Review of the Audit Committee
Dear share owner
During 2007 Bud Morten, Jeffrey Rosen and Esther Dyson, who was replaced by Colin Day in August, were my colleagues on the committee.
We held nine meetings during 2007, which were also attended (by invitation for all or part of any meeting) by the external auditors, the Company's chairman, the Group finance director, the director of internal audit, the Group chief counsel and the Company Secretary. Preparatory meetings were also held with the internal and external auditors as well as members of the Company's senior management. The committee received presentations from the heads of Taxation, Treasury and Legal. The committee also received updates on the activities of the Disclosure Committee as to the quarterly reports. The Board received regular reports on all matters of particular significance arising at the committee meetings.
The committee's terms of reference, which are reviewed with the Board annually, are available for inspection on the Company's website at www.wpp.com and are on display prior to and at all general meetings of the Company. Following this year's review there have been a number of changes made to the remit. Many of these for regulatory, legal and best practice updates. The Board has extended the remit of the committee to review on its behalf acquisition and investment matters and debt financing.
During the year, the committee and its members were formally assessed by the chairman of the Company for their technical suitability to be members of the committee and also for the committee's overall effectiveness. The Board has designated me as the committee's financial expert for Sarbanes-Oxley Act (SOX) purposes and as having recent and relevant financial experience for the purposes of the Combined Code.
The first annual assessment and related report from the auditors confirming compliance with Section 404 was included in the Group's Annual Report on Form 20-F for 2006. The committee has once again overseen the progress towards compliance with Section 404 of SOX for 2007, through regular status reports submitted by the internal and external auditors.
The committee received and reviewed regular reports on both our Right to Speak helpline, which is made available to employees to enable them to communicate confidentially on matters of concern, and the actions taken in response to those calls.
Other work carried out by the committee in 2007 under its terms of reference included:
- monitoring the integrity of the Company's financial statements and reviewing significant financial reporting judgements;
- reviewing internal financial control and internal audit activities;
- assisting the Board in meeting its responsibilities in respect of reviewing and reporting on the systems and key elements of risk management as they affect the Group;
- the review and appointment of the external auditors and approval of their remuneration and terms of engagement;
- monitoring the external auditors' independence, objectivity and effectiveness; WPP's policy regarding non-audit services that may be provided by the auditors, prohibits certain categories of work in line with relevant guidance on independence, such as ethical standards issued by the Auditing Practices Board and SOX. Other categories of work may be provided by the auditors if it is appropriate for them to do so. The provision of such services and associated fees are either pre-approved by the committee, or for certain categories of work, are delegated to the director of internal audit for pre-approval. All fees are summarised periodically for the committee to assess the aggregate value of non-audit fees against audit fees. The value of fees for 2007 is shown in Note 3;
- monitoring the accounting and legal reporting requirements, including all relevant regulations of the UK Listing Authority, the SEC, and NASDAQ with which the Company must comply;
- in conjunction with Paul Richardson, the director responsible for corporate responsibility in 2007, ensuring systems are in place to monitor social, environmental and ethical issues which may affect the Group (other than issues which fall within the remit of the Compensation Committee) and receiving reports on new initiatives being implemented by the Group to reduce carbon emissions; and
- maintaining established procedures for the confidential receipt and treatment of concerns raised by employees.
I would like to thank my colleagues on the committee, our external advisers and all the senior management for their hard work and help. Their endeavours, time commitment and conscientious efforts serve us well.
24 April 2008