The Committee considered and reviewed updates from the internal
audit programme at each of its meetings during the year. Reports
from the internal audit function to the Committee included updates
on the Company’s risk management systems, findings from reviews
of these systems, and reviews of the remit, organisation, annual plan
and resources of the internal audit function. The Committee also
considered how the internal audit function would tailor its audit plans
to support the business during the delivery of the transformation plan.
During the year, the Committee reviewed the effectiveness of the
internal audit function. The review was conducted using an internal
questionnaire with input from the function’s key stakeholders within
the Company, the external auditors and the Committee. No significant
issues were highlighted by the review.
The Committee reviews and makes recommendations to the Board
with regard to the reappointment of the external auditor. In doing so,
the Committee takes into account auditor independence and audit
partner rotation. Deloitte LLP were appointed as external auditor in
2009/10 following a formal tender process. Richard Muschamp was
appointed lead audit partner following the conclusion of the 2013/14
audit process, and will serve as lead partner until the external audit
contract is put out to tender, which will be undertaken by 2019/20.
The committee confirms compliance with the provisions of the
Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014, as published by the
UK Competition and Markets Authority.
During the year, the Committee agreed the approach to and scope of
the audit work to be undertaken by the external auditor, Deloitte LLP.
The Committee also reviewed and agreed the terms of engagement,
the fees, and areas of responsibility and the work to be undertaken
by the external auditor, and agreed the fees payable in respect of the
2015/16 audit work. Details of the amounts paid to the external auditor
for their audit services are given in note 7 to the accounts. In addition,
the external auditor provided the Committee with a schedule of each
matter on which there was an initial difference between them and
management in relation to the accounting treatment, and the final
decisions on these issues.
The Committee also considered the effectiveness and independence
of the external auditor. In consideration of its effectiveness, the
Committee reviewed the experience and expertise of the audit
team, the fulfilment of the agreed audit plan and any variations to it,
feedback from the Company’s businesses and the contents of the
external audit report.
In considering the independence of the external auditor, the
Committee received a statement of independence from the auditor,
a report describing their arrangements to identify, report and manage
any conflicts of interest, and reviewed the extent of non-audit services
provided to the Company. The Committee confirmed its satisfaction
with the effectiveness and independence of the external auditor.
The Committee has recommended to the Board that Deloitte LLP
be proposed for re-appointment by shareholders as the Company’s
external auditor at the forthcoming AGM. As a result of its work during
the year, the Committee has concluded that it acted in accordance
with its terms of reference and has ensured the independence and
objectivity of the external auditor.
In addition to their statutory duties, the services of Deloitte LLP are
also engaged where, as a result of their position as external auditor,
they either must, or are best placed to, perform non-statutory audit
services. This is primarily work in relation to matters such as the
interim review, additional assurance procedures, shareholder circulars,
Company borrowings, tax compliance, regulatory filings and certain
business acquisitions and disposals. Other work is awarded on the
basis of competitive tendering.
The Committee reviewed and approved the scope of non-audit
services provided and proposed by the external auditor to ensure
that there was no impairment of independence and objectivity, and
subsequently monitored the non-audit work performed to ensure
it was within policy guidelines.
The Company has a policy on the use of its external auditor for
non-audit work and this is regularly reviewed. The external auditor is
precluded from engaging in non-audit services that would compromise
their independence or violate any laws or regulations affecting their
appointment as external auditor.
The approval of the Chairman of the Committee is required prior
to awarding contracts for non-audit services to the external auditor,
where in excess of specified amounts. The Company’s policy on the
use of the external auditor for non-audit work can be found on the
Company’s website (kingfisher.com).