Philips 2015 Annual Report Download - page 88

Supervisory Board report 10.3
88 Annual Report 2015
areas of risk (including the internal auditor’s reporting
thereon, and the Chief Legal Ocer’s review of
litigation and other claims) and follow-up actions
and appropriate measures were examined
thoroughly. The Committee again reviewed the
Company’s pension liabilities and its program to de-
risk future pension liabilities and related employee,
economic, nancial accounting and reporting
implications, as well as the implementation of that
program. Each quarter, the Committee reviewed the
Company’s cash flow generation, liquidity and
headroom, capital structure throughout the year and
the implications for the Company’s credit ratings and
its ability 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,
information security, developments in regulatory
investigations as well as legal proceedings including
antitrust investigations and related provisions and
environmental exposures.
•Specic nance topics included the implications to
the Company’s capital structure following the
proposed sale of Lumileds and Automotive
(including its classication as discontinued
operations), the Volcano acquisition and the
accounting therefore, the intended separation of the
Lighting business and its potential impact on the 2015
nancial statements, as well as taxation, the activities
of Philips Capital, the Company’s currency hedging
practices and the impact of certain potential
acquisitions.
• 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
separation of the audit function for Royal Philips and
Philips Lighting, including stang capabilities and its
management succession, was also discussed.
• 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 independence as well as its
professional fitness and good standing of the
external auditor and its engagement partners. For
information on the fees of KPMG Accountants N.V.,
please refer to the table ‘Fees KPMG’ in note 6,
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, and it 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. It also discussed on a
regular basis the developments in and ndings
resulting from investigations into alleged violations of
the General Business Principles and, if required, any
measures taken.
During each Audit Committee meeting, the Committee
reviewed the report from the external auditor in which
the auditor set forth its findings and attention points
during the relevant period. The Committee also
assessed the overall performance of the external
auditor, as required by the Auditor Policy. The
Committee also reviewed its own Charter and
concluded that it was satisfactory.