Internal Control and Audit
Internal Control System
The internal control system of MTS PJSC represents a combination of internal control processes implemented by ICS entities based on existing organisational structure, internal policies and regulations, internal control and risk management procedures and method applied in the Company at all management levels and as part of all functional areas.
Establishment and efficient operation of the internal control system is aimed at assuring reasonable confidence in achievement of objectives faced by the Company and enable to assure proper control over financial and economic activities of the Company as well as its efficiency.The internal control system of MTS PJSC represents a combination of interrelated components, the structure of which meets the general accepted methodology COSO Internal Control — Integrated Framework 2013. In accordance with COSO model a control environment is established, the risk assessment system is applied and control procedures are implemented.
Under the internal control system a range of anti-corruption measures mitigating reputational risks and risks of application of sanctions for officials’ bribery against MTS PJSC. For the purposes of counteraction to abuses, authorisation of transactions and operations, distinction of powers and rotation of duties, control of actual availability and condition of facilities is implemented.
MTS PJSC approved the Policy for meeting anti-corruption legislation defining measures aimed at establishing elements of the corporate culture, organisational structure, rules and procedures assuring non-admission of corruption.
As part of the Single hot line of MTS Group of Companies the line of the internal control and audit unit was organised as a safe, confidential and available method of the Audit Committee informing of the Board of Directors and Internal Control and Audit Unit about facts of breaches of legislation, internal procedures, Code of Business Conduct and Ethics of MTS PJSC by its any employees and (or) any members of the management body or body of control over financial and economic activities of MTS PJSC.
Proposals for improvement of anti-corruption procedures and other internal control procedures are received by the hot line addressed to the Audit Committee of the Board of Directors and the Internal Control and Audit Unit. A person who submitted relevant information is protected from any forms of pressure (including from dismissal, persecution, any forms of discrimination).
For systematic independent evaluation of reliability and efficiency of the risk management and internal control system and corporate management practice performance of the internal audit by the Internal Control and Audit Unit of MTS PJSC was organised in MTS PJSC. The internal control and audit unit is an individual structural division of MTS PJSC functionally subordinate to the Board of Directors and administratively – directly to the President of MTS PJSC.
The audit committee of the Board of Directors of MTS PJSC twice a year reviews Reports of the Internal Control and Audit Unit about the operation of the internal audit, control, compliance and risk management divisions. The audit committee positively evaluated the work of the Internal Control and Audit Unit in terms of evaluation of internal control, risk management and corporate governance system efficiency as well as evaluated operation of the risk management functions as efficient and meeting tasks as of today.
The audit committee of the Board of Directors of MTS PJSC on a quarterly basis reviewed reports of external auditors CJSC Deloitte and Touche CIS approving their performance.
The Board of Directors defines a policy in respect of internal control and annually reviews the report of the Audit Committee based on the work results for a year with an analysis of current control systems and discovered violations. Report of the Audit Commission is annually attached to materials of the annual General Shareholder Meeting of MTS PJSC.
Audit Committee at the Board of Directors
The Audit Committee is a collegial deliberative body of the Board of Directors. The committee was established for the purposes of assisting in efficient implementation of functions of the Board of Directors in terms of control over financial and economic activities of the Company.
Detailed information about the Audit Committee’s work results in the reporting year is presented in the section “Committees of the Board of Directors”.
Results of evaluation by the Committee of the external and internal audit process efficiency
Specified in the section “Report on operation of the Audit Committee”
On June 25, 2015 the followings persons were elected as members of the Auditing Committee at the annual general shareholder meeting of MTS PJSC:
- Irina Borisenkova, born in 1963, takes the post of the Chief Accountant, managing director of the Finance and Investment Complex of JSFC Sistema OJSC.
- Maxim Mamonov, born in 1978, takes the post of the internal control and audit director of MTS PJSC.
- Anatoliy Panarin, born in 1988, takes the post of the planning head of the Finance and Investment Complex of JSFC Sistema OJSC.
