Dear shareholders,
As Chairman of the Audit Committee, I would like to use this opportunity to update you on the tasks and activities of this committee in financial year 2021/22.
Prof. Dr Edgar Ernst
Chairman of the Audit Committee
Profile
Prof. Dr Edgar Ernst studied mathematics with a minor in business administration at the University of Cologne and holds a Master of Operations Research title from the University of Aachen. After completing his studies, he was awarded a doctorate in political science (Dr rer. pol.) from RWTH Aachen (University of Technology in Aachen, North Rhine-Westphalia) in 1982.
Prof. Dr Edgar Ernst began his professional career in 1983 at McKinsey & Company, Inc. In 1986, he transferred to Großversandhaus Quelle GmbH. From 1990 to 1992, Prof. Dr Ernst was the Head of Planning and Controlling, and from 1992 to 2007 Chief Financial Officer of Deutsche Bundespost POSTDIENST (later Deutsche Post AG). From 2006 to 2008, he was a member of the Management Board of the WHU Foundation. Since 2006, he has been an honorary professor at the WHU – Otto Beisheim School of Management. He was President of the German Financial Reporting Enforcement Panel (FREP) from 2011 until the end of 2021. Since 2017, he has been a member of the Supervisory Board and Chairman of the Audit Committee of METRO AG. He is also a member of the Supervisory Boards of Vonovia SE and TUI AG.
- More information about the other members of the Supervisory Board can be found on the website www.metroag.de/en in the section About us – Supervisory Board.
The Audit Committee is in particular responsible for supervising the company’s accounting, accounting processes, the effectiveness and development of the internal control systems, the risk management system, the internal audit system, the audit of the annual financial statements (in particular relating to the selection and independence of the auditor, the audit strategy and planning, the quality of the audit and any additional services provided by the auditor) as well as compliance. Further information on the work of the Audit Committee is defined in the Code of Procedure of the Audit Committee.
- The Code of Procedure of the Audit Committee of the Supervisory Board of METRO AG can be found on the website www.metroag.de/en in the section About us – Corporate Governance.
The Audit Committee is composed of equal numbers of representatives. The following members are part of the Audit Committee (as of 30 September 2022): Prof. Dr Edgar Ernst (Chairman), Xaver Schiller (Vice Chairman), Marco Arcelli, Stefanie Blaser, Michael Heider and Stefan Tieben. Effective 1 October 2022, the Audit Committee was expanded to 8 members, with Jürgen Steinemann and Manfred Wirsch added as new members of the committee.
The Audit Committee held a total of 6 meetings in financial year 2021/22. The itemised meeting attendance of the members of the Audit Committee can be found in the report of the Supervisory Board. The Chairman of the Supervisory Board, Jürgen Steinemann, attended all meetings as a permanent guest. The Management Board was represented by the Chairman of the Management Board and the Chief Financial Officer. Representatives from various METRO departments were available at the meetings to discuss specific topics. The auditor was present for each agenda item that was relevant to the audit of the financial statements. The Audit Committee also conducted additional reporting telephone calls with the Chairman of the Management Board and the Chief Financial Officer between the scheduled meetings to discuss the business development and the effects of the war in Ukraine as well as the measures taken by the company.
In order to perform the duties of the Audit Committee, I frequently communicated with Jürgen Steinemann as Chairman of the Supervisory Board and with the Management Board, especially with Christian Baier as the Chief Financial Officer, outside the meetings to exchange information and ideas on important topics and upcoming decisions. The exchange of information was supported by frequent individual discussions with the auditor and heads of various METRO departments. I notified the Supervisory Board about the content of the discussions as well as about the work and recommendations of the Audit Committee in each of its subsequent meetings.
Main contents of the committee meetings
November 2021 – The committee was briefed on the status of the annual financial statement progress with reference to the effects of the first-time application of the European Single Electronic Format (ESEF) regulations. We decided to issue a separate report on the tasks and activities of the Audit Committee for the first time to reflect the increasing importance of the body. We also received information about the non-audit services provided by the auditor, which mainly included assignments concerning risk management audits and a digitalisation initiative. We continued to focus on the effectiveness and functioning of the group’s governance functions (internal control systems, risk management system, internal audit and compliance) and received information on a sample audit by the German Financial Reporting Enforcement Panel.
December 2021 – The Audit Committee routinely prepared the meeting of the Supervisory Board in December and reviewed the annual and consolidated financial statements for financial year 2020/21, the combined management report of METRO AG and the group for financial year 2020/21, including the combined non-financial statement contained in the combined management report, as well as the report of the Management Board on relationships with affiliated companies. The auditor reported on the results of the audits and was available to answer additional questions and provide information in the absence of the Management Board. In the presence of the auditor, the committee also discussed the results of the audit and recommended to the Supervisory Board to approve the annual and consolidated financial statements for financial year 2020/21. The Audit Committee also decided to recommend to the Supervisory Board that they should suggest to the Annual General Meeting 2022 to elect KPMG AG Wirtschaftsprüfungsgesellschaft as auditors for financial year 2021/22. Furthermore, the Management Board provided information about awarding of donations.
