John Lewis Partnership plc annual report and accounts 2012

The Committee’s principal roles are: assisting the Partnership Board in the discharge of its responsibilities in respect of statutory and financial reporting and reviewing and monitoring the effectiveness of the group’s internal controls and risk management systems; monitoring the effectiveness of the group’s internal audit function; making recommendations to the Board on the appointment of the external auditors following an annual evaluation of their performance; approving the remuneration and terms of engagement of the external auditors and monitoring and reviewing the external auditors’ independence, objectivity and effectiveness, taking into account professional and regulatory requirements.

The external auditors attend the meetings of the Audit and Risk Committee, as does the Finance Director, the Group Financial Controller, the Head of Internal Audit and Risk Management, the Head of Operational Risk Management and the Director of Legal Services and Company Secretary. Other executives are invited to attend as appropriate and the Committee meets at least annually with the external auditors and the Head of Internal Audit and Risk Management without any executives being present.

External auditors

 As part of the approval process for the appointment of the external auditors, the Audit and Risk Committee is responsible for the evaluation of their performance. The members of the Committee and regular attendees of the Committee’s meetings were provided with an opportunity, through a questionnaire, to comment on the effectiveness of the external auditors. The review of PricewaterhouseCoopers LLP by the Audit Inspection Unit was also considered in forming a view on the firm’s professional skills and practices. No significant areas of concern were identified in these evaluation processes and the Committee is satisfied that the external auditors continue to be effective. The external auditors are required to rotate the audit partner responsible for the group audit every five years and accordingly the audit partner changed during the 2011/12 financial year, with the responsibilities transferred upon signature of the 2010/11 Annual Report and Accounts. The Committee is monitoring the development of regulation on the rotation of audit firms from the Financial Reporting Council and elsewhere and will consider the implications for the appointment of the external auditor when the guidance is finalised. PricewaterhouseCoopers LLP, or its predecessor firms, have been the external auditor of the Partnership for a number of years, but continues to perform well and demonstrate independence. Hence, the Committee has no current intention of putting the external audit out for tender.

The Committee keeps under review the nature and extent of non-audit services provided to the Partnership by the external auditors, and receives confirmation from them, at least annually, that in their professional judgement they are independent with respect to the audit.

The Board recognises that the independence of the external auditor is a fundamental safeguard for the interests of the Partnership’s co-owners. The Board has agreed a policy setting out the categories of non-audit services that are prohibited and those that may be undertaken by the external auditor subject to specific approval. Prohibited services include bookkeeping or other services related to the accounting records or financial statements and internal audit services. At each meeting the Audit and Risk Committee reviews the nature of all non-audit engagements with the external auditor and the related costs. It also reviews the assurance provided by them regarding their independence and objectivity. Details of the amounts paid to the external auditors are given in note 5 to the accounts. Having undertaken a review of the non-audit services provided during the year, the Committee is satisfied that these services did not prejudice the external auditors’ independence.

Internal audit

The Head of Internal Audit and Risk Management reports functionally to the Committee and operationally to the Finance Director. The Committee approves the Internal Audit work programme for each year and considers the results of the internal audit work.

Internal control and risk management

 The directors have ultimate responsibility for internal control and the management of risk throughout the business, and also for reviewing its effectiveness and delegate to the Committee the monitoring thereof. Executive management is responsible for identifying and evaluating the

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