Philips 2015 Annual Report Download - page 100

Corporate governance 11.4
100 Annual Report 2015
files its Annual Report on Form 20-F, incorporating
major parts of the Annual Report as prepared under the
requirements of Dutch law.
Internal controls and disclosure policies
Comprehensive internal procedures, compliance with
which is supervised by the Supervisory Board, are in
place for the preparation and publication of the Annual
Report, the annual accounts, the quarterly figures and
ad hoc financial information. As from 2003, the internal
assurance process for business risk assessment has
been strengthened and the review frequency has been
upgraded to a quarterly review cycle, in line with best
practices in this area.
As part of these procedures, a Disclosure Committee
has been appointed by the Board of Management to
oversee the Company’s disclosure activities and to
assist the Executive Committee in fulfilling its
responsibilities in this respect. The Committee’s
purpose is to ensure that the Company implements and
maintains internal procedures for the timely collection,
evaluation and disclosure, as appropriate, of
information potentially subject to public disclosure
under the legal, regulatory and stock exchange
requirements to which the Company is subject. Such
procedures are designed to capture information that is
relevant to an assessment of the need to disclose
developments and risks that pertain to the Company’s
various businesses, and their eectiveness for this
purpose will be reviewed periodically.
Auditor information
In accordance with the procedures laid down in the
Philips Auditor Policy and as mandatorily required by
Dutch law, the external auditor of the Company is
appointed by the General Meeting of Shareholders on
the proposal of the Supervisory Board, after the latter
has been advised by the Audit Committee and the
Board of Management. Under this Auditor Policy, as
updated in 2013, the Supervisory Board and the Audit
Committee assess the functioning of the external
auditor. The main conclusions of this assessment shall
be communicated to the General Meeting of
Shareholders for the purposes of assessing the
nomination for the appointment of the external auditor.
The current auditor of the Company, KPMG
Accountants N.V., was appointed by the 1995 General
Meeting of Shareholders. In 2002, when the Auditor
Policy was adopted, the appointment of KPMG
Accountants N.V. was confirmed by the Supervisory
Board for an additional three years. The 2008, 2011 and
2014 General Meetings of Shareholders resolved to re-
appoint KPMG Accountants N.V. as auditor, at the latest
meeting up to and including the nancial year 2015. Mr
E.H.W. Weusten is the current partner of KPMG
Accountants N.V. in charge of the audit duties for
Philips.
The 2015 Annual General Meeting of Shareholders
appointed Ernst & Young Accountants LLP as the
Company’s new auditor as of January 1, 2016. Mr C.B.
Boogaart is the current partner of Ernst & Young
Accountants LLP N.V. in charge of the audit duties for
Philips.
The external auditor attends, in principle, all meetings
of the Audit Committee. The findings of the external
auditor, the audit approach and the risk analysis are
also discussed at these meetings. The external auditor
attends the meeting of the Supervisory Board at which
the report of the external auditor with respect to the
audit of the annual accounts is discussed, and at which
the annual accounts are approved. In its audit report on
the annual accounts to the Board of Management and
the Supervisory Board, the external auditor refers to the
financial reporting risks and issues that were identified
during the audit, internal control matters, and any other
matters, as appropriate, requiring communication
under the auditing and other standards generally
accepted in the Netherlands and the US.
The external auditor shall attend the Annual General
Meeting of Shareholders. Questions may be put to him
at the meeting about his report. The Board of
Management and the Audit Committee of the
Supervisory Board shall report on their dealings with
the external auditor to the Supervisory Board on an
annual basis, particularly with regard to the auditor’s
independence. The Supervisory Board shall take this
into account when deciding upon its nomination for the
appointment of an external auditor.
Auditor policy
Dutch law requires the separation of audit and non-
audit services, meaning the Company’s external auditor
is no longer allowed to provide non-audit services. In
light of this legislation, the Auditor Policy was updated
in 2013. The policy is published on the Company’s
website. The policy is also in line with US Securities and
Exchange Commission rules under which the appointed
external auditor must be independent of the Company
both in fact and appearance.
The Auditor Policy includes rules for the pre-approval
by the Audit Committee of all services to be provided
by the external auditor. Proposed services may be pre-
approved at the beginning of the year by the Audit
Committee (annual pre-approval) or may be pre-
approved during the year by the Audit Committee in
respect of a particular engagement (specific pre-
approval). The annual pre-approval is based on a
detailed, itemized list of services to be provided,
designed to ensure that there is no management
discretion in determining whether a service has been
approved and to ensure the Audit Committee is
informed of each services it is pre-approving. Unless
pre-approval with respect to a specific service has been
given at the beginning of the year, each proposed
service requires specific pre-approval during the year.
Any annually pre-approved services where the fee for