Annual Report - JD Group

Corporate governance continued
Financial control and reporting
The directors are responsible for ensuring that Group companies
maintain adequate records, and for reporting on the financial
position of the Group and the results of the activities with
accuracy and reliability. Financial reporting procedures are applied
in the Group at all levels to meet this responsibility. Financial and
other information is constantly reviewed and remedial action
taken, where necessary.
Improvements to the quality of reported information are continually
effected by means of replacing or upgrading information systems.
The Group’s financial statements are prepared in accordance with
South African Statements of Generally Accepted Accounting
Practice and International Financial Reporting Standards as well as
the consistent use of appropriate accounting policies, unless an
accounting policy requires revision or adoption of new accounting
standards, in which case proper disclosure will be made,
supported by reasonable and prudent judgements and estimates,
in order to properly disclose the Group’s financial status.
Internal control and internal audit
The board has overall responsibility for ensuring that the Group
maintains a system of internal financial control to provide it with
reasonable, but not absolute, assurance regarding the reliability of
the financial information used within the business and for
publication, and to ensure that assets are safeguarded.
The key features of the internal control systems that operated
throughout the year under review are described hereunder.
Control environment
A documented organisational structure with clearly defined lines
of responsibility and delegation of authority from the board to the
chains and corporate service departments is in place. The board
has established policies and procedures, including a levels of
authority document and a code of conduct, to foster a strong
ethical climate.
Financial monitoring systems
The Group operates a comprehensive annual planning and
budgeting process. The annual budget is approved by the board.
The financial reporting system compares results with plans,
budgets and the previous year and is able to identify deviations on
a daily and monthly basis. Reports include regular cash flow
statements, income statements and balance sheets projected for
12 months, which are used in determining future funding needs.
Main control procedures
The directors have adopted a schedule of matters which are
required to be brought to it for decision, thus ensuring that it
maintains full and effective control over appropriate strategic,
financial, organisational and compliance issues. The board has
identified a number of key areas which include treasury, legislative
requirements, information technology, strategic business goals
and other matters which are subject to regular reporting. Financial
controls and procedures are in place, including procedures for
seeking and obtaining approval for major transactions and
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organisational changes. Organisational controls involving the
segregation of incompatible duties and controls relating to the
security of assets are also covered.
The board regularly reviews the operations and effectiveness of
internal financial control. The board considers that there have
been no weaknesses which have led to any material losses or
contingencies during this financial year.
Internal control
The directors accept responsibility for maintaining appropriate
internal control systems to ensure that the Group’s assets are
safeguarded and managed, and losses arising from fraud or other
illegal acts are minimised. Control systems are monitored and
improved in accordance with generally accepted best practice.
Internal audit
Internal audit is an independent, objective assurance and
consulting function designed to add value to and improve the
Group’s operations. It helps the Group accomplish its objectives
by bringing a systematic, disciplined approach to evaluate and
improve the effectiveness of risk management, control and
compliance processes. It provides:
assurance that the management processes are adequate to
identify and monitor significant risks;
confirmation of the adequacy and effective operation of the
established internal control systems;
credible processes for feedback on risk management and
assurance; and
objective confirmation that the board receives assurance from
management that information is reliable.
The purpose, authority and responsibility of the internal audit
activity are formally defined in an internal audit charter, which is
approved by the board, and which is consistent with the Institute
of Internal Auditors’ definition of internal auditing.
The activities of the internal auditors are co-ordinated by the
Group internal audit executive, with unrestricted access to the
audit committee chairman and its members.
Internal audit co-ordinates with the external auditors to ensure
proper coverage and to minimise duplication of effort. The
external auditors also review reports issued by internal audit.
Audit plans for each chain are tabled annually to take account of
changing business needs. Follow up audits are conducted in areas
where weaknesses are identified.
The internal audit plan, approved by the audit committee, is based
on risk assessments, which are of a continuous nature so as to
identify not only existing and residual risks, but also emerging
risks, as well as issues highlighted by the audit committee and risk
management committee. Internal audits are conducted formally
at each chain workplace and corporate service department on
aregular basis.