Unilever 2012 Annual Report Download - page 60

ABOUT UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
57Unilever Annual Report and Accounts 2012 Report of the Directors overnance
• the ontroller’s Quarterly Risk and Control Status Report,
including Code of Business Principles cases relating to frauds
and financial crimes and significant complaints received through
the global Ethics Hotline;
• regular reviews of the 2012 corporate risks for which the Audit
Committee had oversight and the proposed 2013 corporate
risks identified by the Unilever Leadership Executive;
• progress on management’s improvements to reporting
and internal financial control arrangements;
• 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 audt functon
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 an 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.
Audt 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 reviewed, agreed, 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 audtors
The Committee is responsible for monitoring the performance,
objectivity and independence of the external auditor and
recommends the appointment of the external auditor to the
Boards. PricewaterhouseCoopers (and prior to the merger of Price
Waterhouse and Coopers & Lybrand, Coopers & Lybrand) has been
Unilever’s sole auditor since 1987. The last external audit tender
was conducted in 2002 and the lead audit partners are rotated
every five years. The Dutch lead audit partner will rotate this year.
The current UK lead audit partner joined the audit team for the
2011 year end and is due to rotate following the 2015 year end.
Each year, the Committee assesses the effectiveness of the
external audit process which includes gaining feedback from
key stakeholders at all levels across Unilever. The Committee
has considered the tenure, quality and fees of the auditors and
determined that a tender for the audit work is not necessary at
this time. 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 the external auditors. On the
recommendation of the Audit Committee, the Directors will be
proposing the re-appointment of PricewaterhouseCoopers at the
AGMs in May 2013 (see pages 137 and 143).
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, such as audit partner rotation
and the restriction on non-audit services that the external auditors
can perform as described below. 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, auditrelatedand
non-audit related services provided by PricewaterhouseCoopers and
compliance with Unilever’s documented approach, which prescribes
in detail the types ofengagements, listed below, for which the
external auditors canbeused:
• statutory audit services, including audit of subsidiaries;
• audit related engagements – services that involve attestation,
assurance or certification of factual information that may be
required by external parties;
• non-audit related services – work that our auditors are best
placed to undertake, which may include:
– tax services – all significant tax work is put to tender;
– acquisition and disposal services, including related due
diligence, audits and accountants’ reports; and
– internal control reviews.
Several types of engagements are prohibited, including:
• bookkeeping or similar services;
• systems design and implementation related to financial
information or risk management;
• valuation services;
• actuarial services;
• internal audit; and
• staff secondments to a management function.
All audit related engagements over €250,000 and non-audit related
engagements over €100,000 required specific advance approval
of the Audit Committee Chairman. The Committee further approved
all engagements below these levels which have been authorised
by the Group Controller. These authorities are reviewed regularly
and, where necessary, updated in the light of internal developments,
external developments and best practice. Following legislation
introduced in the Netherlands with effect from 1 January 2013,
we have further reduced the types of engagements for which the
external auditors can be used in the Netherlands.
Evaluaton of the Audt ommttee
The Boards evaluated the performance of the Committee and the
Committee carried out a self-assessment of its performance, and
each have concluded the Committee is performing effectively.
Byron rote
Chairman of the Audit Committee
harles olden
Kees Storm