Sessions held and business transacted
Sessions held and business transacted
The sessions held by the Audit and Control Committee throughout FY2012 and the main business transacted are shown below:
| DATE OF SESSION | BUSINESS TRANSACTED | REPORTS TO THE BOARD OF DIRECTORS | ATTENDANCE BY INDITEX’STAFF MEMBERS |
|---|---|---|---|
| 02/22/2012 |
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| 03/19/2012 |
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| 06/11/2012 |
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| 07/16/2012 |
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| 09/17/2012 |
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| 12/10/2012 |
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Main lines of action
As for the lines of action of the Audit and Control Committee during FY2012, they have revolved around the following aspects:
Periodic financial information, annual accounts and auditors’ report
The Audit and Control Committee reviews the economical and financial information of the company prior to the approval thereof by the Board of Directors.
To this end, prior to the drafting of the quarterly, half-yearly or annual financial statements, the Audit and Control Committee also meets with the Management of the Company to review the application of the accounting principles, estimations considered while preparing the financial statements, etc.
Likewise, the Committee, fully comprised of non executive directors, meets with the external auditors in order to review the annual accounts of the company and certain periodic financial information, ensuring that the legal requirements are met and that the accounting standards generally accepted are correctly applied.
In its meetings held on 19 March, 11 June, 17 September and 10 December 2012, the Audit and Control Committee proceeded to review thoroughly the results for FY2011 and for the first three quarters of FY2012, that the Board of Directors must provide quarterly to the market and to its supervisory bodies, in accordance with the format of the Public Periodic Information (“PPI”), and the pertaining Results Release and Press Release.
Likewise, the individual and consolidated Annual Accounts and Management Report and the Auditors´ Report for FY2011 were reviewed, it being verified by the Committee that the latter was unqualified.
Efficiency and independence of the Auditors
With the attendance of the session held on 19 March 2012 by the Auditors of the Group, who had been previously called to this end, the Audit and Control Committee reviewed the audit carried out during FY2011.
The assignment conducted by the auditors consisted of the audit of the consolidated financial statements of the Group as at 31 January 2012 and the audit of the individual financial statements of certain companies within the Group also as at 31 January 2012; likewise during FY2011 the auditors issued a limited review on the financial statements.
The major issues subject to a special analysis were also reviewed, pointing out different areas: international and national environment, accounting issues and other topics of less significance.
Appointment of the new Auditors
During fiscal year 2012, the external audit firm which renders service for INDITEX has changed. Thus, KPMG has ceased rendering audit services and has been replaced with Deloitte.
The screening process for the new audit firm, which commenced in FY2011, has been marked by a deep respect for the principles of efficiency and transparency and the Audit and Control Committee has played a major role therein, both as regards the approval of the audit tender and the election of the tenderer.
Thus, a formal process took place, involving four audit firms: KPMG, PricewaterhouseCoopers, Deloitte and Ernst&Young. The screening task was coordinated and managed by an internal working group, specially set up to discharge such duty, made up of eight members from different departments, including Chief Financial Office’s Department and Internal Audit Department. Preliminary meetings were held with the bidding firms and the tender specifications and an information dossier about the company were circulated to them for the purposes of enabling a better knowledge of the company. The relevant bids were submitted within a preclusive deadline and were assessed by the above referred working group which submitted a proposal to the Audit and Control Committee. Such Committee, having previously considered and assessed the above referred proposal, gave a favourable report thereto and tabled it to the Board of Directors.
As a result of this screening process, Deloitte was elected – both by the Audit and Control Committee and by the internal working group- as the best bidder.
Internal Audit
Both the Director and other members of the Internal Audit Department and the external auditors attended the meetings of the Audit and Control Committee held throughout FY2012 and took the floor, since the internal audit was one of the key lines of action of the Committee during this fiscal year.
In the various meetings it held, the Committee went through several areas of its remit, such as the supervision of the Internal Audit Department and the approval of its budget, and the activities report of said Department.
