Annual Report 2017

Report of the Audit Committee

Dear Shareholders,

As Chairman of the Audit Committee, I am very pleased to report to you on the tasks and activities performed by that body in financial year 2017.

Responsibility

On the basis of applicable law, the German Corporate Governance Code and the Rules of Procedure of the Supervisory Board and its committees, the Audit Committee deals primarily with questions of accounting, financial reporting and non-financial reporting. In addition, it deals with the annual audit and reviews the qualifications and independence of the external auditors. Furthermore, it discusses the effectiveness and functional capabilities of the risk management system, the internal control system, the internal auditing system and the compliance management system. After the external auditors are elected by the Annual Shareholders’ Meeting, the Audit Committee engages the external auditors to conduct the annual audit and the auditors’ review of interim financial statements, determines the important audit issues and negotiates the audit fees with the external auditors.

Equal representation

Audit Committee Chairman Dr. Clemens Börsig and Joe Kaeser served as the shareholder representatives on the Audit Committee in financial year 2017. Both are independent and have expertise in the field of financial reporting, as well as special knowledge of and experience in the auditing of financial statements and the application of methods of internal control. During financial year 2017, the employees were represented on the Audit Committee by Michael Brecht as the Deputy Chairman of the Committee and by Ergun Lümali.

Meetings and participants

The Audit Committee met six times in financial year 2017. All of these meetings were also attended by the Chairman of the Supervisory Board, Dr. Manfred Bischoff, as a permanent guest. The other permanent participants in the meetings were the Chairman of the Board of Management, the members of the Board of Management responsible for Finance and Controlling and for Integrity and Legal Affairs, and the external auditors. The heads of specialist departments such as Accounting, Internal Auditing, Group Compliance and Legal were also present to report on individual items of the agenda.

In addition, the Chairman of the Audit Committee held regular individual discussions, for example with the external auditors, the members of the Board of Management responsible for Finance and Controlling and for Integrity and Legal Affairs, the head of Internal Auditing and, if required, further heads of the relevant specialist departments. Such individual discussions were mainly held to prepare for the next committee meetings.

Reporting to the Supervisory Board

The Chairman of the Audit Committee informed the Supervisory Board about the activities of the Committee and about the contents of its meetings and discussions in the following Supervisory Board meetings.

Topics in 2017

In the meeting held on February 1, 2017, the Audit Committee dealt with the preliminary figures of the annual financial statements and the annual consolidated financial statements for the year 2016, as well as with the proposal on the appropriation of profits made by the Board of Management. Following an in-depth review, the Audit Committee took positive note of the presented figures and determined that no objections were to be made to their proposed publication. The Committee further recommended that the Supervisory Board, which met immediately thereafter, adopt the same view. The preliminary key figures and the proposal on the appropriation of profits were announced at the Annual Press Conference on February 2, 2017.

In another meeting held on February 10, 2017, the Audit Committee dealt with the annual financial statements, the consolidated financial statements and the combined management report for Daimler AG and the Daimler Group for the financial year 2016, each of which had been issued with an unqualified auditor’s opinion by the external auditors, as well as with the proposal on the appropriation of profits. At the meeting, the external auditors reported on the results of their audit and were available to answer supplementary questions and to provide additional information. The audit reports on the annual company and consolidated financial statements and on the internal control system (ICS), the report on the risk management system (RMS) for the year 2016, Annual Report 2016 and important issues related to accounting were discussed with the external auditors. Following an in-depth review and discussion, the Audit Committee recommended that the Supervisory Board approve the financial statements, the combined management report and the recommendation of the Board of Management to pay a dividend of €3.25 per share entitled to a dividend. Furthermore, the Audit Committee approved the Report of the Audit Committee for the financial year 2016.

Also in this meeting, the Audit Committee discussed the report on the total fees paid to the external auditors in the financial year 2016 for auditing and non-auditing services. The Audit Committee also decided to recommend to the Supervisory Board, and subsequently to the Annual Shareholders’ Meeting, that KPMG be engaged to conduct the annual external audit and the external auditors’ review of interim financial reports for the financial year 2017 and also to conduct the external auditors’ review of interim financial reports for the financial year 2018 in the period leading up to the Annual Shareholders’ Meeting in 2018. The Audit Committee based this recommendation on the quality of the annual audit and the results of the independence review, for which no indications of partiality or a threat to independence were found. Subject to the election of the proposed external auditors by the Annual Shareholders’ Meeting, the Audit Committee also discussed the proposal to be made regarding the fees to be agreed upon with the external auditors for the financial year 2017. Finally, within the framework of its responsibility, the Audit Committee dealt with the draft agenda for the 2017 Annual Shareholders’ Meeting and the annual audit plan for 2017 of the Internal Auditing department.

In the meetings during 2017 related to the quarterly results, the Audit Committee discussed the interim financial reports before their publication with the Board of Management and with the external auditors engaged to carry out the auditors’ review of interim financial statements. In addition, the Committee received reports from the Internal Auditing, Group Compliance and Legal departments. In this connection, the Board of Management reported regularly to the Audit Committee, on the current status of the main legal proceedings, in particular also on the requests, inquiries, investigations and proceedings in connection with the issue of diesel exhaust emissions. In addition, the Audit Committee dealt with notifications concerning possible violations of rules submitted by employees and third parties to the Group’s own whistleblower system BPO (Business Practices Office).

