Holiday Inn 2008 Annual Report Download - page 41

THE BOARD, SENIOR MANAGEMENT AND THEIR RESPONSIBILITIES
Corporate governance and Audit Committee report 39
Audit Committee report
The Audit Committee supports the Board in meeting its
responsibilities in relation to the integrity of the Group’s financial
statements and associated announcements, the adequacy
of internal control and risk management systems and the
appointment and work of the internal and external auditors.
The role of the Audit Committee is summarised below and in
full in its terms of reference, a copy of which is available on
the Company’s website or in writing on request.
The Committee’s composition, and the attendance of its members,
are set out on page 37.
The Committee’s Chairman and financial expert, David Kappler,
is a chartered management accountant and until April 2004 was
Chief Financial Officer of Cadbury Schweppes plc. He also chairs
the Audit Committee of another UK FTSE 100 company.
The Committee’s principal responsibilities are to:
• review the Group’s public statements on internal control and
corporate governance compliance prior to their consideration
by the Board;
• review the Group’s processes for detecting and addressing
fraud, misconduct and control weaknesses and to consider
the response to any such occurrence, including overseeing
the process enabling the anonymous submission of concerns;
• review reports from management, internal audit and external
audit concerning the effectiveness of internal control, financial
reporting and risk management processes;
• review with management and the external auditor any financial
statements required under UK or US legislation before
submission to the Board;
• establish, review and maintain the role and effectiveness of the
internal audit function, including overseeing the appointment
of the Head of Internal Audit;
• assume responsibility for the appointment, compensation,
resignation, dismissal and the overseeing of the external auditor,
including review of the external audit, its cost and effectiveness;
• pre-approve non-audit work to be carried out by the external
auditor, and the fees to be paid for that work, along with the
monitoring of the external auditor’s independence; and
• oversee the Group’s Code of Ethics and Business Conduct and
associated procedures for monitoring adherence.
The Committee discharges its responsibilities through a series
of Audit Committee meetings during the year, at which detailed
reports are presented for review. The Committee commissions
reports, either from external advisers, the Head of Internal Audit,
or Group management, after consideration of the major risks to the
Group or in response to developing issues. The Finance Director
attends its meetings, as do the external auditor and the Head of
Internal Audit, both of whom have the opportunity to meet privately
with the Committee, in the absence of Group management, at the
conclusion of each meeting.
All proposals for the provision of non-audit services by the external
auditor are pre-approved by the Audit Committee or its delegated
member, the overriding consideration being to ensure that the
provision of non-audit services does not impact the external
auditor’s independence and objectivity.
During the year, the Committee’s deliberations included the
following matters:
• quarterly, interim and full-year financial results. These public
financial statements are reviewed by the Committee in advance
of their consideration by the Board. Adequate time is allowed
between the Committee’s review and the Board’s approval for
any actions or further work requested by the Committee to be
completed;
• the scope and cost of the external audit;
• any non-audit work carried out by the Group’s external auditor
(and trends in the non-audit fees) in accordance with the
Committee’s policy to ensure the safeguarding of audit
independence and objectivity;
• the external auditor’s quarterly, interim and full-year reports;
• the effectiveness of the external auditors and consideration
of their objectivity, independence and reappointment;
• the scope of the annual internal audit plan, the internal audit
department’s approach to delivering assurance, its resourcing
and the results of its reviews;
• oversight of the financial control self-assessment process;
• the effectiveness of the internal audit function and its
compliance with professional standards;
• any major changes in the Group’s internal controls and control
environment;
• the co-ordination of the internal and external audit functions;
• the Group’s framework for the identification and control of
major risks, and the results of the Group’s risk review process;
• developments in corporate governance and accounting
standards in the UK and the US;
• reports from the Head of Group Risk Management on the
activities of that function;
• consideration of the results of the Group’s tangible asset
impairment review;
• overseeing the Group’s Sarbanes-Oxley Act compliance work;
• the disclosure controls and procedures operated by the Group,
with reference to periodic reports from the Chairman of the
Disclosure Committee;
• reviewing the Group’s approach to managing tax risk;
• the impact on IHG of the increased volatility and risk aversion
in the financial markets;
• consideration of the Group’s treasury objectives and policies;
• a review of changes to the Group’s policy on delegation
of authority;
• a review of the funding position and governance of the Group’s
main pension plan;
• periodic reports on any significant incidents of fraud or any
allegations made via the Group’s whistleblowing procedures
and the effectiveness of these procedures;
• any material litigation involving the Group; and
• consideration of the effectiveness of the Audit Committee
and the continuing appropriateness of its terms of reference.
David Kappler
Chairman of the Audit Committee
16 February 2009