Audit Committee

Byron Grote has been Chairman of the Audit Committee since his appointment in 2015. The other members of the Audit Committee in 2019 were Peggy Bruzelius1, Michiel Jaski, Dick Sluimers, Patrick Thomas and Jolanda Poots-Bijl2. All members of the Audit Committee have extensive accounting and financial management expertise. The Audit Committee held seven meetings during 2019. The attendance record of the members can be seen in the attendance chart in Supervisory Board activities. Issues discussed in Audit Committee meetings were reported back to the full Supervisory Board in subsequent meetings.

1 Until April 2019.

2 Appointed to the Audit Committee as of April 25, 2019.

General Counsel and Executive Committee member, Isabelle Deschamps, named Gender Diversity Lawyer of the Year (photo)

General Counsel and Executive Committee member, Isabelle Deschamps, was named Gender Diversity Lawyer of the Year in the inaugural Chambers Diversity and Inclusion Awards: Europe 2019. She was recognized for fostering an inclusive culture throughout the company, facilitating a D&I network and strengthening AkzoNobel’s leadership diversity.

Audit Committee activities 2019

Q1 activities 2019

  • Review Q4 2018 financial statements and annual results
  • Review 2018 annual report and accounts
  • External audit report
  • Review risk management and internal control Auditors’ management letter
  • Final dividend 2018
  • HSE audit findings
  • Review full-year compliance report
  • Pension funds update
  • Finance transformation update
  • Review accounting for Specialty Chemicals separation
  • Review transition from accounting standard IAS 17-Leases to IFRS 16-Leases
  • Transformation to deliver towards the 15 by 20 ambition

Q2 activities 2019

  • Review Q1 2019 financial statements
  • Review year-to-date audit findings Compliance and integrity update
  • Follow-up on audit scope and fee 2019
  • Review evaluation external auditor
  • Treasury update
  • Review and approval PWC audit plan
  • Valuation of post-retirement benefit provisions
  • Transformation to deliver towards the 15 by 20 ambition

Q3 activities 2019

  • Review Q2 2019 financial statements
  • Review external auditor performance evaluation FY 2018
  • Transformation to deliver towards the 15 by 20 ambition

Q4 activities 2019

  • Review Q3 2019 financial statements
  • Recommendation on interim dividend 2019
  • Share buyback program
  • Compliance and integrity update
  • Tax strategy review
  • Review budget 2020 and outlook
  • Review audit findings year-to-date
  • Hard close audit report
  • Internal Audit plan 2020
  • Review of legal liability exposure report
  • IFRS changes update
  • Finance transformation update
  • IM update
  • Internal Control framework update
  • Update to the PWC audit plan
  • Valuation of deferred tax assessment and uncertain tax position
  • Transformation to deliver towards the 15 by 20 ambition

External audit

PricewaterhouseCoopers Accountants N.V., AkzoNobel’s external auditors, reported in-depth to the Audit Committee on the scope and outcome of the annual audit of the financial statements, including the consolidated financial statements and the company financial statements and report. The Audit Committee held independent meetings with the external auditors and critically reviewed and constructively challenged their audit approach, fees, risk assessment and audit plan for the year ahead.

Other topics discussed included:

  • The “hard close”, which was discussed with the intention of continuing the improvement in the efficiency of the year-end process and to highlight important issues for the annual financial statements. AkzoNobel performed a “hard close” as of October 31, 2019
  • Quality of the external audit
  • Impact of new accounting rules
  • Transformation of the Finance function

The Audit Committee performed an annual review of the services of the external auditor, and at each meeting it considered and assessed the status of the auditor’s independence. Further details on the external auditors can be found in the Governance and compliance section.

Risk management and internal control systems

The Audit Committee reviewed AkzoNobel’s overall approach to governance, risk management and internal controls, its processes, outcomes, financial reporting and disclosures. Regular updates were received from auditors and functions in this regard, and the Audit Committee was provided with comprehensive risk and internal control reports during the year. In addition, the Audit Committee reviewed the annual operating plan (including budget) and AkzoNobel’s dividend proposals. Upon fulfilling its oversight responsibilities in relation to governance, risk management and internal control systems, the Audit Committee met regularly with senior executives.

The General Counsel reported regularly to the Audit Committee on the company’s compliance framework and compliance matters and activities, and on major litigation, fraud and liability exposures. The Internal Auditor reported to the Audit Committee on their assessment of the status of the system of governance, risk management and internal controls throughout 2019.

Business and function reviews

In fulfilling its oversight responsibilities in relation to risk management and internal control systems, the Audit Committee received updates from functions throughout the year, informing its review of the annual operating plan, including budget. During the year, updates were provided from Finance, Treasury, Information Management and Tax. The Audit Committee continued to monitor functional initiatives, such as the progress on the transformation of the Finance function and the transformation of AkzoNobel into a focused paints and coatings company. The Audit Committee also met regularly with other senior executives.

Internal Audit

The Internal Auditor presented all main audit findings to the Audit Committee and discussed the progress of the audit plan. During the year, the Audit Committee approved Internal Audit’s plan and strategy, and also agreed on the budget and resource requirements for the function. The Audit Committee also met separately with the Internal Auditor during the year to discuss the results of the audits performed and the status of the follow-up on action plans identified. In 2019, the Audit Committee was satisfied with the effectiveness of the Internal Audit function. As the Corporate Director of Internal Audit left AkzoNobel as per January 1, 2020, the Audit Committee agreed on the appointment of the new Corporate Director of Internal Audit, who starts on March 1, 2020. The appointment of the new Corporate Director of Internal Audit was approved by the Supervisory Board.

Results and financial statements

Before each publication of the quarterly results and the financial statements, the Audit Committee reviewed the financial results. In addition, the Audit Committee reviewed and commented on the interim and final dividend proposals and on reports and press releases to be published. This was in addition to the work undertaken by the company’s Disclosure Committee in reviewing the company’s disclosure of potentially price sensitive information. Based on these discussions, advice was provided by the Audit Committee to the Supervisory Board with regard to the publications and disclosures, and to the interim and final dividends. All quarterly or annual releases of financial results, and any potentially price sensitive public disclosures, were approved by the full Supervisory Board prior to publication and release.

In order to ensure its effectiveness and expertise, the Audit Committee was provided with regular updates on IFRS developments and the anticipated impact of these developments on the financial statements. In addition, the Audit Committee reviewed and assessed management assertions made in regard to relevant accounting treatments.

Audit Committee evaluation

The Audit Committee carried out a self-assessment of its performance and concluded that it is performing effectively. Reference is made to the paragraph on the evaluation of the Supervisory Board in this chapter.