AstraZeneca Annual Report and Form 20-F Information 2008

Audit committee

The current members of the Audit Committee are John Buchanan (Audit Committee Chairman), Jane Henney, Michele Hooper (the Senior Non-Executive Director), Jean-Philippe Courtois (who joined on 18 February 2008) and Rudy Markham (who joined on 12 September 2008). They are all Non-Executive Directors. The Board considers each member to be independent under the UK Combined Code and under the general guidance and specific criteria of the New York Stock Exchange’s (NYSE) corporate governance listing standards concerning the composition of audit committees applicable to non-US companies. In April 2008, the Company submitted the required annual written affirmation to the NYSE confirming its full compliance with those standards. For the purposes of the UK Combined Code, the Board remains satisfied that at least one member of the Audit Committee has recent and relevant financial experience. At its meeting in December 2008, the Board determined that Michele Hooper and Rudy Markham are audit committee financial experts for the purposes of the US Sarbanes-Oxley Act of 2002. The Deputy Company Secretary acts as secretary to this committee.

The core remit of the Audit Committee includes reviewing and reporting to the Board on:

• Matters relating to the audit plans of the external auditor and Group Internal Audit (GIA).
• The Company’s overall framework for internal control over financial reporting and for other internal controls and processes.
• The Company’s overall framework for risk management, particularly financial risks.
• The accounting policies and practices of the Company.
• The annual and quarterly financial reporting carried out by the Company.

The Audit Committee is charged with promptly bringing to the attention of the Board any significant concerns of the external auditor or the Vice-President, GIA arising from their audit work, any matters that may significantly affect or impair the independence of the external auditor, any significant deficiencies or material weaknesses in the design or operation of the Company’s internal control over financial reporting or other internal controls, and any serious issues of non-compliance.

The Audit Committee oversees the establishment, implementation and maintenance of the Company’s Code of Conduct and other related policies. It establishes procedures for the receipt and handling of complaints concerning accounting or audit matters. It recommends to the Board the appointment of the external auditor, subject to the approval of the Company’s shareholders at a general meeting. Shareholders in a general meeting authorise the Directors to fix the remuneration of the external auditor. The Audit Committee reviews and approves the appointment and any dismissal of the Vice-President, GIA.

The Audit Committee maintains policies and procedures for the pre-approval of all audit services and permitted non-audit services undertaken by the external auditor, the principal purpose of which is to ensure that the independence of the external auditor is not impaired. The policies and procedures cover three categories of work – audit services, audit-related services and tax services. The policies define the type of work that falls within each of these categories and the non-audit services that the external auditor is prohibited from performing under the rules of the US Securities and Exchange Commission and other relevant UK professional and regulatory requirements. The pre-approval procedures permit certain audit, audit-related and tax services to be performed by the external auditor during the year, subject to fee limits agreed with the Audit Committee in advance. The Chief Financial Officer (supported by the Senior Vice-President, Group Finance; Vice-President, Global Benefits; and Director, Corporate Finance & Insurance) monitors the status of all services being provided by the external auditor. The procedures also deal with placing non-audit work out for tender, where appropriate. Authority to approve work in excess of the pre-agreed fee limits is delegated to the Chairman of the Audit Committee in the first instance. A standing agenda item at Audit Committee meetings covers the operation of the pre-approval procedures and regular reports are provided to the full Audit Committee.

The Audit Committee’s remit is available on the Company’s website, astrazeneca.com.

The Audit Committee held four scheduled meetings during 2008. All of these meetings were held in London, UK. All Audit Committee members participated in all meetings either in person or by telephone, except John Buchanan, who was absent from the meeting on 29 January 2008.

Following each Audit Committee meeting, the Chairman of the Committee (or the Senior Non-Executive Director in the absence of the Chairman of the Committee) reported to the Board on the principal matters covered at the meeting and minutes of the meetings were circulated to all Board members.

Members of the Audit Committee met individual managers or groups of managers from the Company on a number of occasions during 2008, which helped the Audit Committee members gain a deeper insight into areas relevant to the Audit Committee’s work and provided an opportunity to discuss specific areas of interest.

