Corporate Governance Report  | continued Risk management and internal controls External auditors: appointment, tenure and  independence The Board has delegated responsibility for  monitoring the effectiveness of the Group’s risk  management and internal control systems to the  Audit Committee . Further details in relation to the  Committee’s work in this area are set out in the  section on  Risk Management and Internal  Controls  on pages 50 and 51. Under its terms of reference, the  Audit  Committee  makes recommendations to the  Board in relation to the appointment of the  external auditors. The factors taken into account  by the  Audit Committee  in assessing whether to  recommend the auditors for re-appointment are: – the quality of reports provided to the  Audit  Committee  and the Board; – the quality of advice given by the auditors;  – the level of understanding demonstrated of the  Group’s business and industry;  – the objectivity of the auditors’ views on the  financial controls around the Group and their  ability to co-ordinate a global audit;  – the results of formal evaluations of the  auditors. Section 160(2) of the Companies Act, 1963  provides that the auditor of an Irish company  shall be automatically re-appointed at a  company’s annual general meeting unless the  auditor has given notice in writing of his  unwillingness to be re-appointed or a resolution  has been passed at that meeting appointing  someone else or providing expressly that the  incumbent auditor shall not be re-appointed. In  this respect, Irish company law differs from the  requirements that apply in other jurisdictions, for  example in the UK, where auditors must be  re-appointed annually by shareholders at the  annual general meeting. Therefore, the Directors  have not proposed a resolution to re-appoint  Ernst & Young, Chartered Accountants, who are  willing to continue in office, as such a resolution  can have no effect under Irish company law.  A resolution authorising the Directors to fix the  remuneration of the auditors will be submitted to  the Annual General Meeting.  Ernst & Young have been the Group’s auditors  since 1988. Following an evaluation carried out  in 2009, the Committee recommended to the  Board that Ernst & Young be retained as the  Group’s external auditors. The Committee  monitors the implementation of the  recommendations made as part of the evaluation  process. There are no contractual obligations  which act to restrict the  Audit Committee’s choice of external auditor. The Committee has  considered the risk of withdrawal by Ernst &  Young from the market and the potential impact on the Group, were that eventuality to materialise. The Audit Committee  has put in place safeguards to  ensure that the independence of the audit is not  compromised. Such safeguards include:  – seeking confirmation from the external auditors  that they are, in their professional judgement,  independent from the Group;  – obtaining from the external auditors an account of  all relationships between the auditors and the  Group;  – monitoring the Group’s policy prohibiting the  employment of former staff of the external  auditors, who were part of the CRH audit team, in  senior management positions until two years have  elapsed since the completion of the audit; – monitoring the number of former employees of  the external auditors currently employed in senior  positions in the Group and assessing whether  those appointments impair, or appear to impair,  the auditors’ judgement or independence;  – considering whether, taken as a whole, the  various relationships between the Group and the  external auditors impair, or appear to impair, the  auditors’ judgement or independence;  – reviewing the economic importance of the Group  to the external auditors and assessing whether  that importance impairs, or appears to impair, the  external auditors’ judgement or independence. The Group external audit engagement partner is  replaced every five years and other senior audit staff  are rotated every seven years. The Group has a policy governing the conduct of  non-audit work by the auditors. The policy, which  was updated in 2012, is available on the CRH  website. Under the policy, the external auditors are  prohibited from performing services where they: – may be required to audit their own work;  – participate in activities that would normally be  undertaken by management;  – are remunerated through a “success fee”  structure;  – act in an advocacy role for the Group.  Other than the above, the Group does not impose  an automatic ban on the external auditors  undertaking non-audit work. The external auditors  are permitted to provide non-audit services that  are not, or are not perceived to be, in conflict with  auditor independence, provided they have the  skill, competence and integrity to carry out the  work and are considered by the Committee to be  the most appropriate to undertake such work in  the best interests of the Group.  The engagement of the external auditors to  provide any non-audit services must be pre- approved by the  Audit Committee  or entered into  pursuant to pre-approval policies and procedures  established by the Committee. The pre-approval  policy specifies the services that are prohibited  and the services which have general pre-approval.  The Committee has delegated to the Finance  Director responsibility for confirming whether a  service which has general pre-approval can be  provided by Ernst & Young. In addition, Internal  Audit reviews the pre-approval process to ensure  that it is robust in addressing the requirements of  the PCAOB and does not impinge on Ernst &  Young’s independence. The Finance Director  reports regularly to the Committee on services  which have been approved. In 2012, the external auditors provided a number  of audit-related, including Sarbanes-Oxley Section  404 attestation, and non-audit services, including  due diligence services associated with proposed  acquisitions and disposals. They were also  engaged during 2012 in a number of jurisdictions  in which the Group operates to provide help with  local tax compliance, advice on taxation laws and  other related matters; assignments which typically  involve relatively small fees. The  Audit Committee is satisfied that the external auditors’ knowledge  of the Group was an important factor in choosing  them to provide these services. The Committee is  also satisfied that the fees paid to Ernst & Young  for non-audit work, which amounted to 19% of  the total fee in 2012, did not compromise their  independence or integrity. Details of the amounts  paid to the external auditors during the year for  audit and other services are set out in note 4 to  the financial statements on page 86. CRH 47 Percentage of Audit and Non-audit Fees  (see note 4 to the financial statements) 2012 81% 19% 2011 81% 19% 2010 78% 22% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Audited services Non-audited related services