Audit Committee

All the members of the Audit Committee are independent Non-Executive Directors. Having been the Deputy Chief Executive and Finance Director of the House of Fraser Plc, David Adams is considered by the Board to have recent and relevant financial experience and so the requisite experience to chair the Committee. Each of the other independent Non-Executive Directors has, through their other business activities, significant experience in financial matters. The Chairman, senior members of management and advisors are invited to attend meetings as appropriate.

The Audit Committee meets according to the requirements of the Company's financial calendar. The meetings of the Audit Committee also provide the opportunity for the independent Non-Executive Directors to meet without the Executive Directors present and to raise any issues of concern with the Auditors. There have been two such meetings in the period ended 29 March 2013 and nothing of note was reported.

Annual Activity

The Audit Committee is responsible for:

• making recommendations to the Board on the appointment of the Auditor, including on independence, non-audit work undertaken (against a formal policy) and remuneration;
• reviewing the accounting principles, policies and practices adopted throughout the Period;
• assisting the Board in achieving its obligations under the Code in areas of risk management and internal control, focusing particularly on compliance with legal requirements, accounting standards and the Listing Rules;
• ensuring that an effective system of internal financial and non-financial controls is maintained; and
• approving a formal whistleblowing policy whereby staff may, in confidence, disclose issues of concern about possible malpractice or wrongdoings by any of the Group's businesses or any of its employees without fear of reprisal, and includes arrangements to investigate and respond to any issues raised.

Standing Items	One-Off Considerations
May 2012
Recommend the Preliminary Statement to the Board for approval	Update on compliance and strategic initiatives
Recommend to the Board approval of the Annual Report	Approval of the Non-audit Fee Policy
Review of External Auditor's Report
Review Statement of External Auditor's Independence
Review of Internal Auditor's Full-Year Report
Group Whistleblowing Policy
Committee Evaluation
November 2012
Recommend to the Board the approval of the Interim Statement
Review of Internal Audit Half-Year Report
External Auditor's Non-Audit Fees
Terms of Reference
January 2013
Review and Recommendation of External Auditor's Fees
Approval of External Auditor's Annual Programme
Approval of Internal Auditor's Annual Strategy

Internal Control and Risk Management

Overall responsibility for the system of internal control, reviewing its effectiveness and ensuring that there is a process to identify, evaluate and manage any significant risks that may affect the achievement of the Group's strategic objectives lies with the Board.

The Board and the Audit Committee have reviewed the effectiveness of the Group's internal control and risk management systems in accordance with the Code for the period ended 29 March 2013, and up to the date of approving the Annual Report and Financial Statements. The internal control and risk management system is designed to manage, rather than eliminate, the risk of failing to achieve business objectives and can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The internal audit function principally reviews the effectiveness of the controls operating within the business by undertaking an agreed schedule of independent audits each year. The Audit Committee determines the nature and scope of the annual audit programme at the beginning of each calendar year and revises it from time to time according to changing business circumstances and requirements.

Whilst directed by Andrew Findlay, the Company's Finance Director, the internal audit function is independent in action and reporting, with direct line of communication to the Audit Committee Chairman. The findings of the independent audits are reported initially to Executive management and any necessary corrective actions are agreed. Summaries of these reports are presented to, and discussed with, the Audit Committee along with details of progress against action plans as appropriate.

During the period ended 29 March 2013, the Company engaged KPMG to support the internal audit process. KPMG do not perform a management role. An experienced in-house Head of Internal Audit and Risk was appointed in October 2012 and it is planned that following further recruitment, the annual audit plan for future years will be completed by an in-house team supplemented by specialist consultants as necessary.

The assessment and control of risk are considered by the Board to be fundamental to achieving corporate objectives. An ongoing process for identifying and evaluating the significant risks faced by the Group and the effectiveness of related controls has been established by the Board to ensure an acceptable risk/reward profile across the Group. The key elements of this process which cover both the Retail and Autcocentres businesses are:

• a comprehensive system of monthly reporting from key Executives, identifying performance against budget, analysis of variances, major business issues, key performance indicators and regular forecasting;
• well-defined policies governing appraisal and approval of capital expenditure and treasury operations;
• reviews of key business risks and of management's controls and plans to mitigate these risks; and
• an annual corporate governance confirmation made to the Board by senior Executives on the effectiveness of the identification of major risks and of the monitoring of internal controls within their areas of responsibility.

During the year, we reviewed our risk management system. Key elements now include:

• oversight by the Head of Internal Audit and Risk;
• regular meetings and workshops to identify and discuss key risks and mitigations with a broad sample of Group senior management and Executives;
• review of the corporate risk register in terms of completeness and accuracy with Executive team; and
• Audit Committee discussion of the latest corporate risk register and the risk management system with subsequent reports to the Board.

During the financial period to 29 March 2013 and up to the date of this report the risk management system considered the Company's Risk Register and its alignment with the Company's key strategic objectives, reporting the findings to the Board. The Board considered its appetite for risk in relation to the top 30 risks determining that the risks and mitigating actions were appropriate to the level of risk that was both acceptable to, and incumbent within, a FTSE 250 business. More information on the Company's key risks and uncertainties is shown in Risks and Uncertainties.