Annual Report and Accounts 2016


John Lewis Partnership plc


87


The purpose of Internal Audit is to support the Committee in fulfilling the parts of its remit laid down by the Partnership Board that require it to oversee:


a The integrity of the Partnership’s Annual Report and Accounts, and other formal announcements relating to the Partnership’s financial performance


a The Partnership’s systems of risk management and internal control


Internal Audit brings a systematic and disciplined approach to evaluating and improving the effectiveness of the Partnership’s risk management, control, and governance processes.


The Audit and Risk Committee reviews and approves the scope of the Internal Audit work programme on an annual basis, which covers key operational and financial processes, IT and projects and programmes across the Partnership. At each meeting with the Audit and Risk Committee, the Head of Internal Audit and Risk reports on current status against the agreed plan, control weaknesses identified and managements’ progress in developing the control environment. Key elements of the annual plan included:


Change audits


The size and scale of the change agenda presents an ongoing risk to the Partnership. Programme Assurance reviews have therefore included key transformation programmes such as Pioneer, SANDCII (Semi Automated National Distribution Centre) and OCCO (Omni Channel Customer Ordering).


Financial audits


Financial audits provided independent assurance of key financial controls within the Internal Control Framework operated across the Partnership.


Operational audits


Operational audits have included maturity assessments of Divisional IT controls frameworks, the accuracy of Partner pay & personnel processes, strategic procurement, and an end-to-end controls review of online ordering and cash processes.


Regulatory audits


Areas include health and safety reporting, responsible sourcing, the Waitrose compliance report with the Groceries Supply Code of Practice (GSCoP) and CSR.


External Quality Assessment (EQA) Partnership Internal Audit was subject to independent external quality assessment during the year, in compliance with Section 1312 of the Institute of Internal Auditors (IIA) standards, which requires independent EQA once every five years.


Zarin Patel joined the Committee in March 2016.


She is Chief Operating Officer of The Grass Roots Group PLC, a marketing services company.


The review outlined the level of conformance with the IIA’s Code of Ethics and International Standards and offered specific recommendations to support the continuous improvement of the internal audit function over a two-year period. Progress with recommendations raised by the EQA is presented by the Head of Internal Audit and Risk at each Audit and Risk Committee. Notable improvements in the year include alignment of the internal audit team to the Divisional structure of the Partnership, significant developments in capability, and enhancing ways of working – including refreshing the Terms of Reference, improving the quality of deliverables, aligning the audit planning process to the principal risks and a greater focus on end-to-end process reviews.


Relevant qualifications of Audit


and Risk Committee members Keith Williams, Zarin Patel and Sharon Rolston have recent and relevant financial experience. Each is a qualified accountant and has worked in senior finance roles.


Baroness Hogg has significant experience, notably from when she was Chair of the Financial Reporting Council, that supports her leadership of the Committee.


Whistleblowing There were 136 cases of potential wrong doing reported through our internal whistle blowing procedures, which allow Partners to raise, in confidence, anything that ‘does not feel right’. This includes matters such as fraud, health and safety, theft, bullying and harassment. The most common concerns were about behaviour which accounted for over half of the reported cases and 32% related to illegality, theft and discount abuse. Following investigation, action was taken in 60% and 23% of these reported concerns respectively.


Independent external members of the Committee


Zarin Patel


Baroness Hogg Non-Executive Director and Chair of the Audit and Risk Committee


Previously, she was Chief Financial Officer, BBC and held other senior positions. She was also Non-Executive Director, BBC Worldwide where she chaired both Audit and Remuneration Committees.


Zarin is a Fellow of the Institute of Chartered Accountants in England and Wales.


Sharon Rolston


Sharon Rolston joined the Committee in March 2016.


She has been Group Treasurer of Diageo PLC since 2014 having held senior positions in Diageo and Nortel Networks Corporation.


Sharon is a Fellow of the Institute of Chartered Accountants Ireland.


Induction and training An induction programme has been arranged for the two new external independent Committee members who joined the Committee since the end of the year.


Briefings and workshops are provided to the Committee in relation to specialist and developing areas as deemed necessary.


Committee evaluation Please see page 71 for a summary of the evaluation of the effectiveness of the Board and its Committees during the year.


On behalf of the Audit and Risk Committee.


It’s Your Voice


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