February 2022 – The meeting was focused on the quarterly statement Q1 2021/22. Moreover, we passed a resolution to recommend to the Supervisory Board to accept the proposals of KPMG, which included the following tasks: the audit of the annual financial statements and the consolidated financial statements of METRO AG as of 30 September 2022 as well as the combined management report for METRO AG and the group for financial year 2021/22 together with the remuneration report to be prepared for the first time pursuant to § 162 of the German Stock Corporation Act (AktG); the audit review of the condensed interim financial report as of 31 March 2022 as well as the interim group management report for the period from 1 October 2021 to 31 March 2022; and the audit of the combined non-financial statement for financial year 2021/22 in the form of a limited assurance engagement. The Audit Committee based this decision on its discussion of the audit quality. The quality of the audit was again confirmed by the Audit Committee and rated as very good. As part of the recommendation for the auditor election in December 2021, no deficiencies in the audit-related services to date were identified that would argue against the election of KPMG as auditor. In addition, we were updated about the current status of the auditor’s non-audit services and received an overview from the relevant department about the current capital market outlook of METRO, especially in the wake of the Capital Markets Day, which took place at the end of January 2022.
May 2022 – The focus of the meeting was the half-year financial report 2021/22 as well as the half-year report on the governance functions including a risk and compliance update. Once again, we dealt with the assessment of the audit quality of the financial statements and discussed the key audit matters of 2021/22. The committee routinely obtained information about the status of the auditor’s approved non-audit services and the utilisation of the upper statutory cap. Furthermore, it was updated about utilisation of the financing framework. The rest of the meeting dealt with the key points of the strategy/budget for 2022/23, including the strategy implementation planning for the national subsidiaries, as well as information on the group tax planning.
August 2022 – With the participation of the members of the Presidential Committee, we discussed the current interim status of the budget planning for 2022/23 and subsequent years and received an outlook on key figures relevant to remuneration. The quarterly statement Q3 2021/22 was routinely discussed and subsequently approved. Moreover, we received details about the financing strategy as well as innovations and future adjustments of the accounting standards. Next, we discussed the expansion of the Audit Committee from 6 to 8 members.
September 2022 – The resolution on the recommendation to approve the budget planning for 2022/23 and subsequent years was the focus of this meeting. The members of the Presidential Committee also participated in the discussion. Apart from that, we were introduced to the designated KMPG lead partner for audits as from the coming financial year. Due to the regulations on internal rotation, the previous audit manager will sign the audit report on the annual and consolidated financial statements for financial year 2021/22 for the last time. Later in the meeting, the Head of the Group Internal Audit department presented his Internal Audit unit report including the internal audit planning for financial years 2020 to 2023. We also received information about the non-audit services provided by the auditor and approved the assignment of another non-audit service. Moreover, we worked on an amendment to the Code of Procedure of the Audit Committee.
Annual and consolidated financial statements, report on relationships with affiliated companies 2021/22
At the meeting on 6 December 2022, the Audit Committee reviewed and discussed the following items in detail: the annual financial statements and the consolidated financial statements, each of which received an unqualified audit opinion from the auditor; the combined management report for METRO AG and the group for financial year 2021/22; the combined non-financial statement contained in the combined management report; the Management Board’s report on the company’s relationships with affiliated companies for financial year 2021/22; as well as the corresponding audit reports. The required documents were distributed to all members of the Audit Committee in due time prior to these meetings. The auditor reported on the results of the audit and addressed the key audit matters as well as the accounting-related topics of the audit. He was also available to answer questions and provide additional information in the absence of the Management Board. After an intensive exchange of views, the Audit Committee recommended that the Supervisory Board take note of and approve the results of the audit of the annual financial statements and the consolidated financial statements of METRO AG as of 30 September 2022, the combined management report for METRO AG and the group for financial year 2021/22, the combined non-financial statement contained in the combined management report as well as the report of the Management Board on relationships with affiliated companies for financial year 2021/22. The committee also recommended that the Supervisory Board should endorse the audit results of the auditor and join their determination that no objections are to be raised. Furthermore, the Audit Committee recommended that the annual financial statements and the consolidated financial statements of METRO AG as well as the combined management report for METRO AG and the group, including the non-financial statement contained in the combined management report, be approved. The committee added that the Annual Financial Statements of METRO AG should thus be adopted.
On behalf of the entire Audit Committee, I would like to conclude by thanking the Chairman of the Supervisory Board, the auditor and the Management Board for their constructive and dependable collaboration in financial year 2021/22.
Düsseldorf, 6 December 2022
The Audit Committee
Prof. Dr Edgar Ernst
Chairman
- More information about the members of the Supervisory Board can be found on the website www.metroag.de/en in the section About us – Supervisory Board.