John Lewis Partnership plc annual report and accounts 2013

Audit and Risk Committee Report continued

In recognition of that responsibility, the directors set policies and seek regular assurance that the systems of internal control are operating effectively. Strategic, commercial, operational, financial and health and safety risk areas are all included within the scope of these activities.

The systems of internal control are designed to manage, rather than seeking to eliminate, the risk inherent in pursuit of business objectives. In pursuing these objectives, internal controls can only provide reasonable, and not absolute, assurance against material misstatement or loss. The Committee has recently reviewed the effectiveness of the Partnership’s systems of internal control for the accounting year covered by this report.

The Committee monitors the development of policies and systems for identifying, evaluating and managing significant risk throughout the Group. It also monitors management’s actions to manage those risks and reports regularly to the Partnership Board. The John Lewis, Waitrose, Partnership Services and Corporate divisions, include risk assessments as part of their business plans. The Partnership whistleblowing procedure is monitored by the Committee and allows Partners to raise, in confidence, any concerns about possible improprieties including matters of financial reporting, risk issues, fraud, internal controls and auditing issues.

Work performed by the Committee

 Apart from performing the routine tasks laid out in the Committee’s terms of reference, and the activities summarised above, the Committee has:

• reviewed the September 2012 half yearly report and the January 2013 annual report and accounts;

• reviewed and agreed the scope of the audit work to be undertaken by the internal and external auditors;

• agreed the fees to be paid to the external auditors for their audit of the January 2013 financial statements;

• overseen the strengthening and embedding of risk management procedures, as part of a continuous improvement programme. This follows a robust compliance risk identification, assessment and reporting analysis of significant risks faced by the Partnership;

• reviewed the measures for mitigating risks through appropriate internal controls and

•assurance mechanisms, and for developing risk analysis processes and methodology across the business;

• overseeing the development of the financial control and information technology environment for the Partnership and its divisions and considered improvements in the areas of financial control and information technology;

• reviewed and followed up with management on operational risks within the Partnership, in particular those relating to data security, business continuity and disaster recovery, the Olympic Games, profit protection, food safety, health and safety and various external threats;

• reviewed Waitrose’s compliance report with the Groceries (Supply Chain Practices) Market Investigation Order 2009 (‘the Order’) and the Groceries Supply Code of Practice (‘GSCoP’) and reviewed the report to be submitted to the Office of Fair Trading on 29 May 2013; and

• reviewed the output from whistleblowing arrangements.

The significant issues that the Committee considered and discussed in relation to the financial statements included: assumptions in relation to the retirement benefit obligations; provisions in relation to long leave, service guarantee costs, customer refunds, insurance claims, reorganisation costs and property related costs; liability for unredeemed gift vouchers; and impairment of assets. The Committee considers that the financial statements present these items on a fair and balanced basis.

Committee evaluation

Members of the Committee and regular attendees of the Committee’s meetings were provided with an opportunity, through an evaluation questionnaire, to comment on the effectiveness of the Committee. The outcome of the evaluation was reviewed by the Committee and showed a general consensus that the Committee was performing well.

As a result of its work during the year, the Committee has concluded that it has acted in accordance with its terms of reference and has reviewed the independence and objectivity of the external auditors.

On behalf of the Audit and Risk Committee

David Anderson

Non-Executive Director and Chairman of the Audit and Risk Committee

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