Marks and Spencer 2009 Annual Report Download - page 59

55
Accountability and audit
The Board’s objective is to achieve success for M&S by building a
sustainable business for the long term, generating shareholder value
through consistent profitable growth, whilst making sure that our
customers can always trust us to do the right thing.
In doing so, the directors recognise that creating value is the
reward for taking acceptable risks.
The Board has overall accountability for the Group’s approach to
assessing systems of internal control and risk, and for monitoring
their effectiveness. Independent assurance is provided by the
external auditors and internal audit, who present their findings
regularly to the Audit Committee on behalf of the Board.
Internal control and risk assessment are designed to manage,
rather than eliminate, the risk of failure to achieve corporate
objectives. Accordingly, they can only provide reasonable but not
absolute assurance against material misstatement or loss.
Internal control
The Board maintains control and direction over appropriate strategic,
financial, operational and compliance issues. It has put in place an
organisational structure with formally defined lines of responsibility
and delegation of authority.
There are also established procedures for financial planning,
capital expenditure, information and reporting systems, and for
monitoring the Group’s businesses and their performance.
Plans and policies
– communication of the Group’s strategy, objectives and targets,
values and standards;
– annual operating and capital plans and future projections;
– operating policies and procedures;
– clearly defined capital investment control guidelines;
– review of treasury policies by the Board; and
– review of social, environmental and ethical matters by the How
We Do Business Committee.
Competent people
– appointment and development of employees of the necessary
calibre to fulfil their allotted responsibilities; and
– clear roles and accountabilities with regular performance reviews.
Monitor and control
– review by operating divisions of their plans with the relevant director
prior to submission to the Board for approval, including
identification and assessment of risks;
– monthly comparison of operating divisions’ actual financial
performance against budget; and
– regular consideration by the Board of year end forecasts.
Regulatory update
– reporting of accounting and legal developments; and
– regular briefings on latest best practice corporate governance to
the Board.
Risk assessment
Every six months the Board reviews the Group Risk Profile – the tool
that drives risk assessment and action planning. This is supported
by an ongoing process for identifying, evaluating and managing the
significant risks faced by the Group. See the table of principal risks
and uncertainties on pages 56 and 57.
As an integral part of planning and review, managers from each
business area and major projects:
– identify the risks to their plans;
– evaluate the risks using likelihood and impact; and
– document the actions being taken to manage those risks.
This process has been in place for the year under review and up to
the date of approval of the Annual report and financial statements.
It has been regularly reviewed by the Board and accords with the
Internal Control Guidance for directors on the Combined Code
produced by the Financial Reporting Council.
Assurance
On behalf of the Board, the Audit Committee examines the
effectiveness of the Group’s:
– assessment of risk by reviewing evidence of risk assessment
activity and a report from internal audit on the process undertaken;
– systems of internal control, primarily through approving the internal
audit plan and reviewing its findings, reviews of the annual and
interim financial statements and a review of the nature, scope and
reports of the external audit;
– action plans taken, or to be taken, to remedy any failings or
weaknesses identified; and
– action plans in place to manage significant risks.
The Audit Committee has completed its review of the effectiveness
of the Group’s systems of internal control during the year, which are
in compliance with the Turnbull Guidance 2005. It confirms the
necessary action plans to remedy identified weaknesses in internal
control are in place and have been throughout the year.