Tesco 1999 Annual Report Download - page 12

10 TESCO PLC ANNUAL REPORT 1999
Relations with shareholders continued
Each year-end, every shareholder may choose to receive a
full Annual Report and Financial Statements or an abbreviated
Annual Review and Summary Financial Statement. At the half-
year, all shareholders receive an Interim Report. These reports,
together with publicly-made trading statements, are available on
the company’s website (http://www.tesco.co.uk).
Accountability and audit
The company has an Audit Committee, chaired by Mr J W
Melbourn and consisting entirely of non-executive directors,
which meets a minimum of three times a year. Membership
of the Audit Committee is set out in the table on page 11.
Its terms of reference represent current best practice. The Audit
Committee’s primary responsibilities include monitoring
internal control throughout the Group, approving the Group’s
accounting policies and reviewing the interim and annual
financial statements before submission to the Board. In terms
of financial reporting, an assessment of Group performance is
set out in the Operating and Financial Review on pages 2 to 6.
Internal financial control
The Board has decided that until the working party set up
by the Institute of Chartered Accountants in England and
Wales has produced guidance for directors on the application
of the Combined Code provision on internal control, the
Board will report on internal financial control in accordance
with the guidance issued by the Rutteman Working Group
in December 1994.
The Board has overall responsibility for the systems of internal
financial control. Implementation and maintenance of the
internal financial control system is the responsibility of
executive management. The Board, through the Audit
Committee, has reviewed the effectiveness of the systems of
internal financial control for the accounting year and the period
to the date of approval of the financial statements although it
should be understood that such systems are designed to provide
reasonable but not absolute assurance against material
misstatement or loss.
The Group has an established framework of internal financial
controls, the key features of which are as follows:
Organisational structure The responsibilities of the Board set
out above are designed to ensure effective control over strategic,
financial and compliance issues.
Financial framework The Group operates a comprehensive
system of financial reporting to the Board and senior
management, based upon an annual budget and regular
forecasts. Weekly and periodic reports of actual results together
with key performance indicators are produced. The Group
monitors financial performance along with other non-financial
objectives through a balanced scorecard approach ensuring
overall alignment of goals and objectives.
Policies and procedures The Group employs over 200,000
people including over 1,700 senior managers. Management
control is formalised at all levels and is regulated by cascading
limits of authority. Formal policies and procedures also exist for
areas which are identified, by their nature, as being significant
risk areas. Policies and procedures are regularly subject to
compliance audits.
Quality and integrity of personnel The Group attaches high
importance to the values of trust, honesty and integrity of
personnel in responsible positions and operates a policy of
recruiting and promoting suitably experienced personnel with
clearly defined accountabilities.
Investment appraisal The capital investment programme is
subject to formalised review procedures with key criteria
requiring to be met. All major initiatives require business cases
to be prepared, normally covering a minimum period of five
years. Post investment appraisals are also carried out.
Control monitoring PricewaterhouseCoopers, our external
auditors, contribute an independent perspective on certain
aspects of the internal financial control system arising from
their audit work and annually report their findings to the Audit
Committee. The Group also maintains an internal audit
function whose work is focused on areas of perceived high risk,
as identified by risk analysis, and who regularly provide reports
to the Audit Committee.
Corporate governance continued