BP 2010 Annual Report Download - page 100
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Please find page 100 of the 2010 BP annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Corporategovernance
Committee activities
GulfofMexico
Thecommitteeconsideredcriticallythenancialreportingarisingfromthe
incidentintheGulfofMexico,includingtheimpactonthecompany’s
liquidity,provisionsandcontingencies,riskfactordisclosure,theassociated
accountingtreatmentarisingfromeventsandtheapprovalofmarket
announcements.Ithasalsoreceivedreportsfromthegeneralauditorand
thegroupcontrolleronthestatusofnancialcontrolsinthenewGulf
CoastRestorationOrganization.
Financialreporting
Thegroup’squarterlynancialreports,the2009AnnualReportand
Accounts,theAnnualReviewandthe20-Fwerereviewedbythe
committeebeforerecommendingtheirpublicationtotheboard.In
undertakingthisreview,thecommitteediscussedwithmanagementhow
theyhadappliedcriticalaccountingpoliciesandjudgementstothese
documents,includingkeyassumptionsregardingprovisions(suchasfor
theGulfofMexicospillresponse,litigation,environmentalremediationand
decommissioning),contingenciesandimpairmenttesting.Furtherdetails
onimpairmentreviewsareincludedintheFinancialstatements–Note5
onpage164andNote11onpage173.Eachyear,thecommitteealso
reviewsthecompany’sdisclosuresrelatingtooilandgasreserves.
Monitoringbusinessrisk
Thecommitteeoperatesaregularcycleofreviewofrisk,controland
assurancefromBP’sbusinessesandsupportingfunctions.Duringtheyear,
thecommitteeundertookacontrolsreviewoftheUSMidwestfuelsvalue
chainandreceivedanupdateonrisk,governanceandcontrolsactivities
relatingtoTNK-BP.Thelatterincludedthereportsonthesystemofinternal
control,TNK-BP’squarterlynancialreportingproceduresandcertaintax
matters.Functionalreviewswereheldofinformationtechnologyand
services,procurement,integratedsupplyandtradingandBP’sbusiness
servicecentres.
Otherareasofreviewbythecommitteeincludedthecentralcase
planningassumptionsforoilandgaspricesandreningmarginsthatare
utilizedinthegroup’sinvestmentappraisalprocessaswellasimpairment
reviews,areviewofthedeliveryofmajorprojectsandtheriskmanagement
andinvestmentstrategyrelatingtopensionsandretirementbenets.
Duringtheyearthechiefnancialofcerreportedontheworkof
thegroupnancialriskcommittee–thisisanexecutive-levelcommittee
thatprovidesassurancetotheexecutiveonthemanagementofBP’s
nancialrisk.
Internalcontrol,auditandriskmanagement
Theforwardagendafortheauditcommitteecontainsstandingitemson
internalcontrol–theseincludethequarterlyinternalauditndingsreport,
anevaluationofinternalcontrols,andanannualassessmentofBP’s
enterpriselevelcontrols.
Animportantinputintotheboard’sreviewofthecompany’ssystem
ofriskmanagementandinternalcontrolistheannualjointmeeting
betweentheauditcommitteeandtheSEEAC.Thistakesplaceatthestart
ofeachyeartoreviewthegeneralauditor’sreportoninternalcontroland
riskmanagementsystemsforthepreviousyear.Thegeneralauditorreviews
histeam’sndingsandmanagement’sactionstoremedysignicantissues
identiedinthatwork.Hisreportalsoincludesinformationontheresultsof
auditworkundertakenbythesafetyandoperationalriskauditteamand
reviewsbythegroup’snancialcontrolteam.
Externalauditors
In2010,thecommitteeheldtwoscheduledmeetingswiththeexternal
auditorswithoutmanagementbeingpresent.Thesesessions,withoutthe
presenceofexecutivemanagement,offeredanopportunityfordirect
feedbackanddialoguebetweenboththecommitteeandtheauditors.
Inaddition,thechairoftheauditcommitteemeetsprivatelywiththe
externalauditorsbeforeeachauditcommittee.
