The audit committee

The audit committee has up to five members elected by the Board of Directors from among its members. One member is designated as chair and one member is an employee representative.

Members

The Board of Directors has in March 2020 elected the following members to the Audit Committee:

  • Liz Hewitt (re-elected, member since 2012 and chair since 2015; independent; financial expert)
  • Laurence Debroux (re-elected, member since 2019, independent; financial expert)
  • Andreas Fibig (re-elected, member since 2018, independent)
  • Sylvie Grégoire (re-elected, member since 2015; independent)
  • Stig Strøbæk (re-elected, member since 2013, employee representative; non-independent)

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 reported through the Compliance Hotline (whistleblowing), d) financial, social and environmental reporting, e) business ethics compliance, f) information security, g) insurance coverage and h) special theme reviews and other tasks on an ad hoc basis as specifically decided by the Board of Directors.

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.

As part of its oversight of external reporting, the Audit Committee discusses significant legal and tax issues with the chief financial officer, head of finance & compliance, the general counsel, head of group internal audit and the external auditors. The chief financial officer is charged with responsibility for the tax strategy and policy, which is endorsed by the Board of Directors.

Independence

Pursuant to the US Securities Exchange Act four members qualify as independent, including the chair, while one member, the employee representative, relies on an exemption to the independence requirements. In addition, two members, including the chair, have been designated as financial experts as defined by the US Securities and Exchange Commission (SEC).

Under Danish law, four members qualify as independent as defined in the Danish Corporate Governance Recommendations, including the chair, 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.

Attendance

In 2019, the Audit Committee conducted four meetings. All Audit Committee members attended all committee meetings within the member’s term in 2019 except one member who was excused from two meetings within the member’s term in 2019. Please refer to the Annual Report 2019 on p. 39 for a detailed attendance overview.

Compliance hotline

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 for 2019

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 2019 the Audit Committee held four meetings and discussed the following matters:

Audit committee matters and governance

  • Conducted a self-evaluation 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, General Counsel, Head of Group Internal Audit and with the external auditors.

Review of internal and external audit matters

  • Evaluated the performance and the independence of the external auditor.
  • Recommended the re-election of the current external auditor to the Board of Directors and annual general meeting in 2020.
  • Executed an audit tender process and recommended a new external auditor to the Board of Directors. A new external auditor is to be elected at the annual general meeting in 2021.
  • 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 and Compliance, 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 bi-annual risk management reporting,
  • the risk reporting process,
  • the company’s financial counterpart exposure in the company’s treasury policy, and approved an update hereto, and
  • the appropriateness of the insurance coverage regarding property, business interruption and product liability.
  • The Audit Committee performed a fraud risk assessment in Novo Nordisk.

Other matters

  • Reviewed the Compliance reporting from the Business Ethics Compliance officer, and the US Compliance officer.
  • Reviewed issues reported via Compliance Hotline and the Audit Committee agreed on the performed investigations, conclusions and sanctions reached.
  • Reviewed the Information Security activities and focus areas.
  • On behalf of the Board of Directors, reviewed the Diabetes API capacity investment in the US.