Carphone Warehouse 2016 Annual Report Download - page 56

Audit Committee Report
54
non-audit fees and the policy for approval of non-audit fees
paid to the Group’s auditor.
•The effectiveness of the external auditor: Feedback on the
effectiveness of the audit process in addressing areas of
key audit risk was obtained from members of the Committee
and regular attendees, members of the finance team and
senior management within the businesses via a specifically
designed questionnaire. The responses were then
considered by the Committee in conjunction with the
outputs received and responsiveness of the auditor during
the audit process. The results showed a positive view of the
audit process and of Deloitte LLP as the external auditor,
specifically in relation to the high quality and integrity of the
team, the constructive relationship and the effectiveness
of the communication. Following due consideration the
Committee continues to be satisfied with the quality and
effectiveness of the audit.
•Significant issues and areas of judgement arising from
reports from the external auditor: These areas were set
out in the reports from the external auditor and discussed
with the Committee. The Committee concluded that the
judgements taken and assumptions made by management
were all fair and reasonable.
Provision of non-audit services
provided by the external auditor
The Committee’s adoption of a revised policy on auditor
independence last year had further restricted non-audit
services, and limited services provided by the external auditor
to audit and certain specific audit-related services (primarily
those related to the role of reporting accountant and audit
reports on financial information provided by the Group). All
non-audit fee proposals are subject to pre-approval and must
be submitted to the Group Financial Controller. Where
assignments are expected to generate fees of over £100,000,
prior approval must be obtained from the Committee.
During the period under review, the non-audit services
performed by the external auditor primarily arose from the
finalisation of tax services relating to discontinued operations,
interim financial review procedures and the requirement in
Greek law for the external auditor of the company to provide
non-audit services. The Committee has reviewed the services
performed by the external auditor during the year and is
satisfied that these services did not prejudice the external
auditor’s independence and that it was appropriate for them
to perform these services.
The level of non-audit fees paid to the external auditor, which
was approved by the Committee is set out in note 3 of the
Group’s financial statements and amounted to £0.4 million
compared with £1.5 million of audit fees. The non-audit fees
as a percentage of audit fees was 28%. This is considerably
lower than in 2014/15 as a result of one-off, Merger-related
fees last year and the new, more restricted policy governing
the use of Deloitte LLP for non-audit services.
Consideration of auditor appointment
and independence
The Committee continues to consider the appropriateness of
the re-appointment of the external auditor, including rotation
of the audit partner. Deloitte LLP has been the Company’s
external auditor since August 2002, prior to Carphone
Warehouse’s demerger from TalkTalk. Deloitte LLP was also
the external auditor of Dixons Retail. The lead audit partner,
John Adam, has now completed his five-year term and must
be succeeded by a different partner, in accordance with best
practice and the Auditing Practices Board Ethical Standards.
We would like to take this opportunity to thank John for his
valuable input and guidance and welcome Stephen Griggs as
his successor.
The Company’s policy is to comply with the UK Corporate
Governance Code, introduced by the FRC, to put the external
audit out to tender at least once every ten years. In accordance
with the Competition and Markets Authority (‘CMA’) Statutory
Audit Services Order, which is designed to align with
provisions of the EU Regulations on external audit tender and
rotation, and current guidance the Company is required to
conduct a competitive audit tender by June 2023. This will be
the latest period that Deloitte LLP may remain as auditor. The
Committee will continue to evaluate annually the performance
of the auditor, in particular at each five-year rotation of the lead
audit partner, and will recommend a tender for this service if
the circumstances so warrant.
In accordance with International Standards on Auditing
(UK and Ireland) 260 and Ethical Standard 1 issued by the
Accounting Practices Board, and as a matter of best practice,
at year end Deloitte LLP formally confirmed to the Board its
independence as auditor of the Company.
In determining whether to recommend the auditor for
re-appointment this year, the Committee considered the
firm’s internal control procedures, the most recent audit
effectiveness review, the tenure of the lead audit partner and
the rigorous assessment of the replacement lead audit partner,
and thereby affirmed that the audit processes are effective and
that the appropriate independence continues to be met.
Accordingly, the Company confirms that it complied with the
provisions of the CMA Statutory Audit Services Order for the
financial year under review and the Committee concluded that
it was in the best interests of the Company’s shareholders to
reappoint Deloitte LLP as the independent auditor of the
Company. The Committee’s recommendation, that a resolution
to re-appoint Deloitte LLP be proposed at this year’s Annual
General Meeting, was accepted and endorsed by the Board.
Jock Lennox
Chairman of the Audit Committee
28 June 2016
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Corporate Governance
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