A key objective of Internal Audit is to perform regular independent assessment of the reliability and effectiveness of the internal control and risk management system and corporate governance practices.
MAIN TASKS OF INTERNAL AUDIT
- Assisting the executive bodies and employees of the Company in developing and monitoring compliance with procedures and measures aimed at improving the risk management and internal control system, and corporate governance
- Coordinating activities with the Company’s external auditors and persons providing advisory services in the area of risk management, internal controls, and corporate governance
- Conducting internal audits of controlled entities pursuant to the established procedures
- Preparing and submitting to the Board of Directors and the executive bodies reports on the results of internal audits
- Checking whether members of the Company’s executive bodies and its employees comply with the statutory provisions and internal policies of the Company on insider information and anti-corruption, as well as with the requirements of the Company’s Code of ethics
IMPROVING INTERNAL AUDIT
In 2015, the Company worked hard to develop the internal audit function and bring it in line with the advanced standards in this area, including:
- International Standards for the Professional Practice of Internal Auditing
- COSO Internal Control – Integrated Framework
- Russian Corporate Governance Code
- Listing Rules of MICEX Stock Exchange
- Methodological recommendations for organising internal audit in joint stock companies with participation of the Russian Federation (Order of Rosimuschestvo No. 249 dated 04 July 2014)
By order of the Chairman of the Federal Grid’s Management Board No. 246 dated 15 June 2015, the Internal Control and Risk Management Department was restructured as to transfer internal audit function to the Internal Audit Department, which reports functionally to the Board of Directors and administratively to the Chairman of the Management Board.
As at 31 December 2015, the number of employees performing the internal audit function amounted to 16 people. The Director for Internal Audit – Head of the Internal Audit Department is part of the Company’s management team.
On 16 November 2015, the Board of Directors approved the Regulations on Internal Audit of Federal Grid Company (Minutes No. 291 dated 19 November 2015), which cover all issues related to the internal audit function in the Company.
A Standard for assessing the effectiveness of the Federal Grid’s internal control and risk management system was developed in the Company, reviewed by the Audit Committee and recommended for the approval by the Board of Directors (Minutes No. 44 dated 14 December 2015).
In the reporting year, the Company developed and the Audit Committee approved the Programme for assessing and improving the internal audit quality (Minutes No.40 dated 21 September 2015) and the Federal Grid’s Internal Audit Guidelines (Minutes No.43 dated 02 December 2015).
The above Programme provides for periodic internal and external evaluations of the Internal Audit Department performance. Internal evaluation is conducted by internal auditors of the Company through self-evaluation at least once a year and external evaluation is conducted by external independent consultants at least once in five years.
Head of Internal Audit Department
WHAT PROGRESS HAS BEEN MADE BY THE COMPANY IN THE REPORTING YEAR IN THE FIELD OF INTERNAL AUDIT?
“In 2015, the Federal Grid’s internal audit function has been considerably developed. The Board of Directors approved a core document – the Regulations on Internal Audit that cover all key issues in this area.
The Audit Committee approved a number of documents aimed at improving the internal audit effectiveness, including a Programme for assessing and improving the quality of the internal audit function.
Internal auditors assessed the effectiveness of the Federal Grid’s internal control system for 2014 and prepared a report thereof that included a series of recommendations on certain components of the internal control system.
During the implementation of the above recommendations, at the end of the year, the Company has developed a Standard for assessing the effectiveness of the internal control and risk management,system reviewed by the Audit Committee and recommended for approval by the Board of Directors”.
THE BOARD’S ROLE IN ENSURING THE INTERNAL AUDIT EFFECTIVENESS
By the resolution of the Annual Meeting of Shareholders dated 26 June 2015 (Minutes No.16 dated 30 June 2015) the Federal Grid’s Articles of Association has reserved the following matters have been reserved for the Board of Directors in the area of internal audit:
- Approval of an internal audit policy
- Approval of a work plan and budget of the Internal Audit Department
- Approval of a candidate for the position of the Internal Audit Department Head and termination of his/her powers
- Determination of remuneration arrangements for the Internal Audit Department Head, as well as consideration of significant limitations that might adversely affect the performance of the internal audit function