Holiday Inn 2012 Annual Report Download - page 58

Audit Committee Report
Governance
The Audit Committee takes responsibility for reviewing the integrity of the Group’s
financial reporting systems, the effectiveness of internal controls and risk management
systems and the appointment and work of the internal and external auditors.
Committee membership
Appointed to Length of
Meetings Committee tenure to
Member Role attended from 31 Dec 2012
David Kappler Chairman 5/5 Jun 2004 8 yrs 7 mths
Graham Allan Member 2/2 (retired
Jun 2012) n/a
Jennifer Laing Member 5/5 Aug 2005 7 yrs 5 mths
Dale Morrison Member 5/5 Jun 2011 1 yr 7 mths
Total meetings held 5
Governance
The Committee’s terms of reference are available on the Company’s
website www.ihgplc.com/investors under corporate governance/
committees or from the Company Secretary’s office on request.
The Committee was in place throughout 2012. All Committee
members are independent. The Committee had the opportunity
to meet with the internal and external auditors on at least four
occasions in the year without the presence of management.
The Board is satisfied that David Kappler has recent and relevant
financial experience as a qualified accountant and former CFO of
Cadbury Schweppes plc. Details of the qualifications and experience
of the other Committee members are set out on pages 46 and 47.
At the invitation of the Committee, the Chief Executive, Chief Financial
Officer, Head of Global Internal Audit (GIA) and external auditors
(Ernst & Young LLP (E&Y)), attend meetings.
Responsibilities
The Board delegates authority to the Committee under five areas:
internal controls and risk management, financial reporting, internal
audit, external audit and compliance, whistleblowing and fraud.
The Committee’s key responsibilities are set out below:
• to review the integrity of the Company’s internal financial
controls, internal controls and risk management systems,
as well as review reports from management, GIA and the
external auditors;
• to review the Group’s processes for detecting and addressing
fraud, misconduct and control weaknesses and consider the
response to any such occurrence, including overseeing the
whistleblowing process;
• to review and maintain the role and effectiveness of the
internal audit function;
• to oversee the Group’s relations with our external auditors and
make recommendations on their appointment, reappointment,
removal and independence;
• to pre-approve the external auditors’ non-audit work and
associated fees; and
• to oversee the Group’s Code of Ethics and Business Conduct
and associated procedures for monitoring adherence.
Independence of external auditors
E&Y have been the Group’s independent external auditors since 2003.
To ensure the auditors’ independence is safeguarded, lead audit partners
rotate every five years. In 2011 the lead audit partner was rotated.
The Committee reviews the relationship the Group has with E&Y
annually and for the year ended 31 December 2012, the Committee
was satisfied with the independence, objectivity and effectiveness
of the relationship with E&Y as the external auditors.
Non-audit services
A key factor that may impair the external auditors’ independence is a
lack of control over the volume of non-audit services. To address this
issue all proposals for non-audit work are subject to pre-approved
limits and additionally there is a prohibition on the undertaking of
certain services. The Committee is aware of, and sensitive to,
investor body guidelines on non-audit fees. For information on fees
paid to E&Y for non-audit work during 2012 see page 100.
Internal audit
The Head of GIA is responsible for reporting and ensuring findings of
internal audit work are brought to the attention of local management
and the Committee as appropriate. During 2012 GIA operated in all
the Group’s principal regions.
Key issues discussed in 2012 meetings
During 2012, the Committee considered, amongst others, the
following matters:
• review of the quarterly, interim and full-year financial results
in advance of their consideration by the Board;
• review of E&Y’s quarterly, interim and full-year reports as
well as all non-audit work carried out by E&Y to ensure audit
independence and objectivity are safeguarded;
• the effectiveness of E&Y, in particular their objectivity,
independence and reappointment in advance of their
consideration by the Board;
• the scope of GIA’s annual internal audit plan and the review
of GIA’s effectiveness and compliance with professional
standards;
• developments in corporate governance and accounting
standards in the UK and US and compliance with
Sarbanes-Oxley Act 2002;
• reports from the Head of Global Risk Management on the
activities of Global Risk Management;
• review of the disclosure controls and procedures operated
by the Group;
• review of reports on significant incidents of fraud and
whistleblowing; and
• the effectiveness of the Committee and the continuing
appropriateness of its terms of reference.
Key priorities for the Committee in 2013
During 2013 the Committee will continue its role in reviewing the
integrity of the Company’s internal financial controls, internal
controls and risk management systems.
David Kappler
Chairman of the Audit Committee
18 February 2013
56 IHG Annual Report and Financial Statements 2012