External Auditor Policy

The Provision Of Audit And Other (Non-Audit) Services By The External Auditor Policy

According to its charter, St.George Bank - A Division of Westpac Banking Corporation’s (“the Company’s”) Audit Committee must “a t least annually, assess the performance and independence of the External Auditor and whether the independence of this function is maintained having regard to the provision of non-audit related services”. The engagement by St.George Group (“Group”) entities of its external auditor for the provision of audit and other (non-audit) services is subject to this policy.

This policy is interpreted by taking into account the requirements of the Corporations Act 2001 and applicable requirements for companies with subsidiaries that have regulatory interactions with overseas regulatory regimes (eg certain subsidiaries of the Company are subject to various US Securities and Exchange Commission (“SEC”) rules governing auditor independence as a result of the need to comply with SEC Regulation AB filing requirements).

This policy must be read in conjunction with the Audit Committee Charter and the Group’s overriding terms and conditions applicable to engagements undertaken by its external auditor.

1. INDEPENDENCE DECLARATIONS

External Auditor’s Declaration

The external audit firm must maintain a quality control system that provides reasonable assurance that the independence of the firm, its partners and employees will not be impaired. The external audit firm will report annually to the Audit Committee on all aspects concerning independence and provide a written declaration to the Board as to its independence and lack of any conflicts of interest. The written declaration must also outline all of its professional relationships with the Group including the provision of services that may affect their objectivity or independence. The written declaration is in addition to any other declaration that the external auditor must provide pursuant to the Corporations Act 2001 (for example pursuant to section 307C).

Audit Committee‘s Declaration

The annual report of the Company should include a statement from the Audit Committee declaring whether or not the level of other (non-audit) services provided by the external auditor is compatible with maintaining auditor independence.

Factors that the Audit Committee should consider in making this statement include:

The level of total fees paid to the external auditor, considering in particular fees paid for the provision of non-audit services, and those fees as a proportion of total fees;
Whether the compensation of the individuals employed by the external auditor who are performing the audit of the Group is tied to the provision of non-audit services and, if so, whether this impairs or appears to impair the external auditor’s judgment or independence;
Whether the individuals performing the audit would also be involved in providing the non-audit services; and
Whether the audit fees are sufficient to adequately compensate the auditors or whether the audit fees are at a level that could increase the need for the auditor to perform non-audit services to “make-up” for the discounted audit fee.

2. PROHIBITION ON SPECIFIC SERVICES

The external auditor should not provide services that have the potential to impair or appear to impair the independence of their audit role. Generally, these include services where the external auditor:

participates in activities that are normally undertaken by management;
is remunerated through a “success fee” structure;
acts in an advocacy role for entities within the Group; or
where the auditor may be required to audit their own work.

The following activities are examples of services that should not be provided by the external auditor:

Book-keeping, preparation of, and other services in relation to, accounting records and financial statements
The design and implementation of financial information systems or financial controls
Valuation services, appraisals or fairness opinions
Outsourced internal audit services that relate to internal accounting controls, financial systems or financial statements
Secondments to the Group where the audit firm secondee acts as a employee of the Group or performs any decision-making, supervisory or ongoing monitoring functions
Human resources and recruitment services
Actuarial services
Management functions
Legal services
Broker-dealer, investment advisor or investment banking services
Expert services for the purpose of advocating the interests of the Group in litigation or in a regulatory or administrative proceeding or investigation.

In addition, it may not be in the interests of the Group to engage its external auditor to carry out other services where there is a conflict of interest due to a relationship with another client of the external auditor.

3. THE PROVISION OF OTHER (NON-AUDIT) SERVICES

In addition to audit and audit related/assurance services (as described below and in Schedules A and B), the external auditor will be permitted to provide other (non-audit) services (as described in schedules C and D) that are not, and are not perceived to be, in conflict with the role of the external auditor, subject to the authorisation process outlined below or in the relevant schedule.

Notwithstanding the approval for the external auditor to provide an other (non-audit) service (whether pre-approved under this policy in Schedules C and D or specifically approved by the Audit Committee), the external auditor must furnish their opinion that provision of the service will not impair their independence. This opinion must be in writing and state that it has been approved by the appropriate authority within the audit firm (such as the relevant engagement partner, the lead audit partner or where significant in value or unclear, the partner in charge of the firm’s Risk Management Division).

4. SERVICES THAT ARE PRE-APPROVED

As a result of certain subsidiaries of the Company being subject to various of the US SEC rules governing auditor independence, the Company has identified certain audit, audit related and other non audit services that the Company classifies as “pre-approved”.

The “pre-approved” services are prescribed in Schedules A, B, C and D and are categorised as Audit Services, Audit-related/assurance services, Tax Services and Other Services.

In application of this policy, any proposed engagement type that is not specifically identified in the Schedules or that calls on management to exercise judgement as to whether it is covered by services prescribed in the Schedules, is not considered to be pre-approved.

Notwithstanding a tax or other non audit service is pre-approved under this policy, the Group has set monetary thresholds above which the specific approval of the Chairman of the Audit Committee must be obtained prior to the engagement of the external auditor and which need to be subsequently ratified by the Audit Committee at the next regularly scheduled meeting.

