Internal control and audit
The Company’s internal control and audit system has been developed using a risk-based approach. It encompasses the ongoing processes for:
- identification, monitoring, and assessment of risks;
- development, implementation, and improvement of internal control tools to prevent risks and mitigate any adverse impact on the Company’s operations, as well as to achieve the goals of the Company and its shareholders.
The management team is responsible for the efficient implementation of control, risk management, and corporate governance processes, which are assessed through internal audit procedures in terms of how they ensure that:
- the Company’s assets are protected against the misconduct of employees and third-parties;
- the Company’s operations comply with internal rules and regulations, applicable laws and Metalloinvest’s contractual obligations;
- the Company’s financial and operating activities are adequately reflected in management accounts and financial statements.
Metalloinvest’s internal audit framework consists of:
- the Audit Committee of the Board of Directors chaired by an independent director;
- Internal Audit Department of the Managing Company reporting to the Audit Committee;
- internal audit functions of controlled entities reporting to the Director of the Internal Audit Department.
The internal audit framework is structured to cover all levels of governance, ensuring the independence and neutrality of the internal audit functions. Its targets, objectives and principles are formalised in the Internal Audit Regulation of the Group.
The internal audit findings are used to produce recommendations for improving control procedures and mitigating the adverse impact of risks, and their fulfilment is monitored on an ongoing basis.
Twice a year, the Audit Committee reviews a consolidated internal audit report, which covers completed audits, their findings and remedial actions taken by the management to deliver on internal audit recommendations. The most significant findings are also reviewed by the Audit Committee at its regular and extraordinary meetings.
To determine key focus areas for audits, the Company uses a risk-based approach, which factors in the Company’s targets, requests of the Board of Directors, and proposals of the Company’s management and business units. In 2015, the internal audit covered material risks in the following areas:
- operational efficiency management;
- procurement and supply management;
- investment project management;
- ventory management;
- repairs and maintenance of property, plant and equipment;
- material flow management.
The Board of Directors pays particular attention to the internal control and audit system to ensure its effectiveness and compliance with global best practices.
Metalloinvest prepares its financial statements in accordance with the applicable Russian and international standards (RAS and IFRS). The Company engages an external auditor to conduct an independent review of its financial and accounting statements. The Audit Committee provides its recommendations on external auditor candidates to the meeting of shareholders and the meeting of members, which eventually approve one of the candidates. In 2015, the Company’s IFRS financial statements and RAS accounting statements were audited by PricewaterhouseCoopers.
The auditor is selected through negotiations with candidates subject to their credentials and service fees.