Accountability, Audit & Control

Committees of the Board

The Board is responsible for monitoring the following Committees and the minutes of the meetings of these Committees are made available to the Board on a timely basis:

Executive Committee
During 2007, the Executive Committee comprised Ian Coull, John Heawood, Walter Hens, Marshall Lees (until 1 August 2007), David Sleath, Andrew Gulliford, John Probert, Jennifer Titford, Michael Waring, Roger Bell and Inès Reinmann, who was appointed to the Committee with effect from 29 October 2007. The Executive Committee is chaired by the Chief Executive and met ten times in 2007. The Executive Committee is responsible for the day-to-day management of the Group, the development of operational plans and strategy, assessment of risk and the allocation of resource where those matters are not reserved for the Board.

Audit Committee
The Audit Committee comprised Andrew Palmer (Chairman), Lord Blackwell, Stephen Howard, Thom Wernink and Nigel Rich, who resigned from the Committee with effect from 14 May 2007. Andrew Palmer, the Finance Director of a FTSE 100 company is identified as having recent and relevant financial experience as required by the Code. The Committee reviews the clarity and completeness of the disclosures made in the financial statements of the Company and considers significant accounting policies, any changes to them and any significant judgements and estimates. The Committee also considers the appointment, compensation, independence and performance of the external auditors.

During the year, the Audit Committee ran a tender process for the role of external auditors to the Group. As a result of the tender process, Deloitte & Touche LLP were appointed by the Board as external auditors in June 2007. A resolution will be put to shareholders at the forthcoming AGM proposing the formal appointment of Deloitte & Touche LLP as auditors.

The Committee met regularly with the internal and external auditors during the year. The Committee discharged its responsibilities as set out in its terms of reference.

• investigate any activity within its terms of reference; 
• seek any information that it requires from any employee of the Company and all employees are directed to co-operate with any request made by the Committee; and
• obtain outside legal or independent professional advice and such advisors may attend meetings as necessary. 

The types of non-audit work that the auditors may undertake has been restricted and other categories of non-audit work are subject to pre-clearance, as are assignments over certain financial limits. The external auditors have confirmed their independence to the Committee in writing.

Nomination Committee
The Nomination Committee consisted throughout the year of Nigel Rich (Chairman), Ian Coull, Andrew Palmer, Christopher Peacock, Lord Blackwell, Stephen Howard and Thom Wernink. Lesley MacDonagh joined the Committee with effect from 31 January 2008. The Committee has responsibility for making recommendations for new appointments to the Board and for ensuring that the process for all appointments is formal, rigorous and transparent. The Committee prepares a job description for the role required in light of the experience and capabilities of the Board and the requirements of the role. Candidates are then assessed by reference to that job description. External search consultancies are engaged by the Committee, as necessary, to provide candidate lists in respect of Board appointments. The Committee is also responsible for succession planning, ensuring the continuity of the Board and ensuring that the Board comprises the appropriate skills and experience appropriate for running the Company.

The Remuneration Committee
The composition of the Remuneration Committee, its activities during 2007 and the way it applied the principles of the Code are described in the Remuneration Report.

Going Concern

After making enquires, the Directors have a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the accounts.

Internal Control & Internal Audit

The Board is responsible for monitoring and maintaining a robust and effective internal controls framework across the Group and for identifying, evaluating and managing the Group’s significant risks, in compliance with principle C.2 of the Code and the revised guidance on internal control issued by the Financial Reporting Council in October 2005. This framework and system has been developed in compliance with the Turnbull guidance and is continuously reviewed by the Board, who confirm that it has been in place throughout the year and to the date of the 2007 Annual Report. The framework and internal controls system are designed to manage but not to eliminate the risk of failure of the Group to meet its business objectives and as such only provide reasonable but not absolute assurance against material misstatement or loss.

The key features of the internal control framework include:

• the establishment of an organisational structure with clearly defined levels of authority and division of responsibilities;
• a comprehensive system of reporting, budgeting and planning against which performance is monitored;
• the formulation of policies and of approval procedures in a number of key areas such as treasury operations, capital expenditures and environmental matters. These are reviewed from time to time by the Board to confirm their adequacy and effective operation;
• the provision of a code of conduct for employees and the monitoring of the quality of personnel through an annual performance appraisal process;
• a regular and ongoing risk assessment process, undertaken at both Group and subsidiary levels which includes identification and evaluation of the likelihood of key risks materialising and assessment of the controls and other processes in place to manage such risks; 
• a Group Risk Committee, with the responsibility to oversee the identification, assessment and management of all the risks faced by the Group;
• an internal audit function, with a risk-based programme of work aimed at improving processes and the controls; and
• an annual control self-assessment and certification exercise whereby managers throughout the business carry out an assessment of the controls in their area of responsibility and certify whether such controls have been operating effectively throughout the year.

During the year, the Audit Committee reviewed the arrangements put in place whereby employees may raise, in confidence, any concerns which they may have in respect of financial reporting or other matters and the arrangements for the independent investigation of those matters.

In performing its review of effectiveness, the Audit Committee took into account the following reports and activities:

• internal audit reports on reviews of business processes and activities, including action plans to address any identified control weaknesses;
• management’s own assessments of the strengths and weaknesses of the overall control environment in their area, and the action plans to address the weaknesses;
• external auditor reports on any recommendations for improvements in controls or processes identified in the course of their work, including the follow-up of previous recommendations; and
• risk management reporting, including the status of actions to mitigate major risks.

The Board and the Audit Committee monitor management’s action plans designed to address weaknesses in internal controls which have been identified as a result of the above procedures. The Board confirms that it has not been advised of any failings or weaknesses which it regards to be significant.


See also:
Audit Committee Terms of Reference
Nominations Committee Terms of Reference
Remuneration Committee Terms of Reference