In April 2017, the Audit Committee approved the fees agreed upon with the external auditors for the financial year 2017 after the Annual Shareholders’ Meeting made its decision on March 29, 2017 regarding the election of the proposed external auditors for the annual financial statements and the consolidated financial statements.

In its meeting in June 2017, the Audit Committee was informed of a recent development regarding searches of Daimler AG premises conducted by the Stuttgart State Attorney’s Office within the framework of its investigation of known and unknown employees of Daimler AG. The Audit Committee then discussed the Group’s risk management system and dealt in particular with its changes and further development. It also discussed the methods and processes of, and possible changes to, the internal control system, which along with accounting also encompasses the internal auditing function and the compliance management system. In addition, the Audit Committee was informed about the Group Legal System and Group Legal Risk Reporting. Furthermore, the Committee received a report on the non-auditing services provided by the external auditors. In this meeting, the Committee also defined key audit issues for the external audit of the financial year 2017, including new requirements for the audit opinion as well as planning measures for the external audit for 2017 and the framework of approval for engaging the external auditors to provide non-audit services. In addition, the Committee extensively addressed the status of implementation of the EU Audit Reform at Daimler. In this connection, the Committee congruently aligned the period for the approval framework for engaging the external auditors to provide non-audit services with the financial year, thus enhancing the legally required transparency at the Group. This meeting was also used to discuss the results of the internal quality analysis of the external audit for the financial year 2016.

Also in the meeting in June 2017, the Audit Committee dealt in depth with the impact that implementation of the EU CSR Directive will have on reporting at Daimler and on the disclosure of non-financial information. Furthermore, the Committee was informed of new developments in accounting and financial reporting, such as the new financial accounting standards IFRS 9 (Financial Instruments) and IFRS 15 (Revenue Recognition), and other audit-relevant areas such as tax law. The Committee also received detailed information on the audit from the Financial Reporting Enforcement Panel (Deutsche Prüfstelle für Rechnungslegung), which did not result in any objections. Finally, the Audit Committee took note of a report on pension management and of another on current tax issues, and also discussed with the Board of Management the annual report produced by the Group’s Data Protection Officer.

In the meeting held in July 2017, the Audit Committee dealt mainly with the second-quarter results and the risk report. Along with production and technology risks, the Committee members also discussed the possible effects of software retrofitting of Mercedes-Benz diesel vehicles in Europe, the comprehensive plan for diesel engines approved by the Board of Management in July 2017, and the risks stemming from current legal issues.

In the meeting held in October 2017, the Audit Committee dealt with the interim financial report for the third quarter of 2017 and the quarterly reports from the Internal Auditing, Group Compliance and Legal departments. The Committee also once again discussed the effects of the EU CSR Directive on non-financial reporting at Daimler.

Company and consolidated financial statements 2017

In the meeting held on January 31, 2018, the Audit Committee dealt with the preliminary figures of the annual financial statements and the annual consolidated financial statements for the year 2017, as well as with the proposal on the appropriation of profits made by the Board of Management. Following an in-depth review, the Audit Committee took positive note of the presented figures and determined that no objections were to be made to their proposed publication. The Committee further recommended that the Supervisory Board, which met immediately thereafter, adopt the same view. The preliminary key figures and the proposal on the appropriation of profits were announced at the Annual Press Conference on February 1, 2018.

In another meeting held on February 9, 2018, the Audit Committee reviewed and discussed in detail the annual financial statements, the consolidated financial statements and the combined management report for Daimler AG and the Daimler Group for the financial year 2017, each of which had been issued with an unqualified auditor’s opinion by the external auditors, as well as the proposal on the appropriation of profits and the non-financial report. At the meeting, the external auditors reported on the results of their audit and the voluntary audit of the non-financial report within the framework of a limited assurance engagement and were also available to answer supplementary questions and to provide additional information. The audit reports on the annual financial statements and consolidated financial statements (including the particularly important audit issues in the audit opinions) and on the internal control system (ICS), the report on the risk management system (RMS) for the year 2017, the Annual Report 2017, and important issues related to financial reporting were discussed with the external auditors. Following an in-depth review and discussion, the Audit Committee recommended that the Supervisory Board approve the financial statements, the combined management report, the declaration on corporate governance included in the corporate governance report, the non-financial report, and the recommendation of the Board of Management to pay a dividend of €3.65 per share entitled to a dividend. Furthermore, the Audit Committee approved the Report of the Audit Committee for the financial year 2017.

Efficiency review

As in previous years, the Audit Committee once again conducted a self-evaluation of its own activities in 2017 on the basis of an extensive company-specific questionnaire. The results of this efficiency review were once again very positive and were presented and discussed in the meeting on February 9, 2018. This did not result in any need for action with regard to the Committee’s tasks, or with regard to the content, frequency or procedure of its meetings.

Stuttgart, February 2018

The Audit Committee

Dr. Clemens Börsig

Chairman

Zurück
Declaration on Corporate Governance, Corporate Governance Report
Corporate Governance