Performanceoftheexternalauditorsisevaluatedbytheauditcommittee
eachyear,withparticularemphasisontheirindependence,objectivityand
viability.Thecommitteereviewsthecompositionoftheauditteamannually
andmeetstherelevantpartnerswhenundertakingbusinessorfunction
reviews.Additionally,thecommitteehastheopportunitytoassessspecic
technicalcapabilitiesintheauditrmwhenaddressingspecialisttopics,for
examplethisyearinimpairmenttestingandliquidityreviews.
Wemaintainauditorindependencethroughlimitingnon-audit
servicestotaxandaudit-relatedworkthatfallwithindenedcategories.
Anewleadauditpartnerisappointedeveryveyearsandothersenioraudit
staffarerotatedeverysevenyears.NopartnersorseniorstafffromErnst&
YoungwhoareconnectedwiththeBPauditmaytransfertothegroup.
Non-auditworkbyErnst&Youngissubjecttotheauditcommittee’s
pre-approvalpolicy.Non-auditworkundertakenbyErnst&Youngandby
otheraccountancyrmsisregularlymonitoredbythecommittee.
Feespaidtotheexternalauditorfortheyearwere$55million,of
which14.5%wasfornon-auditwork(see Financial statements – Note 17
on page 176).Afterfouryearsofreductions,thefeesandservicesprovided
byErnst&Youngforauditandnon-auditworkincreasedslightlyin2010due
toadditionalworkrequiredconsequentupontheGulfofMexicoincident.
Theauditcommitteeconsidersboththefeestructureandtheaudit
engagementtermsandmonitorsprogressduringtheyear.Ithas
recommendedtotheboardthatthereappointmentofErnst&Youngasthe
company’sexternalauditorsbeproposedtoshareholdersatthe2011AGM.
Internalaudit
Progressofinternalauditagainsttheannualscheduleofauditsismonitored
onaquarterlybasis,andthecommitteelooksatthekeyndingsand
trackingofanymaterialactionsthatareoverdueorhavebeenrescheduled.
Aprogrammeofworkbyinternalauditisproposedeachyearforthe
committee’sapprovalandinreviewingthis,thecommitteelooksat
whetheritbelieveskeyrisksfacingthecompanyhavebeenappropriately
addressed.Theprogrammein2010wassupplementedconsiderablyby
additionalworkrelatedtorisksandcontrolsconsequentupontheGulfof
Mexicoincident.Theprogrammefor2011alsoreectsanenhancedrisk
environmentandwasapprovedbythecommitteeinJanuary2011.
Thegeneralauditormetprivatelywiththecommitteeonceduringthe
year,withoutthepresenceofexecutivemanagementortheexternalauditors.
Healsomeetsasnecessarywiththecommitteechairbetweenmeetings.
Eachyearthecommitteereviewsinternalaudit’sstaffresourcesin
bothnumberandexpertisetoseekassurancethattheyaresufcientto
fullitsrole.Thecommitteewasalsosatisedthatinternalaudithad
appropriateaccesstoinformationandthatmanagementwascommittedin
theprovisionofthatinformation.Thecommitteealsoseekstheviewsof
theexternalauditorsontheeffectivenessandqualityofinternalaudit.
Otheractivities
Throughquarterlyupdatesbythegroupcomplianceandethicsofcerand
generalauditor,thecommitteemonitorsfraud,misconductandnon-
compliancewiththeBPcodeofconductandremedialactionsundertaken
asaresult.Theannualcerticationreportwhichissignedbythegroup
chiefexecutiveisalsoreviewedbythecommittee.
Financialissuesandconcernsthathavebeenaggedthroughthe
company’semployeeconcernsprogrammeOpenTalk,arereviewedbythe
committee–whichtrackstrendsinboththecasetypeandtimetakento
closeoutqueriesandreports.
Committeeevaluation
Theauditcommitteeexaminesitsperformanceandeffectivenessonan
annualbasis.In2010,thecommitteeusedaninternallydesigned
questionnaireadministeredbyexternalconsultants.Itlookedatkeyareas,
includingtheclarityofitsroleandresponsibilities,thebalanceofskills
amongitsmembersandtheeffectivenessofreportingitsworktothe
board.Thereviewconcludedinteraliathatithadbeeneffectiveandwas
satisedwiththeextentoftrainingitreceivedbutwouldseektomaketime
formore.Overallthecommitteeconsideredithadtherightcompositionin
termsofexpertiseandresourcetoundertakeitsactivitieseffectively.
98BPAnnualReportandForm20-F2010