The Audit Committee
The Audit Committee has up to four members elected by the Board of Directors from among its members. One member is designated as chairman.
The Board has in March 2017 elected the following to the Audit Committee:
- Liz Hewitt (re-elected, member since 2012 and chairman since 2015)
- Sylvie Grégoire (re-elected, member since 2015)
- Helge Lund (elected, member since 2017)
- Stig Strøbæk (re-elected, member since 2013, employee representative)
Pursuant to the US Securities Exchange Act three members qualify as independent, including the chairman, while one member, the employee representative, relies on an exemption to the independence requirements. In addition, two members have been designated as financial experts as defined by the US Securities and Exchange Commission (SEC).
Under Danish law, three members qualify as independent as defined in the Danish Corporate Governance Recommendations, including the chairman, and one member, who is an employee representative, qualifies as non-independent. According to the Danish Corporate Governance Recommendations a majority of the members of a board committee shall qualify as independent. Hence, the composition of the Audit Committee adheres to the Danish Corporate Governance Recommendations. In addition, two members have competences in accounting and auditing and the members of the Audit Committee collectively have competences relevant to the healthcare industry as required by the Danish Act on Approved Auditors and Audit Firms.
Roles and responsibilities
The Audit Committee assists the Board with oversight of a) the external auditors, b) the internal audit function, c) the procedure for handling complaints regarding accounting, internal accounting controls, auditing or financial reporting matters and business ethics matters (“whistleblowing”), d) financial, social and environmental reporting, e) business ethics compliance, f) post-completion reviews and post-investment reviews of investments, g) long-term incentive programmes, h) information security, i) insurance coverage and j) other tasks.
Under Danish law, the statutory external auditor is elected by the shareholders. All shareholders as well as the Board have the right to propose candidates for election. The Audit Committee recommends to the Board the statutory external auditor to be nominated by the Board and elected by the shareholders at the annual general meeting.
Concerns of possible business ethics misconduct, financial fraud, breaches of the Novo Nordisk Way or quality misconduct may be raised anonymously by employees and other stakeholders through the global Compliance Hotline. Complaints made through the Compliance Hotline are received by the Audit Committee Secretariat. Complaint handling is monitored by the Board of Directors or the Audit Committee, depending on the nature of the complaint. As such the hotline works independently of Executive Management. The Compliance Hotline is available by telephone and online in multiple languages.
Audit Committee Report 2017
According to SEC reporting requirements for listed companies the Audit Committee shall report on their activities.
The Audit Committee works according to an Annual Work Plan with fixed agenda items following key events of the annual financial reporting cycle. In addition, The Audit Committee request topics to be discussed on their meetings from time to time.
For the financial reporting year 2017 the Audit Committee held four meetings (one hosted in US, one hosted in India and two hosted in Denmark) and discussed the following matters:
Audit Committee matters and governance
- Conducted a self-assessment including a review of the Audit Committee Charter and assessment of independence, financial expertise and other legal requirements of each member of the Audit Committee.
- Conducted private meetings with selected members of Executive Management, Head of Finance, Head of Business Assurance, General Counsel, Head of Group Internal Audit and with the external auditors.
- Reviewed a report on Audit Committee effectiveness.
Review of internal and external audit matters
- Evaluated the performance and the independence of the external auditor.
- Recommended the election of the external auditor to the Board of Directors and annual general meeting.
- Reviewed the performance, independence, effectiveness and organisation of the internal audit function including a review of the charter for Group Internal Audit.
- The Head of Group Internal Audit and the external auditor presented the audit planning and audit resources. In addition, they presented the annual conclusion and results of audit activities conducted each quarter for review including the conclusion of the audit of internal controls over financial reporting.
- Assessed the performance of targets and the remuneration for the head of Group Internal Audit.
- Furthermore, the external auditor presented its annual long form report, and the annual Audit Committee Report required by the PCAOB.
- The Audit Committee reviewed and approved the pre-approval procedure for audit, non-audit and tax services to external auditors, reviewed the given pre-approvals for the current year and pre-approved the level for the next financial year (including engagement letter). Further the Audit Committee reviewed the procedure for hiring employees from external auditors.
Financial, social and environmental reporting
- Discussed with the CFO, Head of Finance, Head of Business Assurance, the General Counsel, Head of Group Internal Audit and the external auditors:
- material and relevant new accounting pronouncement, implementation of such, review of key accounting policies and the accounting for certain transactions and activities,
- accounting for significant legal and tax issues,
- critical accounting estimates,
- transactions with related parties, and
- the scope of internal controls over financial reporting in relation to the requirements in the Sarbanes Oxley Act and Danish legislation.
- The Audit Committee performed a review of:
- the global finance organisation,
- the financial statement releases for the full year and interim financial reports,
- the Annual Report including the statements of financial, social and environmental performance, and the Form-20 F,
- the quarterly risk management reporting,
- the risk reporting process,
- the company’s financial counterpart exposure in the company’s treasury policy, and approved an update hereto,
- the calculation of the long term incentive Programme for management,
- the model account for the statements of the financial, social and environmental performance.
- The Audit Committee performed a fraud risk assessment in Novo Nordisk.
- Review of established Business Ethics activities including a review of:
- the Business Ethics strategy, the Compliance Programme and the compliance organisation, and
- Compliance reporting from the Business Ethics Compliance officer, and the US Compliance officer.
- The Audit Committee performed a review of:
- issues reported via Compliance Hotline and the Audit Committee agreed on the performed investigations, conclusions and sanctions reached,
- the Information Security activities and focus areas as well as the PwC assessment of the Information Security programme,
- post-completion reviews of fixed asset investments previously approved by the Board of Directors, and
- the dividend policy