Marks and Spencer 2013 Annual Report Download - page 53

Governance Marks and Spencer Group plc Annual report and financial statements 2013 51
Overview Strategic review Financial review Governance Financial statements and other information
to provide the services required given their deep understanding
of the business, its culture, and strategy, thus providing better
cost effectiveness without compromising their independence.
This aside, the Committee is very mindful that these were
exceptional items and aim to maintain non audit fees at a lower
level going forward.
Tenure of Auditor
PwC and its predecessor firms have been the Auditor for M&S
since the Company first listed on the London Stock Exchange
in 1926 (a breakdown of how our Auditors have evolved is
provided in the governance section of our corporate website).
Effectiveness of the Audit Committee
The Board is satisfied that Jeremy Darroch, Andy Halford and
Jan du Plessis have recent and relevant financial experience.
Who is on our Committee?
Name of Director From A B
Percentage
of meetings
attended
Jeremy Darroch
(Committee Chairman)
1 Sept 2006
(retiring 19 June 2013) 5 5 100%
Andy Halford21 Jan 2013 2 2 100%
Steven Holliday115 July 2004 5 4 80%
Martha Lane Fox 1 June 2007 5 5 100%
Jan du Plessis 1 Nov 2008 5 5 100%
A = Maximum number of meetings the director could have attended
B = Number of meetings the director actually attended
1) Steven Holliday was unable to attend the Committee meeting on 5 November 2012 due
to prior business commitments with National Grid.
2) Andy Halford will become Committee Chairman following Jeremy’s departure.
What has the Committee done during the year?
The Committee’s performance is reviewed each year as part
of its Board Effectiveness review. Areas for improvement are
highlighted, discussed by the Committee, and included as part
of an action plan for the coming year. During the year the
Committee:
–discussed the upcoming changes to the Governance Code
–undertook a strategic reappraisal of our internal audit and
assurance plan to ensure greater alignment with the
Company’s strategic plan
–undertook an independent review of our internal audit
effectiveness, in line with the Chartered Institute of Internal
Audit. The review was performed by RSM Tenon. It
comprised a series of one-to-one interviews with Committee
members and interview and group workshops with internal
stakeholders to discuss processes and procedures. A
selection of audits were also reviewed and discussed. The
output from this review has already begun to shape our
planning for 2013/14;
–discussed internal financial controls, changes in accounting
policies and impact on our financial statements
–discussed other areas of compliance, including GSCOP,
Bribery Act, M&S Code of Ethics and Behaviours and
Whistleblowing;
–discussed the learning requirements of the Committee as
part of the independent review;
–continued to receive updates from executives managing key
areas of the business, including Plan A, Business Continuity,
Customer Services, EDC/NDC, HR Shared Services, Food
Pricing and Promotions and Multi-channel. These now
account for around a quarter of the time allocated to the
meetings;
–debated our risk profile, classification and management of
key risks, identification of new emerging risks and movement
in risk tolerance as we better manage existing risks; and
–discussed the outcomes of our annual effectiveness review.
What is the action plan for 2013/14?
Looking ahead the Committee believes it is important to
remain focused on the audit, assurance and risk process
within the business, along with oversight of financial and other
regulatory requirements. The actions for 2013/14 are focused
around:
–conduct a tender of our Audit contract;
–review of three-year assurance plan, design and scope;
–risk profile and new emerging risks;
–specific risk presentations on key business areas; and
–implementing the key findings from the RSM Tenon review of
the internal audit function, including a revised Audit Charter.
Committee Updates
Detailed updates from the business units were introduced three
years ago. These updates are fully embedded as fixed agenda
items for each meeting, with one or more areas represented.
This year these topics covered:
EDC / NDC
–updated on the new structure to provide a faster, more agile
and lower cost service;
–updated on the strategy to consolidate our network, provide
greater capacity, improve availability to stores and service
levels to M&S Direct; and
–reviewed the key risks and mitigating actions around
implementation, testing and launch of the EDC/NDC.
Business continuity
–reviewed levels of preparedness for crisis management and
business recovery both nationally and internationally;
–reviewed changes to the out of hours call out process;
–received updates on significant national and international
incidents – ranging from fires, flooding and adverse weather
to medical evacuation, power grid failure and country-specific
national security incidents; and
–discussed enhancement of the ‘Travel Safe’ programme and
the third party integration into the Employee Travel Tracker.
To maintain the objectivity of the audit process M&S actively
supports audit partner rotation – Stuart Watson was appointed
as lead Audit partner in 2008/09 and has now come to the end
of his tenure with M&S. Stuart will be succeeded by Paul
Cragg.
The Committee recognises that length of tenure of auditors has
been a topic of much debate. It notes that the UK Governance
Code is being updated, adding a requirement that the external
Audit contract be put out to tender at least every ten years. In
view of this, the Committee intends to conduct a tender of the
Audit contract during the course of the coming year.