Philips 2004 Annual Report Download - page 28

In its 2004 meetings, the Audit Committee reviewed periodically
matters relating to accounting policies and compliance with
accounting standards; most prominently the preparation of the
Company for the introduction of International Financial Reporting
Standards (IFRS) in the reporting year 2005. Compliance with
statutory and legal requirements and regulations, particularly in
the financial domain, was also reviewed. Important findings and
identified risks were examined thoroughly in order to allow
appropriate measures to be taken. With regard to the internal
audit, the Audit Committee reviewed the internal audit charter,
audit plan, audit scope and its coverage in relation to the scope of
the external audit, as well as the staffing, independence and
organizational structure of the internal audit function. With regard
to the external audit, the Committee reviewed the proposed audit
scope, approach and fees, the independence of the external
auditors, their performance and their (re-)appointment, non-audit
services provided by the external auditors in conformity with the
Philips Policy on Auditor Independence, as well as any changes to
this policy. After assessing the performance of the external
auditors in accordance with the Philips Policy on Auditor
Independence, the Audit Committee has advised the Supervisory
Board to propose to the General Meeting of Shareholders to
re-appoint KPMG Accountants N.V. for another three-year term.
The Audit Committee also considered the report of the external
auditors with respect to the annual financial statements and
advised on the Supervisory Board’s statement to shareholders in
the annual accounts.
The aggregate fees billed by KPMG for professional services
rendered for the fiscal years 2002, 2003 and 2004 were as follows:
2002 2003 2004
Audit fees 13.4 12.4 14.1
Audit-related fees 6.2 2.8 2.8
Tax fees 3.2 2.1 1.0
Other fees 3.1 3.0 3.4
25.9 20.3 21.3
Audit fees consist of fees for the examination of both the
consolidated financial statements (EUR 5.7 million), statutory
financial statements (EUR 5.1 million), and the verification of the
2004 financial statements under IFRS (EUR 0.8 million), as well as
the verification of internal controls (EUR 1.8 million) and IT
Systems (EUR 0.7 million) to the extent necessary for the audit of
these financial statements.
Audit-related fees primarily consist of fees in connection with
audits of acquisitions and divestments (EUR 1.5 million), attest
services not required by statute or regulation (EUR 1.0 million)
and accounting consultations (EUR 0.3 million). Tax fees mainly
relate to tax compliance and expatriate tax services.
Other fees mainly comprise fees for royalty audits (EUR 2.0
million), sustainability audits and advices (EUR 0.8 million) and IT
reviews (EUR 0.6 million).
In 2004 the Audit Committee further periodically discussed the
Company’s policy on business controls, the General Business
Principles including the deployment thereof, and the Company’s
major areas of risk, including the internal auditor’s reporting
thereon. In several meetings, the Audit Committee was informed
on, discussed and monitored the progress of the Company in the
preparation for new internal control certification requirements, in
particular following the Sarbanes-Oxley Act, and related auditor
attestation that will become effective as of 2005. It also discussed
overviews on tax, IT, litigation, environmental exposures and
financial exposures in the area of treasury, real estate and
pensions. The Company’s internal and external auditors attended
all Audit Committee meetings in 2004, and the Audit Committee
met separately after each meeting with the President/Chief
Executive Officer, the Chief Financial Officer, the Internal Auditor
and the External Auditors.
Financial Statements 2004
The financial statements of Koninklijke Philips Electronics N.V. for
2004, as presented by the Board of Management, have been
audited by KPMG Accountants N.V., independent auditors. Their
report appears on page 193 of this Annual Report. We have
approved these financial statements and all individual members of
the Supervisory Board (together with the members of the Board
of Management) have signed these documents.
We recommend to shareholders that they adopt the 2004 financial
statements as presented in the full Annual Report for the year
2004. We likewise recommend to shareholders that they adopt
the proposal of the Board of Management to pay a dividend of
EUR 0.40 per common share.
Finally, we would like to express our thanks to the members of the
Board of Management, the Group Management Committee and all
employees for their continued contribution during the year.
February 22, 2005
The Supervisory Board
27Philips Annual Report 2004