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| Corporate governance continued |
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| ACCOUNTABILITY |
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| Going concern |
The directors endorse and are of the opinion that the Group has sufficient resources to maintain the business for the future. Consequently, the going-concern basis for preparing the financial statements is adopted.
The board minutes the facts and assumptions used in the assessment of the going-concern status of the Group at the financial year end. At the interim reporting stage, the directors consider their assessment at the previous year end of the Group’s ability to continue as a going concern and determine whether any of the significant factors in the assessment have changed to such an extent that the appropriateness of the going-concern assumption at the interim reporting stage has been affected. |
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| Auditing and accounting |
The board is of the opinion that their auditors observe the highest level of business and professional ethics and that their independence is maintained.
The Group aims for efficient audit processes using its external auditors in combination with the internal audit function. Management encourages unrestricted consultation between external and internal auditors resulting in periodic meetings to discuss matters of mutual interest, the exchange of working papers and management letters and reports, and a common understanding of audit techniques, methods and terminology. |
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| Internal financial controls |
The directors are responsible for adequate internal control systems that will provide reasonable assurance regarding the safeguarding of assets and the prevention of their unauthorised use or disposition, the maintenance of proper accounting records and the reliability of financial and operational information used in the businesses.
The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can provide reasonable, not absolute, assurance against material misstatement or loss. There is an ongoing process for identifying, evaluating, managing, monitoring and reporting on significant risks faced by the Group.
The Group’s system of internal financial control includes policies and procedures, clearly defined lines of accountability and delegation of authority, and makes provision for comprehensive reporting and analysis against approved standards and budgets. Compliance is tested by way of management review, internal audit check and external audit. The Group’s various divisional audit committees consider the results of these reviews on a regular basis and confirm the appropriateness and satisfactory nature of these systems, while ensuring that breakdowns involving material loss, if any, together with remedial actions, have been reported to the respective boards of directors. |
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| Internal audit function |
The internal audit departments are independent appraisal functions, whose primary mandate is to examine and evaluate the effectiveness of the applicable operational activities and the attendant business risks. The internal audit function includes the examination of the systems of internal financial control, so as to bring material deficiencies, instances of non-compliance and development needs to the attention of the audit committee, external auditors and operational management for resolution.
Internal audit is an independent and objective assurance and consulting activity designed to add value to and improve the Group’s operations. Internal audit undertakes a continual function in measuring, evaluating and reporting on the effectiveness of risk, control, governance systems and processes. It considers their economy of application and efficiency in meeting the objectives of the organisation using a systematic, disciplined approach. Internal audit further provides:
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assurance that the management processes are adequate to identify and monitor significant risks; |
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confirmation of the adequacy and effective operation of the established internal control systems; |
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credible processes for feedback on risk management and assurance; and |
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objective confirmation that the board receives the appropriate quality of assurance and reliable information from management. |
The purpose, authority and responsibility of the internal audit function is formally defined in an internal audit charter, which has been approved by the board and which is consistent with the Institute of Internal Auditors’ definition of internal auditing. Divisional internal audit committees have their own internal audit function that ensures that the necessary controls are in place for effective risk management and monitoring.
The activities of the divisional internal auditors are co-ordinated by the Group internal audit manager based at the corporate office, who has unrestricted access to the audit committee and its chairman. The Group internal audit manager reports at all audit committee meetings and attends divisional audit committee meetings.
The internal audit function communicates with other internal and external auditors to ensure proper coverage and to minimise duplication of effort. The external auditors also review reports issued by internal audit.
The audit committee is satisfied that adequate, objective internal audit assurance standards and procedures exist within the Group. At committee meetings internal audit reports on the major business units are reviewed, together with proposals for the ongoing internal assurance processes. The adequacy and capability of the Group’s internal audit structures are subject to review annually.
Audit plans for each business segment are tabled annually to take account of changing business needs.
Follow-up audits are conducted in areas where major weaknesses are identified.
The internal audit plan, approved by the audit committee, is based on risk assessment, which is of an ongoing nature in an attempt to identify not only existing and residual risks, but also emerging risks, as well as issues highlighted by the audit committee and senior management. Self-assessment questionnaires are completed on a regular basis by several divisions. Internal audits are conducted formally at each business unit at least once in a two-year cycle. This risk assessment is coordinated with the board’s own assessment of risk.
Where the external auditors also perform the internal audit function, due care is taken to ensure that there is adequate segregation between the two functions in order to ensure that their independence is not impaired. |
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