Annual report and accounts - Cattles Limited

Cattles plc Annual Report and Financial Statements 2004
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The Audit Committee is responsible for reviewing the operation and effectiveness of the internal control system on at least a six
monthly basis. Such reviews have been conducted during the financial year. The principal features of the group’s internal control
system can be summarised as follows:
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A clearly defined organisational structure with lines of responsibility and delegation of authority to divisional executive
management supported by established policies and procedures.
Primary responsibility of the Board to ensure that the major business risks facing the group are identified and that appropriate
policies are developed for the management of those risks. The Board, however, recognises that the internal control system is
designed to manage rather than eliminate the risk of failure to achieve business objectives. Risks are identified and evaluated
by reference to impact and likelihood through a series of structured, high level interviews and facilitated risk management
workshops.
The engagement of a leading firm of professional advisers for the provision of a complete range of internal audit and risk
assurance services, with a direct reporting link to the Audit Committee and the Risk Management Group. The work of the
group’s external risk assurance provider focuses on the group’s most significant areas of risk and, by a formal process of six
monthly risk monitoring and reporting, allows the Audit Committee and the Risk Management Group to assess whether key
control objectives are achieved.
A Risk Management Group, comprising the executive directors, the group’s external risk assurance providers and other key
members of senior management, reviews key group risks together with the effectiveness of the group’s controls to manage
and reduce the impact of these risks. The Risk Management Group meets twice yearly, reporting to the Audit Committee.
Delegation of the responsibility for on-going maintenance of the system of internal control procedures to the executive
management, specifically designated Risk Champions for all business areas and appropriate working parties. The system
ensures that successive assurances are provided to ascending levels of management and changes in the risk profiles for all
business areas are monitored and reported on a monthly basis. The group is continuing to develop its risk management
framework further to ensure that risk monitoring and reporting is embedded at all levels of management and throughout all
areas of the group’s operations.
Arrangements by which staff of the company may in confidence raise concerns about possible improprieties in matters of
financial reporting or other matters, together with arrangements for the proportionate and independent investigation of such
matters and for appropriate follow-up action and reporting to the Board.
Operation of a comprehensive planning and financial reporting system, which covers income, expenditure, cash flows and
balance sheets. Annual budgets and medium term plans are approved by the Board and monitored against actual
performance on a monthly basis to identify any significant deviation from approved plans. The annual budget is reviewed and
reforecast on a regular basis.
Adoption of a schedule of matters specifically reserved for the approval of the Board ensuring that it maintains full and effective
control over appropriate financial, strategic, organisational and compliance issues. As described on page 25, the Board has
identified a number of key areas, which are subject to regular reporting to the Board.
The Board also reviews the role of insurance in managing risks across the group.
Independence of Auditors
Both the Audit Committee and the external auditors, PricewaterhouseCoopers, have in place safeguards to avoid the auditors’
objectivity and independence being compromised. The group’s policy with regard to services provided by its external auditors is as
follows:
Statutory audit services: The external auditors, who are appointed annually by the shareholders, undertake this work. The external
auditors also provide regulatory services and formalities relating to shareholder and other circulars. The Audit Committee reviews
the auditors’ performance on an on-going basis.
Further assurance services: Further assurance services include work relating to the group’s transition to International Financial
Reporting Standards (‘IFRS’), due diligence and other non-regulatory reporting. The group’s normal policy is to appoint the
external auditors to undertake this work because of their knowledge and experience of the business. However, the Board reviews
their independence and expertise on every assignment. In particular, the group appointed the external auditors to advise on the
transition to IFRS because, subject to their being re-appointed at the annual general meeting on 5 May 2005, they will be auditing
the 2005 accounts which will be the first set of financial statements to be drawn up under IFRS. However, the group has also
appointed other accounting advisers to advise on specific aspects of the transition to IFRS.