BP 2015 Annual Report Download - page 72

Committee reports
Audit committee
Chairman’s introduction
2015 was another active year for the audit committee. We took the
opportunity of the new UK Corporate Governance Code reporting
requirements to take a fresh look at the company’s risk management
processes. This involved reviewing the group’s principal risks, considering
scenarios that might impact the company’s longer-term viability and
debating the categorization of what would constitute significant failings and
weaknesses in our system of internal control.
The committee continued to build its understanding of BP’s business,
including how key risks are identified and mitigated and how segments and
functions are performing to achieve the group’s strategy. To complement
the presentations received in the board room, the committee met
employees on several site visits – including trading floors in Houston and
London and the group’s cybersecurity monitoring centre.
During 2015 the committee’s membership evolved, with our longest-serving
member George David retiring in April and Paula Rosput Reynolds joining us
in May. I would like to thank George for his insight and challenge during his
tenure and to welcome Paula, who brings broad financial and corporate
knowledge from her business career. The skills and experience of our
committee membership remain strong and I believe that the committee has
performed effectively over the year.
Brendan Nelson
Committee chair
Role of the committee
The committee monitors the effectiveness of the group’s financial
reporting, systems of internal control and risk management and the
integrity of the group’s external and internal audit processes.
Key responsibilities
• Monitoring and obtaining assurance that the management or mitigation
of financial risks is appropriately addressed by the group chief executive
and that the system of internal control is designed and implemented
effectively in support of the limits imposed by the board (executive
limitations) as set out in the BP board governance principles.
• Reviewing financial statements and other financial disclosures and
monitoring compliance with relevant legal and listing requirements.
• Reviewing the effectiveness of the group audit function, BP’s internal
financial controls and system of internal control and risk management.
• Overseeing the appointment, remuneration, independence and
performance of the external auditor and the integrity of the audit process
as a whole, including the engagement of the external auditor to supply
non-audit services to BP.
• Reviewing the systems in place to enable those who work for BP to
raise concerns about possible improprieties in financial reporting or other
issues and for those matters to be investigated.
Members
Brendan Nelson (chair) Member since November 2010; committee
chair since April 2011
George David Member from February 2008 to April 2015
Phuthuma Nhleko Member since February 2011
Paula Rosput Reynolds Member since May 2015
Andrew Shilston Member since February 2012
Brendan Nelson is chair of the audit committee. He was formerly vice
chairman of KPMG and president of the Institute of Chartered Accountants
of Scotland. Currently he is chairman of the group audit committee of The
Royal Bank of Scotland Group plc. The board is satisfied that Mr Nelson is
the audit committee member with recent and relevant financial experience
as outlined in the UK Corporate Governance Code. It considers that the
committee as a whole has an appropriate and experienced blend of
commercial, financial and audit expertise to assess the issues it is required
to address. The board also determined that the audit committee meets the
independence criteria provisions of Rule 10A-3 of the US Securities
Exchange Act of 1934 and that Mr Nelson may be regarded as an audit
committee financial expert as defined in Item 16A of Form 20-F.
Meetings and attendance
There were 11 committee meetings in 2015, of which three were carried
out by teleconference and five were joint meetings with the SEEAC. All
directors attended every meeting for which they were eligible, with the
following exceptions:
• George David did not attend the teleconference on 25 February 2015
due to prior commitments.
• Phuthuma Nhleko did not attend the committee meeting on 23 April
2015 due to a clash with the AGM of another company.
• Paula Rosput Reynolds did not attend the committee meeting on
23 September 2015 due to a conflicting board meeting.
Meetings are also attended by the chief financial officer, group controller,
chief accounting officer, head of group audit and external auditor.
Activities during the year
Training
The committee held a learning event on changes to the UK Corporate
Governance Code and received technical updates during the year from
the chief accounting officer on developments in financial reporting and
accounting policy.
Financial disclosure
The committee reviewed the quarterly, half-year and annual financial
statements with management, focusing on the integrity and clarity of
disclosure, compliance with relevant legal and financial reporting standards
and the application of critical accounting policies and judgements.
The committee jointly reviewed with the SEEAC whether the BP Annual
Report and Form 20-F 2015 was fair, balanced and understandable and
provided the information necessary for shareholders to assess the group’s
position and performance, business model and strategy. The two
committees considered the processes underpinning the compilation and
assurance of the report in relation to financial and non-financial
management information. Following this joint review, the full board
reviewed the report as a whole – including tone, balance, language and
consistency between the narrative sections and financial statements. Part
of the board’s evaluation included a review of the company’s internal
processes that form the group’s reporting governance framework. The
board’s statement on the report is on page 93.
BP Annual Report and Form 20-F 201568