Pre-approval by the Chairman and subsequent ratification must also be obtained for all services that are not “pre-approved”.

5. APPROVAL PROCESS FOR ENGAGEMENTS FOR OTHER (NON-AUDIT) SERVICES

A summary of the monetary thresholds for other (non audit) services requiring the Chairman of the Audit Committee’s pre approval and subsequent ratification by the Audit Committee appears below:

Engagements approved by the Chairman during the preceding quarter, for the performance of other (non-audit) related services by the External Auditors, where the proposed fees for a particular engagement are $75,000 or more.
Engagements approved by the Chairman during the preceding quarter, for the performance of other (non-audit) related services by the External Auditors, where the cumulative annual total of individual proposals below the $75,000 exceeds $150,000.

Subject to the list of prohibited services in paragraph 2 above, and irrespective of the monetary caps set out in paragraphs i and ii above , non-audit services that are not pre approved and therefore require the pre approval of the Chairman of the Audit Committee include corporate finance services, consulting services, taxation services that do not fit within the categories specified in schedule D, temporary staff assignments (including secondments of junior staff), internal audit services that do not relate to internal accounting controls financial systems or financial statements and IT systems services.

The following Group personnel are permitted to instruct the external auditor to provide other (non-audit) services, including those set out in schedules C and D. All of them have been given a copy of this policy and any engagement of the external auditor must be done in accordance with this policy. The authorised Group Personnel are: (i) Group Executive Members; their Direct Reports (ii) the Divisional Financial Controllers (iii) General Manager-External Reporting and Compliance and his Direct reports.

6. EXCEPTIONS TO THE POLICY

An exception can be made to the above policy where such an exception does not contravene relevant regulatory requirements and is in the interests of the Group and appropriate arrangements are put in place to ensure the integrity and independence of the external auditor. Any such exception requires the specific prior approval of the Audit Committee and must be reported to the Board.

SCHEDULE A
PRE-APPROVED AUDIT SERVICES BY THE EXTERNAL AUDITORS

This is work that constitutes the agreed scope of the statutory audit performed under the Corporations Act 2001 and includes interim reviews or audits.

Audits or interim reviews of financial statements and other procedures required to be performed to enable the external auditor to form an audit opinion on the financial statements of the Group and all subsidiaries or affiliates of the Company as required by applicable companies and securities legislation.
Audits of management certifications as to the adequacy of internal controls where such audits are mandated by applicable companies and securities legislation.

SCHEDULE B
PRE-APPROVED AUDIT RELATED AND OTHER ASSURANCE SERVICES BY THE EXTERNAL AUDITORS

This is work that is outside the required scope of the statutory audit, but is consistent with the role of the external statutory auditor. This category includes work that is reasonably related to the performance of an audit or review and is a logical extension of the audit or review scope, is of an assurance or compliance nature and is work that the auditors must or are best placed to undertake.

Items of such work include:

Services associated with registration statements, periodic reports and other documents required to be filed with regulatory authorities or other documents issued in connection with securities/offerings (e.g. comfort letters, consents), and assistance in responding to comment letters.
Consultations on the accounting treatment or disclosure requirements of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by regulatory or standard setting bodies.
Due diligence services pertaining to potential business acquisitions/dispositions and other major transactions and events (excluding valuation services, appraisals or fairness opinions)
Agreed-upon procedures, extended audit procedures and regulated attest engagements applied to selected accounting information or financial statements required to respond to or comply with financial, accounting or regulatory reporting matters.

SCHEDULE C
PRE-APPROVED TAX SERVICES BY THE EXTERNAL AUDITORS

Work of a tax nature that does not compromise the independence of the external auditor. Items of such work include:

International, federal, state and local tax compliance and advice (excluding strategic tax planning and structuring)
Review of income tax, franchise, and other tax returns
The provision of independent opinions containing interpretations of taxation legislation in connection with tax audits and appeals before the federal, state, local and foreign agencies
Tax only valuation services, including transfer pricing and cost segregation studies
Specialist tax services for acquisition and disposal due diligence activities – provided under the instruction and direction of management
Tax advice and assistance regarding statutory, regulatory or administrative developments
Employee tax assistance and compliance (including expatriates) to the extent that the employee does not have a financial reporting oversight role.
None of these services are pre-approved where they would contain elements of assistance or advice on matters of a strategic tax planning or structuring nature.

SCHEDULE D
PRE-APPROVED OTHER SERVICES BY THE EXTERNAL AUDITORS

Work of an advisory nature that does not compromise the independence of the external auditor. Items of such work include:

Review of operational effectiveness of Treasury operation
Conducting internal investigations and fact finding in connection with alleged improprieties, other than where they relate to potential accounting irregularities
Review of actuarial reports and calculations to assist the Group in understanding the various processes surrounding actuarial valuations and the potential impact of plan changes or changes in accounting standards
Review of compliance by the Group companies with local statutory regulations concerning incorporation of entities, constituent documentation (such as constitutions and articles of association) and lodgement of statutory filings with regulatory bodies