Annual Corporate Governance Report
The Audit and Control Committee in its session of 19 March 2012 gave a favourable report to the Annual Corporate Governance Report for FY2011, drawn up as regards its format, contents and structure, pursuant to the provisions of the Circular 1/2004, of 17 March, as amended by Circular 4/2007 of 27 December of CNMV, and it was resolved by the Committee to submit it to the Board of Directors for approval and to recommend the dissemination thereof through those means set forth in the prevailing legislation and regulations in force.
“Triple Report”: financial, social and environmental
In the meeting held on 10 June 2012, the Committee gave a favourable report to the Sustainability Report also known as “Triple Report” for the year 2011, drawn up taking into account the guidelines, in the 2002 version, of the Sustainability Reporting Guidelines issued by the Global Reporting Initiative (GRI) and following the principles thereof. This is the eighth time this Triple Report has been published.
The Sustainability Report provides full information about the activities of INDITEX, S.A. and its corporate Group over the last years and especially in fiscal 2011, regarding the three major dimensions or areas of the Group: financial, social and environmental.
Annual Report of the Audit and Control Committee
The Committee drew up its ninth Activities Report showing the activities carried out by this body during FY2011.
Update of the Regulatory Compliance Framework: Corporate Compliance of the INDITEX Group
The approval of the new regulatory framework of the INDITEX Group addresses three major needs: meeting the new requirements laid down in the Spanish Criminal Code further to the reform thereof resulting from Ley Orgánica 5/2010, of 22 June; updating the standard for regulatory compliance and improving the risks management and control system in this field.
Below is the list of the internal regulations which, having received first the favourable report of the Audit and Control Committee, were subsequenty approved by the Board of Directors:
- The Code of Conduct and Responsible Practices, which revises and consolidates in a single document both the “Code of Conduct” and the “Internal Guidelines for Responsible Practices” which were approved by the Board of Directors in 2001 and 2006 respectively. This Code has a double goal: (i) to set forth the general principles for ethical behaviours, and (ii) to lay the grounds of the system for criminal risks prevention.
- The Code of Conduct for Manufacturers and Suppliers. This document defines the minimum standards for an ethical and responsible behavior which must be met by manufacturers and suppliers in the course of their business.
- The Manual on Criminal Risks Prevention, whereby the action lines and conducts which govern INDITEX’s business are defined and which adapts the existing control systems for the purposes of preventing the commission of any new crimes as defined in the Criminal Code, further to the enactment of Ley Orgánica 5/2010, of 22 June.
- The Whistle Blowing Channel Procedure, which aims at detecting and preventing any irregular or unlawful behaviour which may jeopardize INDITEX’s reputation.
- The Regulations of the Committee of Ethics which govern the main features and the proceedings of the Committee of Ethics, the internal body which assists the Audit and Control Committee for the purposes of supervising compliance with the action lines and standards of behaviour covered in the Code of Conduct and Responsible Practices, the Code of Conduct for Manufacturers and Suppliers and the Manual on Criminal Risk Prevention.
Review of the Annual Report of the Committee of Ethics
In the course of its last meeting of the year, the Audit and Control Committee reviewed and approved the Annual Report of the Committee of Ethics. This report becomes especially significant in FY2012 as this is the first report after the approval in July 2012 of the new regulatory framework of the INDITEX Group.
Such report addresses, among other things, the reports filed with the Committee of Ethics as of 1 December 2011, with a break- down of the grounds thereof and of the proceedings carried out by the Committee, and the contents of its resolutions, the proceedings and results of the supervision of the Manual on Criminal Risks Prevention, and the actions to implement Corporate Compliance.
Review of the reports of the Code Compliance Supervisory Board and Code Compliance Office
The Audit and Control Committee has reviewed the quarterly reports drawn up by the Code Compliance Office on the incidences occurred with regard to the compliance with the Internal Regulations of Conduct Regarding Transactions in Securities (IRC), pursuant to the provisions of section 10.2.4 thereof, as well as the half-yearly reports drawn up by the Audit and Control Committee on the measures taken to promote the knowledge and guarantee the enforcement of the provisions of the IRC, in accordance with the provisions of section 10.1.4 thereof.
