Unilever 2008 Annual Report Download - page 77

Report of the Audit Committee
The role of the Audit Committee is to assist the Unilever Boards in
fulfilling their oversight responsibilities regarding the integrity of
Unilever’s financial statements, risk management and internal
control, compliance with legal and regulatory requirements, the
external auditors’ performance, qualifications and independence,
and the performance of the internal audit function. During the
year ended 31 December 2008 the principal activities of the
Committee were as follows:
Financial statements
The Committee considered reports from the Chief Financial
Officer on the quarterly and annual financial statements, including
other financial statements and disclosures prior to their
publication and issues reviewed by the Disclosure Committee.
They also reviewed the Annual Report and Accounts and Annual
Report on Form 20-F prior to publication.
Audit of the Annual Accounts
PricewaterhouseCoopers, Unilever’s external auditors, reported in
depth to the Committee on the scope and outcome of the annual
audit, including their audit of internal control over financial
reporting as required by Section 404 of the US Sarbanes-Oxley
Act of 2002. Their reports included accounting matters,
governance and control, and accounting developments.
Risk management and internal control arrangements
The Committee reviewed Unilever's overall approach to risk
management and control, and its processes, outcomes and
disclosure, including specifically:
• review of level of disclosure in quarterly financial results
announcements;
• review of accounting principles and judgements with respect
to financial statements, including the annual impairment review
of goodwill and intangibles;
• review of the analysis supporting the going concern judgement
of the 2008 Annual Report and Accounts;
• Corporate Audit’s interim and year-end reports on the Status of
Risk Management and Control, and management’s response;
• annual report from the Chief Financial Officer on business risks
and positive assurance on operating controls and corporate
policies; and a quarterly review of business risks and safeguards;
• the interim and year-end reports from the Code of Business
Principles Compliance Committee;
• monitoring the resolution of complaints received through the
global Ethics hotline including procedures for handling
complaints and concerns relating to accounting, internal control
and auditing matters;
• quarterly review of progress of the application of the
requirements under Section 404 of the US Sarbanes-Oxley Act
of 2002 with respect to internal controls over financial
reporting;
• review of the application of information and communication
technology;
• a review of the annual pension report and the impact of
financial volatility on pensions;
• annual review of anti-fraud arrangements;
• a review of tax planning policy;
• review of treasury policies, including debt issuance and
hedging;
• review of the annual financial plan; and
• review of the revised dividend policy
External auditors
The Audit Committee conducted a formal evaluation of the
effectiveness of the external audit process. The Committee has
approved the extension of the current external audit contract by
one year, and recommended to the Boards the reappointment of
the external auditors. On the recommendation of the Audit
Committee, the Directors will be proposing the reappointment of
PricewaterhouseCoopers at the AGMs in May 2009 (see pages
146 and 151).
Both Unilever and the auditors have for many years had safeguards
in place to avoid the possibility that the auditors’ objectivity
and independence could be compromised. The Committee
reviewed the report from PricewaterhouseCoopers on the actions
they take to comply with the professional and regulatory
requirements and best practice designed to ensure their
independence from Unilever.
The Committee also reviewed the statutory audit, other audit,
tax and other services provided by PricewaterhouseCoopers, and
compliance with Unilever’s policy, which prescribes in detail the
types of engagements for which the external auditors can and
cannot be used:
• statutory audit services – as detailed above, including audit of
subsidiaries;
• other audit services – work which regulations or agreements
with third parties require the auditors to undertake e.g. in
connection with borrowings and shareholder services;
• other services – statutory auditors may carry out work that they
are best placed to undertake, including internal control reviews;
• acquisition and disposal services – where the auditors are best
placed to do this work;
• tax services – all significant tax consulting work is put to tender,
except where the auditors are best placed to do this; and
• general consulting – external auditors may not tender for
general consulting work.
All engagements over €100 000 require specific advance approval
of the Audit Committee Chairman. The overall policy is regularly
reviewed and, where necessary, updated in the light of internal
developments, external developments and best practice.
The Committee held independent meetings with the external
auditors during the year.
Internal audit function
The Committee reviewed the Corporate Audit department’s audit
plan for the year, and agreed its budget and resource
requirements. The Committee carried out a formal evaluation of
the performance of the internal audit function which included a
review of a report by an external assessor and confirmed that they
were satisfied with the effectiveness of the function. The
Committee held independent meetings with the Chief Auditor
during the year.
Audit Committee terms of reference
The Audit Committee’s terms of reference are reviewed annually
by the Committee taking into account relevant legislation and
recommended good practice. The terms of reference can be
viewed on Unilever’s website at
www.unilever.com/investorrelations/corp_governance or supplied
on request.
Board Assessment of the Audit Committee
The Board evaluated the performance of the Committee and the
Committee carried out a self-assessment of its performance.
Kees Storm Chairman of the Audit Committee
Wim Dik
Charles Golden
Byron Grote
74 Unilever Annual Report and Accounts 2008
Report of the Directors