Dear Ladies and Gentlemen,
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 2022/23.
Prof. Dr Edgar Ernst
Chairman of the Audit Committee
- Information about the Chairman of the Audit Committee and 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) and the financing strategy 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 2023): Prof. Dr Edgar Ernst (Chairman), Xaver Schiller (Vice Chairman), Paul Loyo, Klaus Pollmann, Roman Šilha, Jürgen Steinemann, Stefan Tieben and Manfred Wirsch.
The Audit Committee held a total of 6 meetings in financial year 2022/23. In addition, the Audit Committee passed 1 resolution outside of a meeting. The Management Board was represented by the Chairman of the Management Board and the Chief Financial Officer. Representatives from the METRO departments were available at the meetings to discuss specific topics, in particular the Head of the Corporate Accounting & Controlling department following the resignation of Christian Baier as Chief Financial Officer. 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 cyberattack at the beginning of financial year 2022/23 as well as the measures taken by the company.
As Chairman of the committee, I frequently communicated with Jürgen Steinemann as Chairman of the Supervisory Board and with the Management Board, especially with 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 2022 – The committee was briefed on the status of work on the annual financial statements, which was able to proceed as planned in spite of interference by the cyberattack. We also focused on the effectiveness and functioning of the group’s governance functions (internal control system, risk management system, internal audit and compliance) and received confirmation from our auditor regarding the results of the audit of our risk management system (RMS) in accordance with the auditing standard IDW AuS 981. In addition, we were informed about the status of implementation of the Act on Corporate Due Diligence Obligations in Supply Chains, discussed the audit depth of the non-financial statement and passed a resolution on the report of the Audit Committee for financial year 2021/22.
December 2022 – The Audit Committee routinely prepared the meeting of the Supervisory Board in December and reviewed the annual and consolidated financial statements for financial year 2021/22, the combined management report of METRO AG and the group for financial year 2021/22, 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 2021/22. The Audit Committee also decided to recommend to the Supervisory Board that they should suggest to the Annual General Meeting 2023 to elect KPMG AG Wirtschaftsprüfungsgesellschaft as auditors for financial year 2022/23. Furthermore, the Management Board provided information about awarding of donations and presented to the committee countermeasures following the cyberattack.
January 2023 – As part of a resolution passed outside of one meeting, the Audit Committee decided to approve engaging KPMG with support services from the IT crisis management team in conjunction with the cyberattack. The resolution presented was explained in preparation during a routine informational call of the committee.
February 2023 – The meeting was focused on the quarterly statement Q1 2022/23. Moreover, we received another update on the status of cybersecurity. As part of this, the external consultants additionally hired by the company introduced themselves. They were tasked with using a detailed benchmark analysis with leading IT security practices to create a fact-based understanding of the security situation at METRO. 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 2023 as well as the combined management report for METRO AG and the group for financial year 2022/23; the audit review of the condensed interim financial report as of 31 March 2023 as well as the interim group management report for the period from 1 October 2022 to 31 March 2023; the audit of the combined non-financial statement for financial year 2022/23 in the form of a limited assurance engagement; and the audit of the remuneration report in accordance with the auditing standard IDW AuS 490 for financial year 2022/23. As part of the recommendation for the auditor election in December 2022, 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 we passed a resolution to change the guideline on the engagement of the auditor for non-audit services. We were also given an overview of the current capital market outlook of METRO and were provided with information about awarding donations.
May 2023 – The focus of the meeting was the half-year financial report 2022/23 as well as the half-year report on the governance functions including a risk and compliance update. The committee received the final report of the external consultants on the assessment of the existing cybersecurity practices at METRO. The committee also 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 the financing strategy and utilisation of the financing framework. The rest of the meeting dealt with the key points of the strategy/budget for 2023/24, in consideration of the validation of strategy implementation planning for the national subsidiaries, as well as information on the group tax planning.
August 2023 – With the participation of the members of the Presidential Committee, we discussed the current interim status of the budget planning for 2023/24 and subsequent years and received an outlook on the key figures relevant to remuneration. The quarterly statement Q3 2022/23 was routinely discussed. Furthermore, we dealt with the quality of the audit, which we discussed on the basis of a quality report from the auditor, an anonymised survey of the committee members and a survey of the METRO financial departments and which we consider to be very satisfactory. We also discussed the assessment of the audit risk, the audit strategy and the audit planning, including the key audit matters of 2022/23, with the auditor. Finally, we received details on updates and future amendments to the accounting standards and on the current cybersecurity situation. As part of this, we were also introduced to the new Chief Information Security Officer (CISO).
September 2023 – The resolution on the recommendation to approve the budget planning for 2023/24 and subsequent years was the focus of this meeting. The members of the Presidential Committee also participated in the discussion. 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 2023 to 2026. We also received information about the non-audit services provided by the auditor and approved the assignment of the auditor with the review or audit of the interim financial statements through June 2024, subject to the election of the auditor for financial year 2023/24 by Annual General Meeting 2024. Moreover, we worked on an amendment to the Code of Procedure of the Audit Committee. Finally, we evaluated the responses to the survey carried out in advance of the meeting on the self-assessment of the Audit Committee and discussed the results.
Annual and consolidated financial statements, report on relationships with affiliated companies 2022/23
At the meeting on 11 December 2023, 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 2022/23; the combined non-financial statement contained in the combined management report; the Management Board’s report on the company’s relations to affiliated companies for financial year 2022/23; 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 2023, the combined management report for METRO AG and the group for financial year 2022/23, the combined non-financial statement contained in the combined management report as well as the report of the Management Board on relations to affiliated companies for financial year 2022/23. 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 and that the Management Board’s proposal to Annual General Meeting 2024 on the appropriation of the balance sheet profit be endorsed.
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 2022/23.
Düsseldorf, 12 December 2023
The Audit Committee
Prof. Dr Edgar Ernst