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Non-Audit Services Policy

The Audit Committee’s objective is to ensure that the provision of non-audit services across Meggitt PLC does not impair the external auditor’s independence or objectivity. In the context of non-audit services that are not prohibited by law, the Audit Committee will apply judgement concerning the provision of such services, including assessing:

  • threats to independence and objectivity resulting from the provision of such services and any safeguards in place to eliminate or reduce these threats to a level where they would not compromise the auditor’s independence and objectivity;
  • the nature of the non-audit services;
  • whether the skills and experience of the audit firm make it the most suitable supplier of the non-audit service;
  • the fees incurred, or to be incurred, for non-audit services both for individual services and in aggregate, relative to the audit fee, including special terms and conditions (for example contingent fee arrangements); and
  • the criteria which govern the compensation of the individuals performing the audit.

This Policy is in line with the recommendations set out in the Financial Reporting Council’s (FRC) Guidance on Audit Committees (2016) and the requirements of the FRC’s Revised Ethical Standard (2019). In line with these recommendations and requirements, the Group’s external auditor may only be appointed to perform a service when doing so would be consistent with the requirements and overarching principles of the Ethical Standard.

  1. Permitted Non-audit/Additional Services

(a) Non-audit/additional services which may be provided and are exempt from the non-audit services cap

The following services may be provided by the Group’s external auditor subject to approval of the Audit Committee:

    • Reporting required by a competent authority or regulator under law or regulation;
    • In the case of a member of the Group incorporated and based in a country outside the UK and the EU, reporting required by law or regulation in that jurisdiction where the Group’s external auditor is permitted to undertake that engagement;
    • Reporting on internal financial controls when required by law or regulation;
    • Reporting on the iXBRL tagging of financial statements in accordance with the European Single Electronic Format for annual financial reports;
    • Reports, required by or supplied to competent authorities/regulators supervising any member of the Group, where the authority/regulator has either specified the Group’s external auditor should provide the service or identified to the relevant member of the Group that the Group’s external auditor would be an appropriate choice for such service provider; and
    • Services which support the Group in fulfilling an obligation required by UK law or regulation, including listing requirements where: the provision of such services is time critical; the subject matter of the engagement is price sensitive; and it is probable that an objective, reasonable and informed third party would conclude that the understanding of the Group obtained by the Group’s external auditor for the audit of the financial statements is relevant to the service, and where the nature of the service would not compromise independence.

(b) Services subject to the non-audit services cap

The following services may be provided by the Group’s external auditor subject to approval of the Audit Committee:

  • Reviews of interim financial information; and providing verification of interim profits not otherwise required by law or regulation;
  • Where not otherwise required by law or regulation, non-audit and additional services provided by the Group’s external auditor, in relation to information of the Group for which it is probable that an objective, reasonable and informed third party would conclude that the understanding of the Group obtained by the Group’s external auditor is relevant to the service, and where the nature of the service would not compromise independence;
  • Extended audit or assurance work that is authorised by those charged with governance performed on financial or performance information and/or financial or operational controls, in an entity relevant to an engagement or a third-party service provider, where this work is closely linked with the audit work;
  • Additional assurance work or agreed upon procedures, authorised by those charged with governance performed on material included within or referenced from the annual report of an entity relevant to an engagement;
  • Reporting on government grants;
  • Reporting on covenant or loan agreements, which require independent verification, and other reporting to third parties with whom any member of the Group has a business relationship in accordance with Appendix C of the Ethical Standard (being a participant in a bank lending or bond funded syndicate);
  • Services which have been the subject of an application to the Competent Authority in accordance with Regulation 79 of The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019 (SI 2019/177); and
  • Generic subscriptions providing factual updates of changes to applicable law, regulation or accounting and auditing standards.

Where such services are provided, they will not include any elements of those services subject to outright prohibition (as set out in Section 2 of this Policy). No other non-audit or additional services will be provided to the Group by the Group’s external auditor.

The Audit Committee has delegated their authority to approve non-audit services in certain limited circumstances as set out in Section 3 of this Policy).

  1. Non-audit services which are prohibited

The Group’s external auditor will not directly or indirectly provide to the Group any prohibited non-audit services in:

(a) the period between the beginning of the period audited and the issuing of the audit report; and

(b) the financial year (or period if longer than one year) immediately preceding the period referred to in point (a) in relation to the services listed below with an ‘*’.

For these purposes, prohibited non-audit services shall mean:

  • tax services relating to:
    • the preparation of tax forms;
    • payroll tax;
    • customs duties;
    • identification of public subsidies and tax incentives (unless support from the Group’s external auditor in respect of such services is required by law);
    • support regarding tax inspections by tax authorities (unless support from the Group’s external auditor in respect of such inspections is required by law);
    • calculation of direct and indirect tax and deferred tax; and
    • provision of tax advice;
  • services that involve playing any part in the management or decision-making of the Group;
  • bookkeeping and preparing accounting records and financial statements;
  • payroll services;
  • designing and implementing internal control or risk management procedures related to the preparation and/or control of financial information or designing and implementing financial information technology systems;*
  • valuation services, including valuations performed in connection with actuarial services or litigation support services;
  • legal services with respect to:
    • the provision of general counsel;
    • negotiating on behalf of the Group; or
    • acting in an advocacy role in the resolution of litigation;
  • services related to the Group’s internal audit services;*
  • services linked to the financing, capital structure and allocation, and investment strategy of the Group, except providing assurance services in relation to the financial statements such as the issuing of comfort letters in connection with prospectuses issued by any member of the Group;
  • promoting, dealing in, or underwriting shares in any member of the Group; and
  • human resources services with respect to:
    • management in a position to exert significant influence over the preparation of the accounting records or financial statements which are the subject of the audit, where such services involve (i) searching for or seeking out candidates for such positions; or (ii) undertaking reference checks of candidates for such positions;
    • structuring the organisation design; and
    • cost control.
  1. Procedures

    (a) Approvals

The Audit Committee must approve all non-audit services work which is not deemed “trivial”. Whether or not a matter is trivial is a matter of judgement and the fee payable is not an indicator of triviality.

(b) Fees

    • Fees for non-audit services must be approved as follows:
One-off fee: <£100,000 £100,000-£250,000 >£250,000
Cumulative annual limit: £250,000 £500,000 70% of 3 year average*
Approval by: Chief Financial Officer Audit Committee Chairman Audit Committee

* Permitted non-audit services provided by the Group’s external auditor are subject to a cap of 70% of the average of the fees paid to the Group’s external auditor in the last three consecutive financial years for the audit(s) of the Group (including the consolidated financial statements). Fees for services listed in Section 1(a) of this Policy can be excluded from non-audit fees for the purpose of the cap calculation.

  • Details of all non-audit services including those deemed to be trivial and those approved by the Chief Financial Officer and Audit Committee Chairman must be reported to the Audit Committee.
  • The amount of fees paid for non-audit services will be disclosed in the Annual Report.

As approved by the Audit Committee on 19 February 2020 and effective as of 15 March 2020.


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