Assurance on compliance with systems of internal control and
on their effectiveness is obtained through regular management
reviews, control self-assessment, internal audit reviews and
testing of certain aspects of the internal financial control systems
by the external auditors during the course of their statutory
examinations. The group’s various divisional audit committees
consider the results of these reviews on a regular basis, to 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
appropriate boards of directors.
At the half year and at the year end the divisional managing
directors and finance directors of all the group’s operations are
required to submit formal letters of representation on controls,
compliance and notification of ongoing or potential operational,
financial and legal risks or claims. These letters form the
subject of reports to the audit committee. Directors, executives,
key managers and professionals also make annual written
declarations of interests and are obliged to report without delay
any potential or actual conflicts of interest which may arise.
Internal audit functions operated in all of the group’s principal
business units in the period under review, reporting to local
management and accountable to local audit committees.
The internal audit functions are performed either by teams of
appropriate, qualified and experienced employees, or through the
engagement of external practitioners upon specified and agreed
terms with equivalent access. These structures are reviewed for
effectiveness with external consultants at least once a year.
The audit committee is satisfied that adequate, objective internal
audit assurance standards and procedures exist in the group.
The May 2003 and November 2003 audit committee meetings
reviewed internal audit reports on the major business units.
Reports on these issues were made to the board.
Following the appointment of a head of internal audit during
the year, proposals for a centrally-led strategy for internal audit
have been agreed by the audit committee.
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