Provision of internal control at Zarubezhneft Group of companies
An Internal Audit Department comprising of six persons operates at Zarubezhneft JSC in the framework of the existing corporate governance system. In its activities the Department is guided by the Regulation on the internal audit of Zarubezhneft JSC, Audit inspection planning and holding methodology and the Regulation on the Internal audit department.
The main task of the internal audit of Zarubezhneft JSC, which is assessing and expressing an opinion regarding the reliability and efficiency of the systems of risk management, internal control and corporate governance in the Group of Companies.
The Internal Audit Directorate is reporting to the Zarubezhneft JSC Board of Directors. The existing subordination of the internal audit to the Board of Directors and the Company’s executive bodies ensures the independence, which is sufficient for performance of the internal audit functions.
The annual plan of internal audit and the results of the management activities are reviewed by the Audit Committee and approved by the Zarubezhneft JSC Board of Directors.
The key areas for internal audit in 2018 were identified as follows:
- Assessment of the formation of corporate KPIs (on a quarterly basis);
- Audit of sales of non-core assets of Zarubezhneft JSC (on a quarterly basis);
- Audit of the risk management process in Zarubezhneft Group of Companies;
- Audit of the internal control and risk management system in the field of anti-corruption management.
- Audit of compliance with the corporate governance matrix;
- Audit of “Investment Planning” business process;
- Audit of “Workover” process;
- Audit of "Working Capital Management (Material and Technical Resources Inventory Turnover)”;
- The Audit “Search, Assessment of New Projects, Increasing Zarubezhneft JSC Asset Portfolio”.
All scheduled inspections have been performed as per the approved Plan.
In addition to the scheduled audits, the Internal Audit Department conducted a number of unscheduled inspection activities on the Orders of the General Director of Zarubezhneft JSC.
The Internal Audit Department is the owner of the business process “Audits of Subsidiaries”. As per the “Regulations for the Inspection of Subsidiaries”, the Department coordinates the processes of performing audits, forming audit acts and conclusions. The Department carries out continuous monitoring of the implementation of recommendations based on the results of internal audit and audit activities aimed at improving the internal control, risk management and corporate governance systems.
As part of the expert function implementation, the employees of the Department carried out the examination of documents in BD/GSM of subsidiaries and materials of investment committees, participated in the work of expert groups of Zarubezhneft JSC.
During the reporting year, to improve the regulatory framework of internal audit, the following regulatory documents were updated:
- a new version of “Regulation on Internal Audit” was approved;
- a new version of “Procedure for Planning and Conducting Internal Audits” was approved;
- the Regulation of the Audit of Subsidiaries was updated;
As part of the development and improvement of the internal audit function, in compliance with the best international practices, the Department implemented the following activities:
- an external evaluation of Zarubezhneft JSC’s internal audit function was conducted. According to the evaluation results, the conformity of the Departments’ activities with the best international practices was determined, the main directions for further improvement of the function were outlined;
- as per the requirements of the International Internal Audit Standards, the Department has implemented a procedure for confirming the independence and absence of a conflict of interest among employees;
- a unified system of recording violations detected as a result of inspections and monitoring measures for their eliminate has been developed and implemented;
- a matrix of areas requiring the increased management attention has been developed and introduced into the control process;
- a quality management system for internal audits was developed and implemented (taking into account the requirements of ISO 9001:2015).
During the year, to develop professional competencies, all employees of the Internal Audit Department participated in training activities in the field of activity: trainings, conferences, seminars, and strategic sessions.