John Lewis Partnership plc annual report and accounts 2013
• monitoring the effectiveness of the group’s internal audit function;
• making recommendations to the Partnership Board relating to the appointment, reappointment and removal of the external auditors following an annual evaluation of their performance;
• approving the remuneration and terms of engagement of the external auditors;
• reviewing the scope and results of the external audit during the year; and
• reviewing and monitoring the external auditors’ independence and objectivity and the effectiveness of the audit process, taking into account professional and regulatory requirements.
External auditors
Re-appointment of auditors As part of the approval process for the reappointment of the external auditors, the Committee is responsible for the evaluation of the auditors’ performance. The members of the Committee and senior finance executives were provided with an opportunity, through an evaluation questionnaire, to comment on the effectiveness of the external audit process. The outcome of the evaluation was reviewed by the Committee which concluded the effectiveness of the external auditors and the audit process was satisfactory.
Audit tendering It is the Committee’s policy to ensure that there is audit partner rotation every five years to safeguard the external auditor’s objectivity and independence. The year ended 26 January 2013 is the second year of the current audit engagement partner’s appointment. The Committee has adopted a policy in line with the Code relating to tendering external audit contracts at least every ten years. In determining the timing of the audit tender, the Committee will consider the date of rotation of the audit engagement partner and other factors.
Auditors’ independence and objectivity 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 judgment they are independent with respect to the audit.
The Committee recognises that the independence of the external auditors is a fundamental safeguard for the interests of the Partnership’s co-owners. During the year, the Committee has agreed a new policy under which the external auditors may only perform non- audit services in exceptional circumstances. Certain categories of non-audit services are prohibited and there is a specific approval process for any work that is proposed to be undertaken by the external auditor.
Prohibited services include bookkeeping or other services related to the accounting records or financial statements, internal audit services, taxation services and any other work that could compromise the independence of the external auditor or is prohibited by UK ethical guidance. The 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 Group Finance Director. The Committee approves the Internal Audit work programme for each year. At each meeting, the Committee receives a report from the Head of Internal Audit and Risk Management on the work undertaken by internal audit and management responses to proposals made in the audit reports issued by the function.
During the year the Committee reviewed the resourcing, qualifications and experience of the internal audit team and agreed to strengthen the information technology resources within Internal Audit, reflecting the ongoing information technology change programmes.
Internal control and risk management
The Partnership Board has ultimate responsibility for the Partnership’s system of internal control and risk management and reviewing its effectiveness. The Partnership Board delegates the monitoring of internal control and risk management processes to the Committee. Executive management is responsible for identifying and evaluating the key business risks and for implementing and maintaining systems for managing those risks in an efficient and effective manner through the business planning process.
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