Carphone Warehouse 2002 Annual Report Download - page 20

Corporate governance continued
18 The Carphone Warehouse Group PLC Annual Report 2002
Accountability and Audit
Internal control
The Board of Directors has overall responsibility for systems of internal control throughout the Group and for reviewing their effectiveness.
The Board’s monitoring covers all controls, including financial, operating and compliance controls and risk management. The control systems
in place are designed to provide reasonable and not absolute assurance against misstatement or loss and are designed to manage rather
than eliminate the risk of failure to achieve business objectives.
Among the principal features of the Group’s systems of internal control is a planning process within which the Board approves strategy and
a Group business plan. Managers of individual business units prepare plans and budgets covering a two year period. These plans are
challenged and approved by the Executive Board.
The Board receives comprehensive monthly information including financial and business performance showing variances against budget
and key performance indicators. There is also a regular reforecasting process in place.
Capital expenditure is subject to the disciplines of appraisal and approval by appropriate levels of management.
The Audit Committee acts under delegated authority from the Board and meets at least three times a year. It is responsible for reviewing
the adequacy and effectiveness of the systems of internal control throughout the Group. During the period it was assisted in this work by the
risk management team, covering systems of internal control in the Group’s substantive business units and issues relating to the Group’s
central support functions.
There is a continuous process for identifying, evaluating and managing the significant risks faced by the Group. This process has been in
place for the period under review and up to the date of approval of the Annual Report and Accounts. This process is reviewed annually by the
Board.
The process used by the Board through the Audit Committee and risk management team includes the following:
• Review of the external and internal audit work plans;
• Regular review by the Board of a detailed risk management report;
• Consideration of reports from management and internal audit on the systems of internal control and any material control weaknesses;
• Discussions with management on the actions taken on areas identified either by the Board or by internal or external audit or risk reports;
• Consideration of the performance of internal audit or the risk management team together with an annual review of its resourcing, skills and
terms of reference; and
• Consideration of the appropriate Audit Committee minutes and reporting of significant issues through the Audit Committee Chairman to
the Board.
Auditors
During the period the Group has had safeguards to ensure that the objectivity and independence of its auditors could not be compromised.
In particular, the Group’s procedures in respect of services provided by Arthur Andersen are:
• Audit related services – these are areas of the Group’s work that, in their position as the Group’s auditors, Arthur Anderson are best placed
to undertake. Such work includes formalities relating to borrowings, shareholder and other circulars, various other regulatory reports and
work in respect of acquisitions and disposals.
• Tax consulting – the Group uses Arthur Andersen for certain tax consulting projects, while other tax advice and services are provided by
other parties with experience in the relevant area.
• General consulting – all significant general consulting projects are subject to Audit Committee review and approval. Arthur Andersen are
only permitted to tender when the Audit Commitee and Arthur Andersen are satisfied that the nature of the work presents no potential
threat to the independence of the audit team.
These safeguards have been approved by the Audit Committee and are regularly reviewed and updated in the light of internal and external
developments.
Arthur Andersen report to the Directors and the Audit Committee on the actions they take to comply with relevant professional and
regulatory requirements and best practice to ensure their independence from the Group.