Holiday Inn 2015 Annual Report Download - page 64

Corporate Governance continued
Code of Conduct and related policies (including a report on the progress
of training and awareness efforts). The Head of Information Security
provided an update on our approach to, and the activities planned to
mitigate against, information security risks. In addition, the Committee
considered the requirements for, and approach to the preparation of,
the viability statement, together with the other requirements of the 2014
UK Corporate Governance Code and other relevant regulatory changes.
See pages 25 to 27 for further details.
Financial reporting and controls
During the year the Committee reviewed the interim and annual
financial statements (considering the relevant accounting and
reporting matters) and the Group’s treasury policies and financing
strategy. The Committee also received a presentation from the head
of the Group’s offshore, centralised accounting service, the Business
Service Centre, given the significant role the Centre plays in the
Group’s financial controls and reporting. The key financial controls
across the business continue to be monitored and tested to ensure
that an appropriate framework exists and to ensure compliance with
our US obligations arising from the Sarbanes-Oxley Act 2002 (SOX).
The Committee assesses the approach to SOX compliance each year
and the Committee regularly reviews reports on the progress of the
SOX programme, which has enabled representations regarding the
effectiveness of internal financial controls to be made, noting that
there are no material weaknesses in the control environment.
An external review of current SOX control processes was conducted
in 2015 and the findings were presented to the Audit Committee in
July. The review concluded that the Group has a clear framework
for reviewing SOX compliance and is committed to effective internal
controls. Opportunities were identified to further enhance the Group’s
framework and the Group is addressing these on an ongoing basis.
The Committee continues to conclude that the Group has in place
an effective system of risk management and internal controls,
and, through its review, has not identified any significant failings
or weaknesses.
Global Internal Audit (GIA) effectiveness
An effectiveness review of GIA is undertaken annually and reported
to the Committee. In 2015, GIA undertook a self-assessment against
the categories identified in the last external review: GIA’s positioning
within the business, the appropriateness of staffing and the adequacy
of GIA’s processes. The Committee concluded that GIA continues to
operate effectively.
External Auditor – Ernst & Young LLP (EY)
The Committee considers the appointment of its Auditor annually after
assessing EY’s performance (including its independence,
effectiveness and objectivity) and considering the requirements for
putting an audit out to tender as set out in the Code and EU and
Competition and Markets Authority legislation. EY has been our
Auditor since IHG’s listing in April 2003.
Having reviewed the effectiveness of the audit, we concluded that it
would not be in the best interests of the Group to undertake an audit
tender at this time, but we will continue to monitor the performance of
the Auditors and an audit tender will be undertaken when appropriate
and, in any event, when required by the current legislation.
As part of its annual review, the Committee reviews the effectiveness
of the relationship between EY and the Group’s management
(including the responses to questionnaires on EY’s audit process
completed by more than 30 senior IHG employees who work with EY),
and receives reports from EY on its independence. As well as Group
policies and procedures, which aim to safeguard EY’s independence
and effectiveness, EY has its own protective policies and systems in
By ensuring that high standards of
governance are embedded throughout
the business, we support the long-term
success of the Group.”
Audit Committee Report
The Board has overall responsibility for the management of business
risk. The Audit Committee plays a crucial role in assisting the Board
to discharge that duty by monitoring, reviewing and challenging the
effectiveness of the Group’s systems of control and processes
concerning financial reporting; fraud, bribery and corruption detection;
whistleblowing; business continuity; and risk management, thereby
ensuring that robust systems and procedures are in place to aid the
long-term success of the Group as a whole. The Committee also
monitors and reviews the appointment of the Group’s external Auditor
(including the nature and scope of the audit), the Auditor’s independence
and effectiveness, audit fees and the provision of non-audit services.
Governance
Details of our role and responsibilities are set out in our terms of
reference (ToR), which are reviewed annually and updated accordingly.
The ToR are available on the Company’s website at www.ihgplc.com/
investors under corporate governance/committees. Anne Busquet
was appointed to the Committee on 1 March 2015, and all members
are Independent Non-Executive Directors, as required under the ToR.
System of risk management and internal controls
Internal controls and risk management
The Committee supports the Board in reviewing the effectiveness
of the Group’s internal control and risk management systems, having
oversight of the risk and control activities in operation across the
Group. In support of this, the Audit Committee regularly reviews the
principal risks and the operation of the risk management systems,
seeking assurance that the principal risks faced by the Group are
being identified, assessed, prioritised, evaluated and appropriately
managed and mitigated, having regard to the Group’s risk appetite.
The Committee’s review is supported by the Global Internal Audit
(GIA) plan, which is discussed in December each year. The Committee
approves the nature and scope of the plan, and is responsible for
reviewing and monitoring the activities of the GIA department in line
with the agreed plan. In 2015, the agreed schedule of audits included
reviews of System Fund controls, the IHG Rewards Club points
redemption processes, the Kimpton integration, and project and
programme management.
The Committee also considered in 2015 the Group’s biannual reports
on significant incidents of fraud and matters raised through the Group’s
confidential disclosure channel and any related investigations, and the
62 IHG Annual Report and Form 20-F 2015