Page 135 - Annual Report 2020

Evaluation of External Auditor and external audit process • Audit-related and other assurance services – work that is Strategic Report
The RAC evaluates the objectivity and independence of the outside the scope of the statutory audit but is consistent with
External Auditor and the quality and effectiveness of the external the role of the external statutory auditor, is of an assurance
audit arrangements. As part of this evaluation, the RAC considers or compliance nature, is work the External Auditor must
specified criteria, including delivering value to shareholders or is best placed to undertake and is permissible under the
and BHP, and also assesses the adequacy of the external audit relevant applicable standard.
process with emphasis on quality, effectiveness and performance. Activities outside the scope of the categories above are
It does so through a range of means, including: not ‘pre-approved’ and must be approved by the RAC prior
• the Committee considers the External Audit Plan, in particular to engagement, regardless of the dollar value involved. 2
to gain assurance that it is tailored to reflect changes in In addition, any engagement for other services with a value
circumstances from the prior year over US$100,000, even if listed as a ‘pre-approved’ service,
• throughout the year, the Committee meets with the audit requires the approval of the RAC. All engagements for other
partners, particularly the lead Australian and UK audit services whether ‘pre-approved’ or not and regardless of
engagement partners, without management present the dollar value involved are reported quarterly to the RAC. Governance at BHP
• following the completion of the audit, the Committee While not prohibited by BHP’s policy, any proposed non-audit
considers the quality of the External Auditor’s performance engagement of the External Auditor relating to internal control
drawing on survey results. The survey is based on a two-way (such as a review of internal controls) requires specific prior
feedback model where the BHP and EY teams assess each approval from the RAC. With the exception of the external
other against a range of criteria. The criteria against which audit of BHP’s Financial Statements, any engagement identified
the BHP team evaluates EY’s performance include ethics and that contains an internal control-related element is not
integrity, insight, service quality, communication, reporting considered to be pre-approved. In addition, while the categories
and responsiveness of ‘pre-approved’ services include a list of certain pre-approved
• reviewing the terms of engagement of the External Auditor services, the use of the External Auditor to perform these Remuneration Report
• discussing with the audit engagement partners the skills and services will always be subject to our overriding governance
experience of the broader audit team practices as articulated in the policy.
• reviewing audit quality inspection reports on EY published In addition, the RAC did not approve any services during the
by the UK Financial Reporting Council in considering the year ended 30 June 2020 pursuant to paragraph (c)(7)(i)(C)
effectiveness of the audit of Rule 2-01 of SEC Regulation S-X (provision of services other
In addition, the RAC reviews the integrity, independence and than audit).
objectivity of the External Auditor and assesses whether there Fees paid to BHP’s External Auditor during FY2020 for audit
is any element of the relationship that impairs or appears to and other services were US$16.7 million, of which 75 per cent
impair the External Auditor’s judgement or independence. comprised audit fees (including the US Sarbanes-Oxley Act of 2002 Directors’ Report
The External Auditor also certifies its independence to the RAC. as amended (SOX)), 11 per cent for audit-related fees, 2 per cent
Non-audit services was for tax fees and 12 per cent for all other fees. Details of the fees
Although the External Auditor does provide some non-audit paid are set out in note 35 ‘Auditor’s remuneration’ in section 5.
services, the objectivity and independence of the External Based on the review by the RAC, the Board is satisfied that the
Auditor are safeguarded through restrictions on the provision External Auditor is independent.
of these services with some services prohibited from being Business Risk and Audit Committees
undertaken, including services where the External Auditor:
• may be required to audit its own work Business Risk and Audit Committees (Business RACs), covering
each asset group, assist management in providing the information
• participates in activities that would normally be undertaken to enable the RAC to fulfil its responsibilities. They are management
by management committees and perform an important monitoring function
• is remunerated through a ‘success fee’ structure in the governance of BHP. Meetings take place annually as part Financial Statements
• acts in an advocacy role for BHP of our financial governance framework.
The RAC has adopted a policy entitled ‘Provision of Audit As management committees, the appropriate member of the ELT
and Other Services by the External Auditor’ covering the participates, but the committee is chaired by a member of the
RAC’s pre-approval policies and procedures to maintain the RAC. Each committee also includes the Group Financial Controller,
independence of the External Auditor. This policy was reviewed the Chief Risk Officer and the Group Assurance Officer.
and updated in FY2020, including to reflect only those services
permitted to be provided by the External Auditor in the revised Significant operational and risk matters raised at Business
RAC meetings are reported to the RAC by management.
Ethical Standard published by the UK Financial Reporting Council.
Risk function
Our policy on Provision of Audit and Other Services by the The Risk function’s role is to create and maintain the Group’s
External Auditor is available at bhp.com/governance. Additional information
Risk Framework, and to support, verify, oversee and provide
In addition to audit services, the External Auditor is permitted insight on the effective application of the Risk Framework for
to provide other (non-audit) services that are not and are not all risks, including strategic, operational and emerging risks.
perceived to be in conflict with their role. In accordance with The RAC assists the Board with the oversight of risk
the requirements of the Exchange Act and guidance contained management, although the Board retains accountability for
in Public Company Accounting Oversight Board (PCAOB) BHP’s risk profile. In addition, the Board requires the CEO to
Release 2004-001, certain specific activities are listed in our implement a system of control for identifying and managing
policy that have been ‘pre-approved’ by the RAC. risk. The Directors, through the RAC, review the systems
The categories of ‘pre-approved’ services are: that have been established, regularly review the effectiveness
of those systems and monitor that necessary actions have
• Audit services – work that constitutes the agreed scope been taken to remedy any significant failings or weaknesses Shareholder information
of the statutory audit and includes the statutory audits of BHP identified from that review. The RAC regularly reports to the
and its entities (including interim reviews). This category also Board to enable the Board to review our Risk Framework at least
includes work that is reasonably related to the performance annually to confirm that the Risk Framework continues to be
of an audit or review and is a logical extension of the audit sound and that BHP is operating with regard to the risk appetite
or review scope. The RAC monitors the audit services set by the Board. A review was undertaken during FY2020,
engagements and if necessary, approves any changes in resulting in refinements to BHP’s Risk Framework. For more
terms and conditions resulting from changes in audit scope, information, refer to section 1.5.4.
Group structure or other relevant events.

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