Marks and Spencer 2000 Annual Report Download - page 9

Accountability and audit
Going concern: A statement in accordance with the going
concern principle is included in the Financial Review on page 5.
Internal control: The Combined Code has extended the
existing requirement that the Board reviews the effectiveness
of the Group’s system of internal financial controls to cover all
controls including financial, operational, compliance and risk
management. The Group has adopted the transitional approach
for the Combined Code set out in the letter from the London
Stock Exchange to listed companies in September 1999 and has
continued to review and report upon internal financial controls.
Wider aspects of internal control: Nevertheless, the Board
confirms that it has established the procedures necessary
to review and report on internal controls for next year.
In particular:
– the Board has established a new corporate risk management
process which will enable it to report that there is an
“ongoing process for identifying, evaluating and managing
the significant risks faced by the Company, that it has been
in place for the year under review and that it is regularly
reviewed by the Board”.
– the Audit Committee has extended its remit to include the
monitoring of the new corporate risk management process
on behalf of the Board by reviewing a programme of risk
assessment activity and a report from internal audit on the
risk assessment process.
Internal financial control
The Board has overall responsibility for the Group’s systems of
internal financial control and for monitoring their effectiveness.
However, such systems are designed to provide reasonable, but
not absolute, assurance against material misstatement or loss.
The Board maintains full control and direction over appropriate
strategic, financial, organisation and compliance issues, and has
reviewed the organisation structure with formally defined lines
of responsibility and delegation of authority. There are established
procedures for planning and capital expenditure, for information
and reporting systems, and for monitoring the Group’s businesses
and their performances. The Board has delegated to executive
management the implementation of the systems of internal
financial control within an established framework that applies
throughout the Group; these systems are monitored and
supported by an independent internal audit function which
operates globally.
The boards of the operating divisions review their annual
and three year operating and capital plans with the relevant
executive directors prior to submission to the parent Board for
approval. This process includes the identification and assessment
of the business and financial risks inherent in each operating
area. Treasury policies are regularly reviewed by the Treasury
Committee and any changes are approved by the Board.
The systems of internal financial control include:
– comprehensive budgeting systems with annual budgets
approved by the Board
– regular consideration by the Board of year end forecasts
– clearly defined capital investment control guidelines and
procedures which have been revised this year and agreed
with the Board
– regular reporting of legal and accounting developments to
the Board.
On behalf of the Board, the Audit Committee examines the
effectiveness of the Group’s systems of internal financial control
primarily through agreeing the scope of the internal audit
programme and reviewing its findings, reviews of the annual
and interim financial statements and a review of the nature
and scope of the external audit. Any significant findings or
identified risks are closely examined so that appropriate
action can be taken.
The work of the internal audit department is focussed on
areas of priority as identified by risk analysis and in accordance
with an annual audit plan approved each year by the Audit
Committee and by the Board. The Board receives a full report
from the Chief Internal Auditor, Hilary Gay, each year on the
department’s work and findings and regular interim updates on
specific issues. The external auditors are engaged to express an
opinion on the financial statements. They review and test the
systems of internal financial control and the data contained in
the financial statements to the extent necessary to express their
audit opinion. They discuss with management the reporting of
operational results and the financial condition of the Group.
The directors through the Audit Committee have reviewed the
effectiveness of the Group’s systems of internal financial control.
Compliance with the Combined Code
The directors confirm that for the year ended 31 March 2000
the Company complied with all the Code provisions.
7Annual Report and Financial Statements 2000