Independent external auditors
Duration of the mandate and term of office of the auditor
Ernst & Young are the auditors of ABB’s statutory and consolidated financial statements. Ernst & Young assumed the sole auditing mandate of the consolidated financial statements of the ABB Group beginning in the year ended December 31, 2001 (having previously been joint auditors since 1994). The auditor in charge and responsible for the mandate, Leslie Clifford, began serving in this function in respect of the financial year ended December 31, 2013. Pursuant to ABB’s Articles of Incorporation, the term of office of ABB’s auditors is one year.
During 2017, ABB announced that its Board has decided to appoint KPMG as its external auditor effective for the financial year 2018. The appointment is subject to shareholder approval.
Information to the Board and the Audit and Compliance Committee
Supervisory and control instruments vis-à-vis the auditors
The FACC prepares proposals to the Board for the appointment and removal of the auditors. The FACC is also responsible for supervising the auditors to ensure their qualifications, independence and performance. It meets regularly with the auditors, at least four times each calendar year, to obtain reports about the results of their audit procedures. The FACC reports the material elements of its supervision of the auditors to the Board.
Audit and additional fees paid to the auditor
The audit fees charged by Ernst & Young for the legally prescribed audit amounted to $28.3 million in 2017. Audit services are defined as the standard audit work performed each fiscal year necessary to allow the auditors to issue an opinion on the consolidated financial statements of ABB and to issue an opinion on the local statutory financial statements. Included in the 2017 audit fees were approximately $2.4 million related to the 2016 audit, which were not agreed until after the Company had published its annual report on March 13, 2017.
This classification may also include services that can be provided only by the auditors, such as pre-issuance reviews of quarterly financial results and comfort letters delivered to underwriters in connection with debt and equity offerings.
In addition, Ernst & Young charged $2.4 million for non-audit services performed during 2017. Non-audit services include primarily accounting consultations, audits of pension and benefit plans, accounting advisory services, other attest services related to financial reporting that are not required by statute or regulation, income tax and indirect tax compliance services and tax advisory services. In accordance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and rules issued by the SEC, ABB has, on a global basis, a process for the review and pre-approval of audit and non-audit services to be performed by Ernst & Young.