BP 2012 Annual Report Download - page 151

Corporate governance
Corporate governance
BP Annual Report and Form 20-F 2012
149
Code of ethics
The company has adopted a code of ethics for its group chief executive,
chief financial officer, group controller, general auditor and chief
accounting officer as required by the provisions of Section 406 of the
Sarbanes-Oxley Act of 2002 and the rules issued by the SEC. There have
been no waivers from the code of ethics relating to any officers.
BP also has a code of conduct, which is applicable to all employees. This
was updated (and published) on 1 January 2012.
Controls and procedures
Evaluation of disclosure controls and procedures
The company maintains ‘disclosure controls and procedures’, as such
term is defined in Exchange Act Rule 13a-15(e), that are designed to
ensure that information required to be disclosed in reports the company
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms, and that such
information is accumulated and communicated to management, including
the company’s group chief executive and chief financial officer, as
appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our
management, including the group chief executive and chief financial
officer, recognize that any controls and procedures, no matter how well
designed and operated, can provide only reasonable, not absolute,
assurance that the objectives of the disclosure controls and procedures
are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within the company have been
detected. Further, in the design and evaluation of our disclosure controls
and procedures our management necessarily was required to apply its
judgement in evaluating the cost-benefit relationship of possible controls
and procedures. Also, we have investments in certain unconsolidated
entities. As we do not control these entities, our disclosure controls and
procedures with respect to such entities are necessarily substantially
more limited than those we maintain with respect to our consolidated
subsidiaries. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected. The company’s disclosure controls and procedures have been
designed to meet, and management believes that they meet, reasonable
assurance standards.
The company’s management, with the participation of the company’s
group chief executive and chief financial officer, has evaluated the
effectiveness of the company’s disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15(b) as of the end of the period
covered by this annual report. Based on that evaluation, the group chief
executive and chief financial officer have concluded that the company’s
disclosure controls and procedures were effective at a reasonable
assurance level.
Management’s report on internal control over
financial reporting
Management of BP is responsible for establishing and maintaining
adequate internal control over financial reporting. BP’s internal control over
financial reporting is a process designed under the supervision of the
principal executive and financial officers to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of BP’s
financial statements for external reporting purposes in accordance with
IFRS.
As of the end of the 2012 fiscal year, management conducted an
assessment of the effectiveness of internal control over financial reporting
in accordance with the Internal Control Revised Guidance for Directors
(Turnbull). Based on this assessment, management has determined that
BP’s internal control over financial reporting as of 31 December 2012 was
effective.
The company’s internal control over financial reporting includes policies
and procedures that pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect transactions and dispositions
of assets; provide reasonable assurances that transactions are recorded
as necessary to permit preparation of financial statements in accordance
with IFRS and that receipts and expenditures are being made only in
accordance with authorizations of management and the directors of BP;
and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of BP’s assets
that could have a material effect on our financial statements. BP’s internal
control over financial reporting as of 31 December 2012 has been audited
by Ernst & Young, an independent registered public accounting firm, as
stated in their report appearing on page 181 of BP Annual Report and
Form 20-F 2012.
Changes in internal control over financial reporting
There were no changes in the group’s internal controls over financial
reporting that occurred during the period covered by the Form 20-F that
have materially affected or are reasonably likely to materially affect our
internal controls over financial reporting.
Principal accountants’ fees and services
The audit committee has established policies and procedures for the
engagement of the independent registered public accounting firm,
Ernst & Young LLP, to render audit and certain assurance and tax services.
The policies provide for pre-approval by the audit committee of specifically
defined audit, audit-related, tax and other services that are not prohibited
by regulatory or other professional requirements. Ernst & Young are
engaged for these services when its expertise and experience of BP are
important. Most of this work is of an audit nature. Tax services were
awarded either through a full competitive tender process or following an
assessment of the expertise of Ernst & Young relative to that of other
potential service providers. These services are for a fixed term.
Under the policy, pre-approval is given for specific services within the
following categories: advice on accounting, auditing and financial reporting
matters; internal accounting and risk management control reviews
(excluding any services relating to information systems design and
implementation); non-statutory audit; project assurance and advice on
business and accounting process improvement (excluding any services
relating to information systems design and implementation relating to
BP’s financial statements or accounting records); due diligence in
connection with acquisitions, disposals and joint ventures (excluding
valuation or involvement in prospective financial information); income tax
and indirect tax compliance and advisory services; employee tax services
(excluding tax services that could impair independence); provision of, or
access to, Ernst & Young publications, workshops, seminars and other
training materials; provision of reports from data gathered on non-financial
policies and information; and assistance with understanding non-financial
regulatory requirements. BP operates a two-tier system for audit and
non-audit services. For audit related services, the audit committee has a
pre-approved aggregate level, within which specific work may be
approved by management. Non-audit services, including tax services, are
pre-approved for management to authorize per individual engagement,
but above a defined level must be approved by the chairman of the audit
committee or the full committee. The audit committee has delegated to
the chairman of the audit committee authority to approve permitted
services provided that the chairman reports any decisions to the
committee at its next scheduled meeting. Any proposed service not
included in the approved service list must be approved in advance by the
audit committee chairman and reported to the committee, or approved by
the full audit committee in advance of commencement of the
engagement.
The audit committee evaluates the performance of the auditors each year.
The audit fees payable to Ernst & Young are reviewed by the committee in
the context of other global companies for cost effectiveness. The
committee keeps under review the scope and results of audit work and
the independence and objectivity of the auditors. External regulation and
BP policy requires the auditors to rotate their lead audit partner every five
years. (See Financial statements – Note 16 on page 212 and Audit
committee report on pages 120-122 for details of audit fees.)