Audit Committee report
The Audit Committee consists of four independent non-executive directors. It is chaired by Phil Bentley, who is a qualified accountant and was, until his promotion to Managing Director of British Gas, the Group Finance Director of Centrica plc and as such is considered to be suitably qualified to be the Audit Committee Chairman. He, Daniel Bernard, John Nelson and Michael Hepher served for the whole year.
At the invitation of the Committee, the Chairman of the Board and the Group Chief Executive regularly attended meetings, as did the Group Finance Director, Group Audit and Risk Management Director and the external auditors. Private meetings were also held with the external and internal auditors at which management were not present.
The Committee provides an independent overview of the effectiveness of the Group’s internal control systems and financial reporting processes. The principal responsibilities include monitoring the integrity of the financial statements, including a review of the significant financial reporting judgements contained in them, and overseeing the work of both the internal and the external auditors. The Committee’s terms of reference are available at www.kingfisher.com.
The principal activities of the Audit Committee during the year ended 31 January 2009 were:
The Committee considered reports from the Group Finance Director on the interim and annual financial statements. It reviewed the reports from the external auditors, PricewaterhouseCoopers LLP (PwC), on the scope and outcome of their interim review and annual audit. The financial statements were reviewed in light of these reports and the results of these reviews reported to the Board.
Risk management and internal control
The Committee reviewed the process by which the Group evaluated its control environment, its risk assessment process and the way in which significant business risks were managed. These included:
- monitoring the work of the internal audit function and progress in implementing the actions committed to as a result of the previous year’s independent review by an external consultant – an update review will be undertaken by the same external consultant during 2009;
- considering the internal audit function’s reports on the effectiveness of internal controls, significant frauds and any fraud that involved management or employees with a significant role in internal controls; and
- reviewing the policy and process enabling employees within the Group to make confidential disclosures about suspected financial and operational improprieties. The Committee received reports on the results of investigations and any corrective actions.
As reported in the Corporate governance section, the review of the effectiveness of the internal control systems resulted in the identification of significant control weaknesses in B&Q China. Corrective action has been taken and regular progress reports to the Committee have and will continue to be made.
Historically Kingfisher has followed a decentralised management model. Under the new CEO, with the formation of the new Retail Board, the Group is being managed on a more integrated basis. Under this new approach a programme has been initiated to standardise and improve control processes in a number of areas including IT systems, which the Committee believes will act to enhance the control environment within Kingfisher.
During the year, the Committee reviewed the assurances from PwC confirming the external auditors’ independence and objectivity. It also reviewed and approved the scope of non-audit services provided by the Auditors to ensure that there was no impairment of independence.
The Committee approved the scope and fees for audit services provided by PwC and confirmed the wording of the recommendations put by the Board to the shareholders on the appointment and retention of the external auditors.
The Committee has reviewed the effectiveness of the external audit and the external auditors’ performance and have recommended their reappointment as Auditors to the Board.
Effectiveness of the Audit Committee
As part of the Board effectiveness evaluation, the Audit Committee’s work was assessed and no significant issues or concerns were highlighted.
Chairman of the Audit Committee
25 March 2009