Philips 2013 Annual Report Download - page 116

9 Supervisory Board report 9.3 - 9.3
116 Annual Report 2013
9.3 Report of the Audit
Committee
The Audit Committee is chaired by Jackson Tai, and its
other members are Neelam Dhawan, Kees van Lede
and Heino von Prondzynski. The Committee assists the
Supervisory Board in fulfilling its supervisory
responsibilities for (inter alia) the integrity of the
company’s financial statements.
The Audit Committee met for four quarterly meetings
and two education and training sessions during 2013
and reported its findings to the plenary Supervisory
Board. The CEO, the CFO, the Head of Internal Audit,
the Group Controller and the external auditor (KPMG
Accountants N.V.) attended all regular meetings.
Furthermore, the Committee met each quarter
separately with each of the CEO, the CFO, the Head of
Internal Audit and the external auditor as well as on an
ad hoc basis with other company employees, such as
the Group Treasurer, the Group Controller and Head of
Financial Risk and Pensions Management.
The overview below indicates certain of the matters
that were discussed during meetings throughout 2013:
• The company’s 2013 annual and interim financial
statements, including non-financial information,
prior to publication thereof. It also assessed in its
quarterly meetings the adequacy and
appropriateness of internal control policies and
internal audit programs and their findings.
• Matters relating to accounting policies, financial risks
and compliance with accounting standards.
Compliance with statutory and legal requirements
and regulations, particularly in the financial domain,
was also reviewed. Important findings, Philips’ major
areas of risk (including the internal auditor’s reporting
thereon, and the General Counsel’s review of
litigation and other claims) and follow-up action and
appropriate measures were examined thoroughly.
Specifically, the Committee reviewed the company’s
pension liabilities and its program to de-risk future
pension liabilities and related economic, accounting
and legal implications. The Committee reviewed the
company’s cash flow generation, liquidity and
headroom throughout the year to undertake its
financial commitments, including the company’s
share repurchase program and payment of
dividends, The Committee also reviewed the
goodwill impairment test performed in the second
quarter, risk management, tax issues, IT strategy and
transformation (including information security) and
remediation of IT related internal control findings, the
company’s finance transformation, developments in
regulatory investigations as well as legal proceedings
including antitrust investigations and related
provisions, environmental exposures and financing
and performance of financial holdings and recent
acquisitions and new Dutch legislation on mandatory
auditor rotation and prohibition on non-audit
services.
• With regard to the internal audit, the Committee
reviewed, and if required approved, 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. The
Committee also reviewed and approved the
appointment of a new Head of Internal Audit
following the rotational reassignment of the previous
incumbent.
• With regard to the external audit, the Committee
reviewed the proposed audit scope, approach and
fees, the independence of the external auditor, non-
audit services provided by the external auditor in
conformity with the Philips Auditor Policy, as well as
any changes to this policy. The Committee also
reviewed the External Auditor’s independence as
well as its professional fitness and good standing. For
information on the fees of KPMG Accountants N.V.,
please refer to the table ‘Fees KPMG’ in note 3,
Income from operations.
• The company’s policy on business controls, the
General Business Principles including the
deployment thereof and amendments thereto. The
Committee was informed on, discussed and
monitored closely the company’s internal control
certification processes, in particular compliance with
section 404 of the US Sarbanes-Oxley Act and its
requirements regarding assessment, review and
monitoring of internal controls.
On January 1, 2016, the new legislation on mandatory
auditor rotation will become eective, which has also
been reflected in the Auditor Policy amended as per
January 1, 2013 (please refer to chapter 10, Corporate
governance, of this Annual Report for more
information). Under the new rotation rules, Philips must