john-lewis-partnership-plc-annual-report-2015

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108 John Lewis Partnership plc Annual Report and Accounts 2015 Audit and Risk Committee report (continued) The Partnerships approach to internal audit Relevant qualifications of Audit and Risk Committee members Keith Williams has recent and relevant financial experience. The Committee reviews and approves the scope of the Internal Audit work programme each year. At each meeting, the Committee receives a report from the Head of Internal Audit and Operational Risk Management on the work of Internal Audit, and on management responses to recommendations for improvements made in the audit reports issued. Change audits Change delivery was a Partnership principal risk last year and has remained so this year. Examples include the John Lewis transformation programmes, Pioneer and OCCO. During the year, the Committee has reviewed 20 Internal Audit reports covering key processes, systems and controls and IT projects and programmes. The reports have provided a wide coverage across different areas in the Partnership and have recommended improvements that can be made to the control environment to increase efficiency and add value. Examples of the areas that have been reviewed in the year include: Operational audits Operational audits included Buying, E-Commerce, Social Media, IT Spend Governance, Central Transport and Contact Handling Centres. Composition of the Audit and Risk Committee At the year end, the Audit and Risk Committee comprised the following members: aa Three Non-Executive Directors; aa Three Elected Directors; aa The Partners’ Counsellor. The composition, including the Partners’ Counsellor and Elected Directors, reflects the Constitution and the co-owned structure of our business. Financial audits Financial Control audits were performed across both trading divisions. Additional audits At the request of the Committee, in response to issues raised in other UK retailers, an internal audit review of rebates from both trading divisions was commissioned. Regulatory audits Areas include Health and Safety and the Waitrose compliance report with the Groceries Supply Code of Practice (‘GSCoP’). Whistleblowing The Partnership whistleblowing procedures allow Partners to raise, in confidence, any concerns about possible improprieties including matters of financial reporting, risk, fraud, internal controls and auditing issues. During the year, there have been two audits conducted in response to whistleblowing. The internal audit plan seeks to provide risk-based assurance across a wide variety of the Partnership’s activities from Gift Cards to the Leckford Estate, and our large IT and change programmes. The Committee conducted their annual evaluation of the internal audit function during the year and members of the Committee and management were provided with an opportunity, through an evaluation questionnaire, to comment on the Internal Audit function’s effectiveness. The outcome of the evaluation demonstrated progress since last year although team capacity remained an area where it was believed improvement was needed.
Annual Report and Accounts 2015 John Lewis Partnership plc 109 Training During the year, the Directors have continued to receive induction training on Audit and Risk Committee matters. Training has been provided by external training providers and also internally. It has been linked to the Partnership Board agenda and covers the Partnership’s financial risks and financial reporting. An induction programme was arranged for the two new Non-Executive Directors and one Elected Director who joined the Committee during the year. Committee evaluation During the year, the Committee undertook an internal evaluation of its own effectiveness facilitated through the ‘Thinking Board’ on-line self-assessment tool provided by Independent Audit Limited and supported by interviews with Committee members conducted by the Interim Director of Legal Services. Key recommendations of the 2014/15 evaluation The key recommendations of the 2013/14 evaluation had been to review the role and responsibilities of the Committee, and the role of management that supports and provides assurance to the Committee, so that they are clearly defined and reflected within the Committee’s Terms of Reference. The Terms of Reference for the Committee were subsequently reviewed in light of this recommendation. As a result one of the key areas the 2014/15 evaluation was designed to assess was how effective this review had been. This year’s evaluation concluded that the new Terms of Reference for the Committee provided the greater clarify identified as being required in the previous year’s evaluation. Other key results of the 2014/15 evaluation included agreement that the priorities of the Committee are clear, the Committee facilitates high quality discussions in meetings and has the right mix of skills, experience and diversity of perspectives. One area for development and focus for improvement in 2015/16 was identified as continuing to look at the scope of information that the Committee receives to ensure reports presented to the Committee provide appropriate information to enable the Committee to fulfil its responsibilities. The Committee concluded that it has acted in accordance with its terms of reference and is performing its duties to the Board effectively. The new General Counsel and Company Secretary is reviewing the main themes from the evaluation and will make recommendations to the Board during the course of the year. On behalf of the Audit and Risk Committee Baroness Hogg Non-Executive Director and Chair of the Audit and Risk Committee Comply or explain? Composition of the audit and risk committee Code Provision C.3.1 states that the Board should establish an Audit Committee of at least three independent Non-Executive Directors. This provision supports the Code principle that the Audit Committee should be independent of executive management. During the year, the Partnership Board’s Audit and Risk Committee comprised three Non-Executive Directors, three Elected Directors, the Partners’ Counsellor and, until 30 April 2014, an external independent member. This composition ensures that the assurance and critical analysis of the business systems, operations and financial probity is conducted with appropriate objective and independent scrutiny, whilst also mindful of Partners’ interests. The Partnership has voluntarily adopted the UK Corporate Governance Code on a comply or explain basis. For more information: Go to page 84, Introduction Partnership difference Principles Strategy Performance Governance Financial statements
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