Strategic Review
40 Finsbury Food Group Annual Report & Accounts 2018
Audit Committee Report
Corporate Governance
Financial Statements
Overview
The Committee met three times during the year. The external auditors attended two of these meetings at the invitation of the Committee Chairman. The Committee also met with the external auditors without the presence of Executive Directors or management.
During the year, in addition to its core responsibilities the Committee discussed the development of new M3 financial reporting system and revised the Committee’s terms of reference in line with best practice.
Terms of Reference The principle duties carried out in the year were to:
Review and monitor the integrity of the Financial Statements, reviewing significant financial reporting issues and judgements which they contain, and recommend to the Board whether the Financial Statements give a fair, balanced and understandable view of the Group’s assets, liabilities and financial position.
Receive reports on and keep under review the effectiveness of the internal controls and risk management processes, carry out an annual assessment of these processes and approve statements to be included in the Annual Report concerning internal controls and risk management.
Oversee the Company’s relations with the external auditors and consider and make recommendations on the appointment, reappointment and removal of the external auditors.
Monitor and review the effectiveness of the internal audit programme in the context of the overall risk management system to ensure that the internal audit is operating efficiently and effectively within the organisation, review and assess the internal audit plan and reports, recommendations and management responses.
Additional duties were to review foreign exchange, interest rate and commodity hedging policies, review and approve the Group’s insurance policies, review and approve new bank facility agreements and review Health and Safety policies, practices and risk management procedures.
Financial Reporting
During the year, the Committee concluded that the Annual Report and Financial Statements, taken as whole, were fair, balanced and understandable and provided the information necessary for shareholders to assess the Group’s business model, strategy and performance. During the year, the Committee considered the following key matters of judgement:
• Revenue recognition policy and the future impact of IFRS 15 • Valuation of goodwill and intangible assets • Significant non-recurring items • The Committee considered the budget for 2019 and the business plan for 2020/21 and the debt financing arrangements at year end and concluded that the going concern basis is appropriate.
The Committee reviewed the full-year and half-year results announcement, Annual Report and Financial Statements and considered reports from the external auditors identifying accounting or judgemental issues requiring its attention. The committee also reviewed the Strategic Report and concluded that it presented a useful and fair, balanced and understandable review of the business.
External Audit
The Committee considered the effectiveness of last year’s external audit against five criteria, Qualification, Expertise and Resources, Effectiveness, Independence and Value and concluded that the audit was effective.
The Committee will assess the external auditor’s performance and effectiveness for the current year through a questionnaire to be completed by Audit Committee members and the Group’s senior finance team. The output from the process will be reviewed and discussed by the Audit Committee and with the external auditor at the Committee’s October 2018 meeting.
Independence and Non-audit Services
The Committee agreed a new policy on the provision of non-audit services in May 2018. The general principle is that the External Auditor should not provide a non-audit service if this would have a material effect on, or relevance to, the production of the company’s Financial Statements and/or involve taking decisions or making significant subjective judgement that should properly be the responsibility of management. During the year, the fees paid to the auditor, KPMG, were £180,000 (2017: £173,000) for audit services, and £207,000 (2017: 142,000) for non-audit services. No services were provided pursuant to contingent fee arrangements.
The Committee reviewed and considered the following factors to assess the objectivity and independence of KPMG:
• The auditor’s procedures for maintaining and monitoring independence, including those to ensure that the partners and staff have no personal or business relationships with the Group, other than those in the normal course of business permitted by UK ethical guidance.
• The degree of challenge to management and the level of professional scepticism shown by the audit partner and the audit team throughout the process. • The nature of non-audit work undertaken during the year and its approval in accordance with the Audit Committee’s policy on non-audit services. The additional services provided during the year comprised due diligence on proposed acquisitions, pension advice on pensions fund investment procedures and tax compliance work, none of which had an effect on the Company’s Financial Statements or involved executive decisions. • A report from KPMG that they have adequate policies and safeguards in place to ensure that auditor objectivity and independence is maintained.
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