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Dixons Carphone plc Annual Report and Accounts 2014/15
Corporate Governance
51
• the effectiveness of the external auditor. Feedback on the
effectiveness of the audit process in addressing areas of
key audit risk was obtained from members of the Audit
Committee and regular attendees, members of the finance
team and senior management within the businesses via a
specifically designed questionnaire. The responses were
then considered by the Committee in conjunction with the
outputs received and responsiveness of the auditor during
the audit process. The results showed a positive view of the
audit process and of Deloitte as the external auditor,
specifically in relation to the high quality and integrity of the
team, the constructive relationship and effectiveness of the
communication. Following due consideration the Committee
continues to be satisfied with the quality and effectiveness
of the audit; and
• significant issues and areas of judgement arising from
reports from the external auditor, which in addition to those
matters referred to above, included IT controls and risks.
These areas were set out in the reports from the external
auditor and were discussed with the Committee. The
Committee concluded that the judgements taken and
assumptions made were all fair and reasonable.
Provision of non-audit services provided by the
external auditor
The Committee has a formal policy on auditor independence
which specifies the types of work from which the external
auditor is excluded and those which the auditor may perform.
In July 2015 the Audit Committee approved a change to this
policy, further restricting non-audit services, so that after a
short transitional period the only services permitted by the
external auditor will be audit services and certain other audit
related services (primarily those related to the role of reporting
accountant and or audit reports on financial information
provided by the Group). All non-audit fee proposals are subject
to pre-approval and must be submitted to the Group Financial
Controller. Where assignments are expected to generate fees
of over £100,000, approval must be obtained from the Audit
Committee in advance.
During the period under review, the non-audit services
performed by the external auditor primarily related to activities
in relation to the Merger, assignments which were closely
related to the annual audit or work of such a nature that a
detailed understanding of the Group was necessary. The Audit
Committee reviewed the services performed by the external
auditor during the year and are satisfied that these services did
not prejudice the external auditor’s independence and that it
was appropriate for them to perform these services.
The level of non-audit fees paid to the external auditor, which
was approved by the Committee is set out in note 3 to the
Group financial statements and amounted to £1.9 million
compared to £2.0 million of audit fees. Excluding the effect of
acting as reporting accountants for the Merger, the proportion
of non-audit fees vs audit fees was 28%.
Due to the change in the auditor independence policy
detailed above, and following the completion of the Merger,
non-audit fees incurred by the Group are expected to reduce
in the future.
Consideration of auditor appointment and independence
On an ongoing basis the Committee considers the
appropriateness of the re-appointment of the external auditor,
including rotation of the audit partner. Deloitte LLP has been
the external auditor since the Group’s formation in 2010
(following the demerger of TalkTalk Group). Deloitte LLP was
also the external auditor of Dixons Retail. The current lead
audit partner has been in place for four years (partner rotation
is required on a five yearly basis).
The Committee will continue to consider the requirements
of the Code and also the recent Competition & Markets
Authority’s Final Order which is now designed to align with the
new European Union Regulation 547/2014 (which allows
companies greater flexibility) on audit tendering and rotation
timings. Under current guidance Deloitte can continue to be
reappointed for year ends beginning before June 2023, at
which point we would be required to change. A tender process
would then be undertaken and a proposal made accordingly.
In addition to this, the Group will consider retendering the
external audit at each partner rotation.
In light of the assessments and review undertaken, the Audit
Committee recommended to the Board that Deloitte LLP be
retained as auditors of the Company. This recommendation
was endorsed by the Board.
Jock Lennox
Chairman of the Audit Committee
16 July 2015