Auditors

 

During the year, the Committee agreed the approach and scope of the audit work to be undertaken by the external auditor, Deloitte LLP, and undertook an assessment of their qualification, expertise and resources, independence and the effectiveness of the external audit process. The Committee also reviewed and agreed the terms of engagement, the fees, and areas of responsibility and the work to be undertaken by the external auditor, and agreed the fees payable in respect of the 2013/14 audit work. Details of the amounts paid to the external auditor for their audit services are given in note 7 to the accounts on page 92. In addition, the external auditor provided the Committee with a schedule of each matter on which there was an initial difference between them and management in relation to the accounting treatment, and with the final decisions on these issues.

During the year, the Committee considered the effectiveness and independence of the external auditor. In consideration of its effectiveness, the Committee reviewed the experience and expertise of the audit team, the fulfilment of the agreed audit plan and any variations to it, feedback from the Group's businesses and the contents of the external audit report.

In considering the independence of the external auditor, the Committee received a statement of independence from the auditor, a report describing their arrangements to identify, report and manage any conflicts of interest, and reviewed the extent of non-audit services provided to the Group. The Committee concluded that it is satisfied with the effectiveness and independence of the external auditor.

In addition to their statutory duties, the services of Deloitte LLP are also engaged where, as a result of their position as external auditor, they either must, or are best placed to, perform the work in question. This is primarily work in relation to matters such as shareholder circulars, Group borrowings, tax advice, regulatory filings and certain business acquisitions and disposals. Other work is awarded on the basis of competitive tendering.

The Committee reviewed and approved the scope of non-audit services provided and proposed by the external auditor to ensure that there was no impairment of independence and objectivity, and subsequently monitored the non-audit work performed to ensure it was within policy guidelines.

The Group has a policy on the use of its external auditor for non-audit work and this is regularly reviewed. The external auditor is precluded from engaging in non-audit services that would compromise their independence or violate any laws or regulations affecting their appointment as external auditor. The approval of the Chairman of the Committee is required prior to awarding contracts for non-audit services to the external auditor, where in excess of specified amounts. The Group's policy on the use of the external auditor for non-audit work can be found on the Group's website.

During the year, Deloitte LLP charged the Group £1.8m (2012/13: £1.6m) for audit and audit-related services and a further £0.4m (2012/13: £0.4m) for non-audit services.

The Committee reviews and makes recommendations to the Board with regard to the reappointment of the external auditor. In doing so, the Committee takes into account auditor independence and audit partner rotation. Deloitte LLP were appointed as external auditor in 2009/10 following a formal tender process. Panos Kakoullis was appointed lead audit partner at that time and will step down following the conclusion of the 2013/14 audit process, when he will be replaced by Richard Muschamp. Richard will serve as lead audit partner until the external audit contract is put out to tender, which will be in 2019 at the latest. During the year under review, Deloitte also replaced the lead audit partner for B&Q UK. The Committee noted provision C.3.7 of the Code in relation to audit tendering and has taken into account the UK Competition Commission's recent decision to introduce mandatory audit tendering at ten-year intervals, in making the decision to tender the external audit contract by 2019 at the latest.

The Committee has recommended to the Board that Deloitte LLP be proposed for re-appointment by shareholders as the Company's external auditor at the forthcoming Annual General Meeting. As a result of its work during the year, the Committee has concluded that it acted in accordance with its terms of reference and has ensured the independence and objectivity of the external auditor.

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