Marks and Spencer 2016 Annual Report Download - page 45

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ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
FINANCIAL STATEMENTS OUR BUSINESSOUR PERFORMANCEGOVERNANCE
EFFECTIVENESS OF THE AUDIT COMMITTEE (CONTINUED)
AUDIT COMMITTEE ACTION PLAN
The Audit Committee’s performance
was reviewed within the framework of
the wider Board E ectiveness Review.
The Committee received positive
feedback on the way it challenges
the business and was seen as open,
transparent and e ective. Areas of
improvement were highlighted, discussed
and debated by the Committee, and
included as part of the action plan for
the coming year. The Committee made
good progress on the 2015/16 action
plan by continuing to focus on our
international business and ethical
sourcing, monitoring the Group risk
management process, and supporting
the development of the assurance plan.
Looking ahead, the Committee will remain
focused on the audit, assurance and risk
processes within the business, and
strengthen its oversight of fi nancial and
other regulatory requirements.
The action plan for 2016/17:
> Review the mitigating controls over
the Group’s principal risks and assess
the level of assurance provided.
> Continue to support risk assurance
mapping across the Group, with
particular focus on strategic priorities.
> Increased oversight of the Board’s
management of cyber security risk.
> Monitor and respond to the changing
regulatory environment.
TENURE
Deloitte were appointed by shareholders
as the Group’s Statutory Auditor in
2014 following a formal tender process.
The external audit contract will be put
out to tender at least every ten years.
The Committee recommend the
reappointment of Deloitte for 2016/17.
We believe the independence and
objectivity of the external auditor and
the e ectiveness of the audit process
are safeguarded and remain strong.
The Company has complied with the
Statutory Audit Services Order for the
fi nancial year under review.
The FRC’s Audit Quality Review (‘AQR’)
team selected to review the audit of the
Company’s 2014/15 fi nancial statements
as part of their 2015 annual inspection of
audit fi rms. The focus of the review and
their reporting is on identifying areas where
improvements are required rather than
highlighting areas performed to or above
the expected level. The Chairman of the
Audit Committee received a full copy of
the fi ndings of the AQR team and has
discussed these with Deloitte. Whilst there
were no signifi cant fi ndings, some matters
were identifi ed as requiring improvement
and we have agreed an action plan with
Deloitte to ensure the matters identifi ed
by the AQR have been addressed in
the audit of the Company’s 2015/16
fi nancial statements.
EFFECTIVENESS
The assessment of the e ectiveness
of our external auditor is based on a
framework setting out the key areas of
the audit process for the Audit Committee
to consider, as well as the role that
management has contributed to an
e ective process.
The framework provides the Audit
Committee with a mechanism to encourage
management to improve standards in a
number of key areas. These include ensuring
that information is presented with a culture
of ‘right fi rst time’, that the quality of
management papers is high, that robust
internal systems and controls are
maintained, that the audit process is
respected and valued by the management
team, and that proposed audit adjustments
are examined seriously. The Committee
believes that this framework provides a
robust process for monitoring auditor
e ectiveness, and can be measured against
the fi ndings of future external auditor
e ectiveness surveys. Looking forward,
the Committee will reassess the calendar
timing of the e ectiveness review to ensure
maximum insight and e ciency is gained
from the process.
The approach to the assessment is tailored
to enable senior management to answer
the detailed questions on the Company-
wide audit process, and provide the Audit
Committee with su cient detail to
establish an informed view on the overall
e ciency, integrity and e ectiveness of
the external audit.
Questionnaires were tailored to the
following target groups:
1. Chief Finance O cer and Director
of Group Financial Control: A full
questionnaire was completed, covering
all areas of the audit process, and in
consideration of the questionnaire
completed by the Heads of Finance for
Food, Clothing & Home and International.
2. Heads of Finance: Food, Clothing
and Home and International: Shorter
questionnaire, focusing on the audit team,
planning, challenge and interaction with
the business.
3. Audit Committee: A high level set
of questions with specifi c focus on the
audit partner, planning, execution,
value, communication and challenge.
The Committee had access to copies of the
completed fi nance questionnaires (sections
1 and 2 above) to assist their considerations.
WHAT WAS THE OUTCOME?
The results of the questionnaire were
examined, and feedback identifi ed a good
understanding of the business and its
values, a joined-up approach towards
signifi cant issues for discussion, and a
team that o er robust challenge and
technical insight. Areas for improvement
were identifi ed in relation to better
communication during the audit, and
more business insights.
NON-AUDIT FEES
A robust auditor engagement policy
is in place and adhered to. It is
reviewed annually and disclosed on
marksandspencer.com/thecompany.
The business is committed to maintaining
non-audit fees at a low level, and can report
that the non-audit fees to audit fees ratio
for the year was 0.17:1, compared to 0.49:1
last year. Of the total non-audit fees of
£0.3m paid to Deloitte, £0.2m relates to
assurance services in relation to the Half
Year review, turnover certifi cates, and EMTN
renewal. It is normal practice for such
assurance services to be provided by the
Company’s statutory auditor. A number
of smaller non-assurance services were
provided, including in relation to taxation
compliance in the International business,
and these amounted to £0.1m.
Where non-audit work is performed by
Deloitte, both the Company and Deloitte
ensure robust processes to prevent
auditor objectivity and independence
from being compromised.
All non-audit work performed by Deloitte
was put to the Audit Committee for
consideration and approval, regardless
of size.
Further details on non-audit services
provided by Deloitte can be found in
note 4 on page 96.
EXTERNAL AUDITORS