executives (INEs) in so far as it is relevant to the oversight of the audit practice and firm and discharge of the ANEs and INEs respective responsibilities in these areas.
• 6.5. Both the Executive and the Audit Executive Committee will ensure that all information requested under 6.3b. above is provided on a prompt basis and that they will pay due regard to the advice of the Audit Board.

7. Definitions of different categories of independent non-executives

• 7.1. The following definitions are used in these Terms of Reference:
• 7.1.1. INE – Public Interest Committee Independent Non-Executives, being those independent non-executives who are members of the Public Interest Committee.
• 7.1.2. ANE – Audit Non-Executives, being any Audit Board independent non-executive regardless of whether they are also a member of any other governance committee of the firm (for example, the Public Interest Committee).
• 7.1.3. DIANE – Doubly Independent Audit Non-Executive, being those ANEs who are not also a member any other governance committee of the firm (for example, the Public Interest Committee).

Get in touch

The Audit Board Secretary can be contacted using the following email address Secretariat@mazars.co.uk.