BT 2014 Annual Report Download - page 116

113
Governance
Governance
Disclosure controls and procedures
The Chief Executive and Group Finance Director, after evaluating the
eectiveness of BT’s disclosure controls and procedures as of the end of
the period covered by this Annual Report & Form 20-F, have concluded
that, as of such date, BT’s disclosure controls and procedures were
eective 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 concluded that BT’s
disclosure controls and procedures are also eective to ensure that the
information required to be disclosed by the company in reports that
it les under the Securities Exchange Act of 1934 (Exchange Act) is
recorded, processed, summarised and reported within the time periods
specied in the rules and forms of the SEC.
The Chief Executive and Group Finance Director have also provided the
certications required by the Sarbanes-Oxley Act.
Internal control over nancial reporting
BT’s management is responsible for establishing and maintaining
adequate internal control over nancial reporting for the group.
Internalcontrol over nancial reporting is designed to provide
reasonable assurance regarding the reliability of nancial reporting
andthe preparation of nancial statements for external reporting
purposes in accordance with IFRS. Management conducted an
assessment of the eectiveness of internal control over nancial reporting
based on the framework for internal control evaluation contained in
theRevised Guidance for Directors on the UK Governance Code
published by the Financial Reporting Council (the Turnbull Guidance).
Based on this assessment, management has concluded that at 31 March
2014, BT’s internal control over nancial reporting was eective.
There were no changes in BT’s internal control over nancial reporting
that occurred during 2013/14 that have materially aected, or are
reasonably likely to have materially aected, the group’s internal control
over nancial reporting. Any signicant deciency, as dened by the US
Public Company Accounting Oversight Board (PCAOB), in internal control
over nancial reporting, is reported to the
Audit & Risk Committee .
PricewaterhouseCoopers LLP, which has audited the consolidated
nancial statements for 2013/14, has also audited the eectiveness
of the group’s internal control over nancial reporting under Auditing
Standard No.5 of the PCAOB.
The Auditorso report is on page
121
Internal control and risk management
The Board is responsible for the group’s systems of internal control
and risk management and for reviewing each year the eectiveness
of those systems. Such systems are designed to manage, rather than
eliminate, the risk of failure to achieve business objectives any system
can provide only reasonable, and not absolute, assurance against
material misstatement or loss. The process in place for reviewing BT’s
systems of internal control includes procedures designed to identify and
evaluate failings and weaknesses, and, in the case of any categorised as
signicant, procedures exist to ensure that necessary action is taken to
remedy the failings.
The Board also takes account of signicant social, environmental and
ethical matters that relate to BT’s businesses and reviews annually BT’s
corporate responsibility policy. The company’s workplace practices,
specic environmental, social and ethical risks and opportunities and
details of underlying governance processes are dealt with in pages 24
to 29 in the Delivering our strategy section and Our performance as a
responsible and sustainable business on pages 71 to 73.
We have enterprise-wide risk management processes for identifying,
evaluating and managing the principal risks faced by the group. These
processes have been in place throughout the year and have continued up
to the date on which this document was approved. The processes are in
accordance with the Turnbull Guidance.
Risk assessment and evaluation take place as an integral part of BT’s
annual strategic planning cycle. We have a detailed risk management
process which identies the key risks facing the group, each line of
business and our internal service unit, BT TSO.
Our current key risks are summarised in the
Strategic Report s Our risks on pages 50 to 55. 50
The key features of the enterprise-wide risk management and internal
control process comprise the following procedures
• Senior executives collectively review the group’s key risks and have
created a Group Risk Register describing the risks, owners and
mitigation strategies. This is reviewed by the Group Risk Panel and
the
Operating Committee before being reviewed and approved by the
Board.
• The lines of business and BT TSO (internal service unit) carry out risk
assessments of their operations, create risk registers relating to those
operations, and ensure that the key risks are addressed.
• Senior executives with responsibilities for major group operations
report quarterly with their opinion on the eectiveness of the
operation of internal controls in their areas of responsibility.
• The group’s internal auditors carry out continuing assessments of the
quality of risk management and control, report to management and
the
Audit & Risk Committee on the status of specic areas identied
for improvement and promote eective risk management in the lines
of business and our internal service unit.
• The
Audit & Risk Committee , on behalf of the Board, considers the
eectiveness of the internal control procedures in the group during
the nancial year. It reviews reports from the internal and external
auditors and reports its conclusions to the Board. The
Audit & Risk
Committee
has carried out these actions for 2013/14.
Joint ventures and associates, which BT does not control, have not
been dealt with as part of the group risk management process and are
responsible for their own internal control assessment.
BT’s signicant accounting policies are set out on pages 129 to 134.
Theconsistent application of those policies is subject to ongoing
verication through management review and independent review by
internal and external auditors.
The processes supporting the preparation and consolidation of the
nancial statements have been documented and are subject to annual
verication through the programme of testing conducted by our internal
auditors. This serves to conrm the operation of the internal controls
over nancial reporting and compliance with the Sarbanes-Oxley Act.
The
Audit & Risk Committee reviews BT’s published nancial results,
related disclosures and accounting judgements. The committee’s
activities are set out on pages 83 to 85.
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 BT 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 identied senior executives.