Unilever 2011 Annual Report Download - page 49

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REPORT OF THE AUDIT COMMITTEE
The role and terms of reference of the Audit Committee is to
assist the 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.
The Audit Committee is comprised only of independent Non-
Executive Directors with a minimum requirement of three such
members. During 2011 the Committee comprised Kees Storm
(Chairman), Charles Golden and Byron Grote. The Committee met
five times in 2011. All Committee members attended all the
meetings except Byron Grote who attended four out of the five
meetings. The Boards have satisfied themselves that the current
members of the Audit Committee are competent in financial
matters and have recent and relevant experience. For the
purposes of the US Sarbanes-Oxley Act of 2002, Kees Storm was
the Audit Committee’s financial expert up to 28 February 2012.
Byron Grote will take over the Chairmanship of the Committee on
29 February 2012 and will become the Audit Committee’s financial
expert on this date.
During the year, principal activities 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, the quarterly performance and
accompanying press releases prior to publication. These reviews
incorporated the accounting policies and key judgements and
estimates underpinning the financial statements as disclosed
within Note 1 on pages 68 and 69, including:
• goodwill and intangible assets;
• provisions;
• business combinations;
• financial instruments;
• pensions;
• taxation; and
• going concern assessment.
The Committee was satisfied with the accounting treatments
adopted.
Risk management and internal control arrangements
The Committee reviewed Unilever’s overall approach to risk
management and control, and its processes, outcomes and
disclosure. It reviewed:
• the Controller’s Quarterly Risk and Control Status Report
(which includes matters arising from the Global Code and
Policy Committee), including Code cases relating to frauds and
financial crimes and significant complaints received through
the global Ethics Hotline;
• Corporate Risks, including regular reviews of the 2011 risks
and the 2012 Focus Risks identified by the Unilever Leadership
Executive;
• Management’s work to implement a simplified policy
framework that directly underpins the Code of Business
Principles;
• progress on management’s Effective Financial Control &
Reporting project;
• the application of information and communication technology;
• tax planning, insurance arrangements and related risk
management;
• treasury policies, including debt issuance and hedging;
• commodity risk management, governance and derivatives
hedging; and
• litigation and regulatory investigations.
The Committee reviewed the application of the requirements
under Section 404 of the US Sarbanes-Oxley Act of 2002 with
respect to internal controls over financial reporting.
In addition, the Committee reviewed the annual financial plan and
Unilever’s dividend policy and dividend proposals.
In fulfilling its oversight responsibilities in relation to risk
management, internal control and the financial statements, the
Committee met regularly with senior members of management
and are fully satisfied with the key judgements taken.
Internal audit function
The Committee reviewed Corporate Audit’s audit plan for the year
and agreed its budget and resource requirements. It reviewed
interim and year-end summary reports and management’s
response. The Committee carried out a formal evaluation of the
performance of the internal audit function and was satisfied with
the effectiveness of the function. The Committee met
independently with the Chief Auditor during the year and
discussed the results of the audits performed during the year.
Audit of the Annual Accounts
PricewaterhouseCoopers, Unilever’s external auditors and
independent registered public accounting firm, reported in depth
to the Committee on the scope and outcome of the annual audit,
including their audit of internal controls 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.
The Committee held independent meetings with the external
auditors during the year and discussed and challenged their audit
plan, including their assessment of the financial reporting risk
profile of the Group. The Committee discussed the views and
conclusions of PricewaterhouseCoopers regarding
management’s treatment of significant transactions and areas of
judgement during the year and PricewaterhouseCoopers
confirmed they were satisfied that these had been treated
appropriately in the financial statements.
External auditors
The Audit Committee conducted a formal evaluation of the
effectiveness of the external audit process. The Committee has
considered the tenure, quality and fees of the auditors and
determined that a tender for the audit work is not necessary. As a
result, the Committee has approved the extension of the current
external audit contract by one year, and recommended to the
Boards the re-appointment of external auditors. On the
recommendation of the Audit Committee, the Directors will be
proposing the re-appointment of PricewaterhouseCoopers at the
AGMs in May 2012 (see pages 116 and 122).
Unilever Annual Report and Accounts 2011
Report of the Directors Governance