Corporate governance report Audit, risk and internal control continued DISCUSSING AND ADDRESSING SIGNIFICANT Following its review, the Committee confirmed to the Board ISSUES that in its view the FY21 Annual Report was ‘fair, balanced The major accounting issues discussed by the Committee in and understandable’ and provided the information necessary September 2021 in relation to the FY21 Annual Report and for our shareholders to assess the Company’s position, Accounts were as follows: performance, business model and strategy. Provisions for inventory EXTERNAL AUDIT The Committee considered the approach taken by External auditor management and assessed available evidence. Particular The report and financial statements were audited by attention was given to reviewing the provision for obsolete, PricewaterhouseCoopers LLP, following the firm’s slow-moving or discontinued inventories including the appointment as statutory auditor in January 2014. utilisation of provisions reported in prior periods. The Committee noted that management has refined the As reported last year, our audit partner from the FY19 audit calculation to be more mechanical and less judgemental, onwards is Mark Skedgel. with specific items such as the Ever Given impact assessed. The Committee concluded that the values recorded in the PricewaterhouseCoopers LLP attended the Committee financial statements are appropriate. meetings in September 2020, and February, June and September 2021. The Committee also met privately with the Impairment review auditor during each meeting and, as Chair of the Committee, While a full store impairment trigger did not exist in FY21 I had regular dialogue with the audit partner. due to the strong financial performance across the estate, management have tested the least profitable stores. In line EXTERNAL AUDIT EFFECTIVENESS AND with IAS36, we have reviewed the future cashflows of each INDEPENDENCE ‘cash generating unit’ compared to their value in use. Of these It is the responsibility of the Audit and Risk Committee to stores, twoare considered yb management to be impaired assess the effectiveness and independence of the external at an expense of £1.2m. The Committee has analysed the audit process. results of this review and is satisfied that management has appropriately identified all individual ‘cash generating units’ The Chief Financial Officer and her team presented their where an individual impairment test is required and the review of the FY20 audit in February 2021. This covered a cashflows and assumptions used in calculating the associated number of aspects including: impairment charge is reasonable. • The quality of the audit work and the reports provided to FAIR, BALANCED AND UNDERSTANDABLE the Committee and the Board and the quality of advice At the request of the Board, the Committee also considered given. whether the Annual Report and financial statements as a • The level of understanding demonstrated by the audit team whole are ‘fair,balanced and understandable’. Factors taken of the Group’s businesses and the retail sector. into account included: • The objectivity of the external auditor’s views on the • Does the narrative of the CEO Review and CFO Review controls around the Group, the robustness of challenge to fairly reflect the performance of the Group over the period management and appropriate scepticism and findings on reported on? areas which required management judgement. • Are the narrative sections consistent with each other, and • The findings from the FRC’s annual inspection of auditors with the financial statements? published in May 2020. • Is the connection between strategy and remuneration The Committee reviewed the effectiveness of the audit, clearly described? taking into account the Chief Financial Officer’s paper. • Can readers easily identify key events that happened Its conclusion was that the audit had been effective and during the year? carried out with the necessary objectivity and challenge to • Is the language and tone of voice used commensurate with demonstrate independence and that there were no significant the spirit of ‘fair, balanced and understandable’? issues to highlight. In its review of the FY21 audit the Committee will use the Audit Quality Indicators (AQIs) being Committee members received the draft Annual Report developed by PwC, in line with the focus areas set out in and Accounts in advance and had the opportunity to make FRC’s letter to audit firms of November 2019 (risk assessment, comments in advance of the formal meeting at which the resourcing, timeliness, challenge, reporting and continuous report was tabled for approval. improvement), to inform its review. 134 DUNELM GROUP PLC ANNUAL REPORT & ACCOUNTS 2021