The Auditing Committee acting in accordance with the articles of association of MTS PJSC as well as the Regulation on the Auditing Committee of MTS PJSC is a permanently operating elected body of the Company and exercises periodic control over financial and economic activities of the Company , activities of its management bodies and officials (including its separate subdivisions, services, branches and representative offices) by means of documentary and actual audits.
The Auditing Committee is independent from officials of the Company’s management bodies and is accountable only to the General Shareholder Meeting of the Company.
Report on operation of the Auditing Committee
In April 2015, based on the results of the performed audit, the Auditing Committee did not record material facts of violation of accounting and financial statements submission procedures while carrying out financial and economic activities of the Company.
The Auditing Committee confirmed that financial statements of the Company for 2014 and the Annual report on Company’s activities for 2014, in terms of Company’s financial statements, are authentic.
In April 2016 the Auditing Committee held the audit of financial and economic activities of the Company for 2015. The opinion report of the Auditing Committee will be submitted for approval of the Annual General Shareholder Meeting of MTS in June 2016.
Internal Control and Audit Unit
The Internal Control and Audit Unit is an independent structural subdivision and consists of the Internal Audit Department, Control Department, administrative control department and methodology and coordination department. Head of the Unit is the Director for Internal Control and Audit who is functionally subordinated to the Chairman of the Audit Committee under the Board of Directors of MTS PJSC, and administratively subordinated directly to the President of MTS PJSC.
The Internal Control and Audit Unit performs the following functions:
- Evaluation of the internal control system’s efficiency based on the following areas: efficiency and effectiveness of business operations, authenticity of financial and management accounting, compliance with internal standards and external requirements;
- Evaluation of the risk management system’s efficiency in the company in general and development of recommendations for improvement of the risk management system;
- Development of recommendations for improvement of internal control, risk management and corporate governance procedures, and assistance to management in development of corrective measures based on the results of performed audits / inspections of financial and economic activities;
- Implementation of monitoring of execution of recommendations for rectification of violations and deficiencies discovered based on audit results;
- Analysis of authenticity of performance indicators and achievement of planned results during audits/inspections of financial and economic activities;
- Coordination, analysis and registration of messages received to the “Unified hot line”;
- Analysis of compliance of company’s operations with requirements of legislation (including anti-corruption) during audits/inspections of financial and economic activities.
The Internal Control and Audit Unit submitted 4 reports at meetings of the Auditing Committee, all reports were approved by the Auditing Committee.
Report on operation of the Internal Control and Audit Unit
In 2015, the Internal Control and Audit Unit carried out the activities in accordance with the functions entrusted to them, including:
- in September 2015 a new revision of the Regulation on the internal control system defining a combination of interrelated components, the structure of which meets the generally accepted methodology COSO IC-IF, was drafted and approved by the Board of Directors;
- in July 2015 the Company’s President approved a new revision of the regulation “Processing of messages of the “Unified hot line” of MTS Group of Companies expanding the number of control objects.
Department of Internal Control Systems
The Department of Internal Control Systems is an independent structural subdivision and consists of the development and support department, certification and testing department, IT-process control department.
The Department of Internal Control Systems performs the following main functions:
- Perform testing, evaluation and certification of the system of internal control over generation of financial statement of MTS Group.
- Coordinate interaction of external auditors and functional subdivisions of the company during the audit of efficiency of the internal control system of MTS Group.
The department of internal control systems is directly subordinate to the vice-president of MTS PJSC for finance and investments and is accountable to the Auditing Committee at the Board of Directors of MTS PJSC.
Report on operation of the Department of Internal Control Systems
In 2015, the internal control system for MTS Group was updated taking into consideration testing and external audit results for 2014, changes of organisational structure and business processes.
Based on the results of internal evaluation and external audit the internal control system of MTS Group as of December 31, 2015 was found efficient having no material and significant deficiencies