Philips 2015 Annual Report Download - page 182

Company nancial statements 13.5
182 Annual Report 2015
Contingent liabilities and provisions from claims, proceedings an investigations (Legal)
Key audit matter The Company and certain of its group companies and former group companies are involved as a party in legal
proceedings, including regulatory and other governmental proceedings as well as investigations by authorities.
Since the ultimate disposition of asserted claims and proceedings and investigations cannot be predicted with
certainty, an adverse outcome could have a material adverse eect on the nancial position, results of
operations and cash ows, resulting in the identication of a signicant risk.
The accounting and disclosure for (contingent) liabilities from claims, proceedings and investigations is complex
and judgmental, and the amounts involved are, or can be material to the nancial statements as a whole. At
December 31, 2015, the provisions from legal proceedings amount to EUR 578 million and the litigation payables
which were transferred to other current liabilities in 2015 at the moment the Company was able to reach a
settlement. In case the company has a present legal or constructive obligation that cannot be estimated reliably,
no provisions have been recognized.
Our response In response to these risks, our audit procedures included, amongst others, testing the eectiveness of the
Company’s controls around the identication and evaluation of claims, proceedings and investigations at
dierent levels in the organization, and the recording and continuous re-assessment of the related (contingent)
liabilities and provisions and disclosures, in accordance with EU-IFRS. We also inquired with both legal and
nancial sta in respect of ongoing investigations or claims, proceedings and investigations, inspected relevant
correspondence, inspected the minutes of the meetings of the Audit Committee, Supervisory Board and
Executive Committee, requested external legal conrmation letters from a selection of external legal counsel,
met with external legal counsel when deemed necessary and obtained a legal representation letter from the
Company.
We evaluated and tested the Company’s policies, procedures and controls surrounding the application of the
General Business Principles (GBP), the identication and reporting of violations, and assessed management’s
response to any GBP violations. We also assessed the disclosure regarding (contingent) liabilities from legal
proceedings and investigations as contained in Section 12.9, Note 19 Provisions, Note 22 Other Liabilities and
Note 26 Contingent assets and liabilities.
Responsibilities of the Board of Management
and the Supervisory Board for the nancial
statements
The Board of Management is responsible for the preparation
and fair presentation of the financial statements in
accordance with EU-IFRS and with Part 9 of Book 2 of the
Netherlands Civil Code and for the preparation of the
Management report in accordance with Part 9 of Book 2 of
the Netherlands Civil Code. Furthermore, the Board of
Management is responsible for such internal control as Board
of Management determines is necessary to enable the
preparation of the financial statements that are free from
material misstatement, whether due to errors or fraud.
In preparing the financial statements, the Board of
Management is responsible for assessing the Company’s
ability to continue as a going concern. Based on the financial
reporting frameworks mentioned, the Board of Management
should prepare the financial statements using the going
concern basis of accounting unless the Board of
Management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
The Board of Management should disclose events and
circumstances that may cast significant doubt on the
Company’s ability to continue as a going concern in the
financial statements. The Supervisory Board is responsible
for overseeing the Company’s financial reporting process.
Our responsibilities for the audit of the nancial
statements
Our objective is to plan and perform the audit assignment in
a manner that allows us to obtain sufficient and appropriate
audit evidence for our opinion. Our audit has been performed
with a high, but not absolute, level of assurance, which means
we may have not detected all errors and fraud. For a further
description of our responsibilities in respect of an audit of
financial statements in general, we refer to the website of the
professional body for accountants in the Netherlands (NBA).
www.nba.nl/standardtexts-auditorsreport.
Report on other legal and regulatory
requirements
Report on the Management report and the other
information
Pursuant to legal requirements under Part 9 of Book 2 of the
Dutch Civil Code (concerning our obligation to report about
the Management report and other information):
• We have no deficiencies to report as a result of our
examination whether the Management report, to the
extent we can assess, has been prepared in accordance
with Part 9 of Book 2 of the Dutch Civil Code, and
whether the information as required by Part 9 of Book 2
of the Dutch Civil Code has been annexed.
• We report that the Management report, to the extent we
can assess, is consistent with the financial statements.
Engagement
We were engaged before 2003 for the first time as auditor
of Koninklijke Philips N.V. and operated as auditor since then.
We were re-appointed by the Annual General Meeting of
Shareholders as auditor of Koninklijke Philips N.V. on May 1,
2014, for the year 2015, after which we will rotate off from the
Philips audit.
Amsterdam, The Netherlands
February 23, 2016
KPMG Accountants N.V.
E.H.W. Weusten RA