Unilever 2005 Annual Report Download - page 73

70 Unilever Annual Report and Accounts 2005
Report of the Audit Committee
The role of the Audit Committee is to assist the Unilever Boards in
fulfilling their oversight responsibilities regarding the integrity of
Unilever’s financial statements, risk management and internal
control, compliance with legal and regulatory requirements, the
external auditors’ performance, qualifications and independence,
and the performance of the internal audit function. During the
year ended 31 December 2005 the principal activities of the
Committee were as follows:
Financial statements
The Committee considered reports from the Chief Financial
Officer on the quarterly and annual financial statements and
reviewed the Annual Report and Accounts prior to publication.
Audit of the Annual Accounts
PricewaterhouseCoopers, Unilever’s external auditors, reported in
depth to the Committee on the scope and outcome of the annual
audit. Their reports included accounting matters, governance and
control, and accounting developments.
Risk management and internal control arrangements
The Committee reviewed Unilever's overall approach to risk
management and control, and its processes, outcomes and
disclosure, including specifically:
• Corporate Audit’s interim and year-end reports on the Status of
Risk Management & Control, and management’s response;
• Annual report from the Chief Financial Officer on business risks and
positive assurance on operating controls and corporate policies;
• The interim and year-end reports from the Code of Business
Principles Compliance Committee;
• Monitoring the resolution of complaints received through the
global Ethics hotline which included a procedure for handling
complaints and concerns relating to accounting, internal control
and auditing matters;
• Monitoring progress of the implementation of the requirements
under Section 404 of the Sarbanes-Oxley Act of 2002 with
respect to internal controls over financial reporting;
• A review of pensions arrangements;
• Reviewing the management of transition risks arising from
changes in the organisation and operating framework;
• A review of treasury and tax matters relating to investment
hedging and gearing, and developments on engaging with tax
authorities;
• A review of anti-fraud arrangements;
• A review of the Slim•Fast impairment and a learning review of
the accounting process;
• A review of financing strategy; and
• A review of risk management in the outsourcing projects.
External auditors
The Audit Committee undertakes a periodic formal review of the
appointment of external auditors, and the most recent review was
completed in November 2005. The Committee has approved the
extension of the current external audit contract by one year, and
recommended to the Boards the reappointment of the external
auditors. On the recommendation of the Audit Committee, the
Directors will be proposing the reappointment of
PricewaterhouseCoopers at the AGMs in May 2006 (see pages
173 and 178).
Both Unilever and the auditors have for many years had safeguards
in place to avoid the possibility that the auditors’ objectivity
and independence could be compromised. The Committee
reviewed the report from PricewaterhouseCoopers confirming
their independence and objectivity, and also conducted a formal
evaluation of the effectiveness of the external audit process.
The committee also reviewed the statutory audit, other
audit, audit-related, tax and other services provided by
PricewaterhouseCoopers, and compliance with Unilever’s policy,
which prescribes the types of engagements for which the external
auditors can be used. In 2005, the Audit Committee also
reviewed and approved the policy regarding the pre-approval of
the non-audit services. All non-audit services undertaken by the
external auditors were reviewed and authorised by the Committee
in line with the policy and further information on all of these
services is noted immediately following this report.
The Committee held independent meetings with the external
auditors during the year.
The external auditors report to the Directors and the Audit
Committee on the actions they take to comply with the
professional and regulatory requirements and best practice
designed to ensure their independence from Unilever, including,
for example, the periodic rotation of key team members. The UK
lead partner in charge of the audit, who was appointed in 2001,
will rotate off at the 2006 AGM and a new lead partner will be
appointed by PricewaterhouseCoopers LLP.
Internal audit function
The Committee engaged in discussion and review of the
Corporate Audit Department’s audit plan for the year, and
approved its budget and resource requirements.
The Committee approved the appointment of a new Chief
Auditor arising from the transfer of the previous holder to a new
senior finance position following organisational changes.
The Committee carried out a formal evaluation of the
performance of the internal audit function and confirmed that
they were satisfied with their relationship with the Chief Auditor.
The Committee held independent meetings with the Chief Auditor
during the year.
Audit Committee terms of reference
The Audit Committee’s terms of reference were updated in 2005
to reflect the realignment of the roles previously carried out by
the Corporate Risk Committee, and also to include an annual
review of the Group’s anti-fraud arrangements. In February 2006,
the terms of reference were updated to reflect requirements
under the Dutch Corporate Governance Code that the Audit
Committee has oversight of the policy of the Group on tax
planning, the financing of the Group, and the applications of
information and communication technology.
The Audit Committee carried out a self-assessment of its own
performance.
The Audit Committee’s terms of reference can be viewed on
Unilever’s website at
www.unilever.com/investorcentre/corpgovernance.
Hilmar Kopper Chairman of the Audit Committee
Wim Dik
Oscar Fanjul