BT 2006 Annual Report Download - page 48

by the Operating Committee before being reviewed and
approved by the Board.
sthe lines of business carry out risk assessments of their
operations, have created registers relating to those risks,
and ensure that the key risks are addressed.
ssenior management reports regularly to the Group Finance
Director on the operation of internal controls in its area of
responsibility.
sthe Chief Executive receives annual reports from senior
executives with responsibilities for major group operations
with their opinion on the effectiveness of the operation of
internal controls during the financial year.
sthe group’s internal auditors carry out continuing
assessments of the quality of risk management and control.
Internal Audit reports to the management and the Audit
Committee on the status of specific areas identified for
improvement. Internal Audit also promotes effective risk
management in the lines of business operations.
sthe Audit Committee, on behalf of the Board, considers the
effectiveness of the operation of internal control procedures
in the group during the financial year. It reviews reports from
the internal auditors and from the external auditors and
reports its conclusions to the Board. The Audit Committee has
carried out these actions for the 2006 financial year.
New subsidiaries acquired during the year have not been
included in the above risk management process. They will be
included for the 2007 financial year. Material joint ventures and
associates, which BT does not control, outside the UK have not
been dealt with as part of the group for the purposes of this
internal control assessment.
The Board has approved the formal statement of matters
which are reserved to it for consideration, approval or oversight.
It has also approved the group’s corporate governance
framework, which sets out the high level principles by which the
group is managed and the responsibilities and powers of the
Operating Committee and the group’s senior executives. As part
of this framework the development and implementation of
certain powers relating to group-wide policies and practices are
reserved to identified senior executives.
US SARBANES-OXLEY ACT OF 2002
BT has securities registered with the US Securities and
Exchange Commission (SEC). As a result, BT is obliged to
comply with those provisions of the Sarbanes-Oxley Act
applicable to foreign issuers. BT complies with the legal and
regulatory requirements introduced pursuant to this legislation,
in so far as they are applicable to the group.
With the appointment of Phil Hodkinson, it is the opinion of
the Board that the Audit Committee now includes a member who
is an ‘audit committee financial expert’, and who is
independent (as defined for this purpose). The Board considers
that the Committee’s members generally have broad
commercial and business leadership experience, having held
various roles in accountancy, financial management and
supervision, treasury and corporate finance and that there is a
broad and suitable mix of business, financial and IT experience
on the Committee.
The Chief Executive and Group Finance Director, after
evaluating the effectiveness of BT’s disclosure controls and
procedures as of the end of the period covered by this Annual
Report and Form 20-F, have concluded that, as of such date,
BT’s disclosure controls and procedures were effective to ensure
that material information relating to BT was made known to
them by others within the group. The Chief Executive and
Group Finance Director have also provided the certifications
required by the Sarbanes-Oxley Act.
There were no changes in BT’s internal control over financial
reporting that occurred during the year ended 31 March 2006
that have materially affected, or are reasonably likely to
materially affect, BT’s internal control over financial reporting.
Preparations are well advanced for BT to be able to comply with
the requirements of Section 404 of the Sarbanes-Oxley Act. BT
is required to report under Section 404 in the 2007 Annual
Report and Form 20-F.
The code of ethics for the Chief Executive, Group Finance
Director and Director Group Financial Control and Treasury,
adopted for the purposes of the Sarbanes-Oxley Act, is posted
on the company’s website at www.bt.com/ethics
THE NEW YORK STOCK EXCHANGE
The company, as a foreign issuer with American Depositary
Shares listed on the New York Stock Exchange (NYSE), is
obliged to disclose any significant ways in which its corporate
governance practices differ from the corporate governance
listing standards of the NYSE.
The company has reviewed the NYSE’s new listing standards
and believes that its corporate governance practices are
consistent with them, with the following exception where the
company does not meet the strict requirements set out in the
standards. The standards state that companies must have a
nominating/corporate governance committee composed entirely
of independent directors and with written terms of reference
which, in addition to identifying individuals qualified to become
board members, develops and recommends to the Board a set
of corporate governance principles applicable to the company.
BT has a Nominating Committee chaired by the Chairman Sir
Christopher Bland. It does not develop corporate governance
principles for the Board’s approval. The Board approves the
group’s overall system of internal controls, governance and
compliance authorities. The Board and the Nominating
Committee are made up of a majority of independent, non-
executive directors.
The Sarbanes-Oxley Act, the SEC and NYSE introduced rules
on 31 July 2005 requiring the company to comply with certain
provisions relating to the Audit Committee. These include the
independence of Audit Committee members and procedures for
the treatment of complaints regarding accounting or auditing
matters. The company is fully compliant with these
requirements.
FINANCIAL STATEMENTS
So far as each of the directors is aware, there is no relevant
information that has not been disclosed to the company’s
auditors and each of the directors believes that all steps have
been taken that ought to have been taken to make them aware
of any relevant audit information and to establish that the
company’s auditors have been made aware of that information.
A statement by the directors of their responsibilities for
preparing the financial statements is included in the Statement
of directors’ responsibility. The directors’ statement on going
concern is included in the Operating and financial review –
Financial review – Capital resources on page 37.
BT Group plc Annual Report and Form 20-F 2006 Report of the directors46