During the year, in line with its normal practice, the Audit Committee also held a number of private meetings, without management present, with the Company’s Vice-President, GIA, the Global Compliance Officer and the lead partners from the Company’s external audit firm. The purpose of these meetings was to facilitate free and open discussions between the Audit Committee members and those individuals, separately from the main sessions of the Audit Committee, which were attended by the Chief Financial Officer and the Senior Vice-President, Group Finance.

During 2008 and January 2009, the business considered and discussed by the Audit Committee included the matters referred to below:

• The Company’s financial disclosures were reviewed and various accounting matters considered.
• Reports were received from the external auditor concerning its audit of the Financial Statements of the Group and from management, GIA, Global Compliance and the external auditor on the effectiveness of the Company’s system of internal controls and, in particular, its internal control over financial reporting. This included review and discussion of the results of the Company’s ‘continuous assurance’ and annual ‘letter of assurance’ processes (described further below in the UK Corporate Governance Requirement section). The Audit Committee also reviewed quarterly activity reports of audit work carried out by GIA and the status of follow-up actions with management as well as reports from the Global Compliance function.
• The Company’s continuing work to comply with the applicable provisions of the US Sarbanes-Oxley Act of 2002. In particular, it regularly reviewed the status of compliance with the programme of internal controls over financial reporting implemented pursuant to section 404 of the Act. Further information about the implementation of section 404 of the Act is set out in the Financial Review section.
• A review of data about calls made by employees via the AZethics telephone lines and other routes regarding potential breaches of the Company’s Code of Conduct together with the results of enquiries into these matters. No material issues were reported through this route during the year.
• The Audit Committee reviewed reports from the Vice-President, GIA on areas where GIA’s resources could most appropriately be focused and where efficiency savings could be achieved in the context of the strengthening capabilities of the Global Compliance function and the continued work of the Financial Controls and Compliance Group.
• Reports from the Group Treasury Function and, in particular, considered the Group’s liquidity and cash position and the appropriateness of its cash management policies in the context of the current economic situation.
• Other reports concerning the GIA, global compliance and financial compliance and control and the global finance functions, including the internal audit plan and progress and plans of the Global Compliance Officer.
• The amount of audit and non-audit fees of the external auditor throughout 2008. The Audit Committee was satisfied throughout the year that the objectivity and independence of the external auditor were not in any way impaired by either the nature of the non-audit work undertaken by the external auditor during the year, the level of non-audit fees charged for such work or any other facts or circumstances. Further information about the audit and non-audit fees for the year is disclosed in Note 27 to the Financial Statements.
• A review and assessment of the Audit Committee’s performance and it was concluded that this was satisfactory.

In line with best practice, the Group will periodically consider how the audit requirements of the Group are best served in the context of business need and the prevailing external environment and, against the background of this review, will from time to time undertake a formal tendering programme with audit firms of appropriate size and calibre. Following discussions at a meeting in January 2009, the Audit Committee unanimously recommended to the Board that a resolution for the re-appointment of KPMG Audit Plc as the Company’s external auditor be proposed to shareholders at the AGM in April 2009. Based on its experience of working with external auditors, the Audit Committee believes that the quality of the interaction with and level of service received from KPMG Audit Plc were key factors supporting this recommendation. The Audit Committee was also satisfied that, notwithstanding the length of tenure of KPMG Audit Plc, KPMG Audit Plc met the independence criteria under the relevant statutory, regulatory and accounting standards. Consistent with current market practice, KPMG Audit Plc’s services to the Group are provided pursuant to terms of engagement which are reviewed by the Audit Committee. These terms of engagement do not include any contractual obligations under which the Directors would be prevented from appointing a different audit firm were they to consider this to be in the best interests of the Group. The Audit Committee, through management, continues to maintain contact and dialogue with other major audit firms who are familiar with the Company’s business for succession purposes as required. This is reported to the Audit Committee in order to ensure a smooth transition from the current auditor, should this be necessary.

At the same meeting, the Chief Executive Officer and the Chief Financial Officer presented to the Audit Committee their conclusions following the evaluation of the effectiveness of the Company’s disclosure controls and procedures required by Item 15(a) of Form 20-F as at 31 December 2008. Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as at that date, the Company maintains an effective system of disclosure controls and procedures.

There was no change in the Company’s internal control over financial reporting that occurred during the period covered by this Annual Report and Form 20-F Information 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Audit Committee is currently scheduled to meet four times in 2009 and will meet at such other times as may be required.

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