Tesco 2007 Annual Report Download - page 27

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THE BOARD AND THEIR
RESPONSIBILITIES
Corporate Responsibility Risk Register which specifically
considers social, ethical and environmental (SEE) risks.
Oversight of these risks is the responsibility of the Corporate
Responsibility Committee. The Board incorporates SEE risks
on the Key Risk Register where they are considered material
or appropriate.
With reference to the ABI guidelines on social responsibility,
we confirm that the Board takes regular account of the
significance of SEE matters to the business of the Group.
We recognise that some investors and other stakeholders take
a keen interest in how companies manage SEE matters and
so we report more detail on our policies and KPIs in our
Annual Corporate Responsibility Review and on our website
(www.tesco.com/corporate). To provide further assurance, the
Group’s Corporate Responsibility KPIs are audited on a regular
basis by Internal Audit.
Internal controls Accountability for managing risk at an
operational level sits with management. We have a Group-wide
process for clearly establishing the risks and responsibilities
assigned to each level of management and the controls which
are required to be operated and monitored.
The CEOs of subsidiary businesses are required to certify
by way of annual statements of assurance that the Board’s
governance policies have been adopted both in practice and
in spirit. For certain joint ventures, the Board places reliance
upon the internal control systems operating within our
partners’ infrastructure and the obligations upon partners’
Boards relating to the effectiveness of their own systems.
Monitoring The Board oversees the monitoring system and
has set specific responsibilities for itself and Board or Executive
committees as set out below. The minutes of the Audit,
Finance, Compliance and Corporate Responsibility
Committees are distributed to the Board and a report is
submitted for formal discussion at least once a year. These all
provide assurance that the Group is operating legally, ethically
and in accordance with approved financial and operational
policies. We noted the updates to the Turnbull Guidance and
keep under review how the Turnbull Guidance has been
applied. In addition, both Internal Audit and our external
auditors play key roles in the monitoring process.
•Audit Committee Annually, the Audit Committee reports
to the Board on its review of the effectiveness of the
internal control systems for the accounting year and the
period to the date of approval of the financial statements.
Throughout the year the Committee receives regular
reports from its external auditors covering topics such as
quality of earnings and technical accounting developments.
The Committee also receives updates from Internal Audit
and has dialogue with senior managers on their control
responsibilities.
It should be understood that such systems are designed
to provide reasonable, but not absolute, assurance against
material misstatement or loss.
•Internal Audit The Internal Audit department is fully
independent of business operations and has a Group-wide
mandate. It operates a risk-based methodology, ensuring
that the Group’s key risks receive appropriate regular
examination. Its responsibilities include maintaining
the Key Risk Register, reviewing and reporting on the
effectiveness of risk management and internal control
to the Executive Committee, the Audit Committee and
ultimately to the Board. Internal Audit facilitates oversight
of risk and control systems across the Group through a
number of Audit and Compliance Committees established
on either a geographic or business basis. The Head of
Internal Audit also attends all Audit Committee meetings.
•External Audit PricewaterhouseCoopers LLP, the
Company’s external auditors, contribute a further
independent perspective on certain aspects of our internal
financial control systems arising from their work, and report
to both the Board and the Audit Committee.
The engagement and independence of external auditors
is considered annually by the Audit Committee before they
recommend their selection to the Board. The Committee
has satisfied itself that PricewaterhouseCoopers LLP are
independent and there are adequate controls in place
to safeguard their objectivity. One such measure is the
requirement to rotate audit partners every five years. This
year, the audit engagement partner, having served five years
on the Tesco audit, will be rotated. We have a non-audit
services policy that sets out criteria for employing external
auditors and identifies areas where it is inappropriate for
PricewaterhouseCoopers LLP to work. Non-audit services
work carried out by PricewaterhouseCoopers LLP is
predominantly the review of subsidiary undertakings’
statutory accounts, transaction work and corporate tax
services. PricewaterhouseCoopers LLP also follow their
own ethical guidelines and continually review their audit
team to ensure their independence is not compromised.
•Finance Committee Membership of the Finance
Committee includes Non-executive Directors with relevant
financial expertise, Executive Directors and members of
senior management. The Committee usually meets twice
a year and its role is to review and agree the Finance Plan
on an annual basis to review reports of the Treasury and
Tax functions, and to review and approve Treasury limits
and delegations.
•Compliance Committee Membership of the Compliance
Committee includes three Executive Directors and
members of senior management. The Company Secretary
attends meetings of the Committee in his capacity as its
Secretary. The Committee normally meets six times a year
and its remit is to ensure that the Group complies with
all necessary laws and regulations in all of its operations
world-wide. The Committee has established a schedule
for the regular review of operational activities and legal
exposure. Every international business in the Group is also
required to have a local Compliance Committee designed
to ensure compliance with local laws and regulations as
well as Group Compliance policies.