The Board Audit Committee’s roles and responsibilities are embodied in the Board Audit Committee Charter approved by the Board of Directors. It provides
assistance to the Board of Directors in fulfilling the Board’s oversight responsibility to the shareholders relating to: (a) the quality and integrity of the Company’s
accounting, auditing, legal, ethical and regulatory compliance; (b) risk management; (c) financial reporting practices; and (d) corporate governance. Any
proposed changes to the Audit Committee Charter are referred to the Board for approval.
As of December 31, 2010, the Audit Committee is composed of five members - three independent directors and two As of December 31, 2012, the Board Audit
Committee is composed of five (5) members, three (3) of whom are independent directors.
I, Jose R. Facundo, Independent Director and Chair of the Committee is ably assisted by Romeo L. Bernardo (Independent Director), Jakob G. Disch (Independent
Director), Mikel A. Aboitiz (Executive Director) and Jaime Jose Y. Aboitiz (Executive Director).
In compliance with the Board Audit Committee Charter, four (4) regular meetings were held during the year: February 29, May 3, August 2, and October 30, 2012.
Two (2) joint meetings with the Board Risk & Reputation Committee were also held on August 1 and Dec 6, 2012; and one (1) special meeting was called on March
1, 2012. Also present in these meetings is the Group Internal Audit Head, the Chief Reputation and Risk Management Officer, and by invitation, the Aboitiz Power
Corporation’s Chief Financial Officer and Assistant Vice President-Controller.
On a high level basis, we reviewed, discussed, and endorsed for the approval of the Board the quarterly unaudited consolidated financial statements and the
annual audit financial statements of Aboitiz Power Corporation and Subsidiaries, including the Management’s Discussion and Analysis of Financial Condition
and Results of Operations following prior review and discussion with management, the internal auditors and SyCip Gorres Velayo & Co. (SGV), the company’s
The activities of the Audit Committee were performed in the following context:
• That management has the primary responsibility for the financial statements and the financial reporting process; and
• That SGV is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with Philippine Financial
The overall scope and audit plan of SGV were reviewed and approved. The terms of engagement which covers audit-related services provided by SGV and its
related fees were also reviewed. There was no non-audit related service provided for the year 2012.
We also discussed with SGV the results of the SGV’s audits and its assessment of the overall quality of the financial reporting process. SGV also presented the
effects of changes in relevant accounting standards and presentation of financial statements that impact on the reported results.
We also noted and approved the delegation of the appointment of the Company’s external auditors for 2012 by the shareholders to the Board of Directors.
TA reorganization of the Internal Audit department took effect in August 2012. Majority of the auditors were deployed to the different business units where
resident internal audit teams were formed to handle finance and operations audits. For AboitizPower, a resident audit team was set up each for the Power
Generation Group and the Power Distribution Group.
The corporate team, now referred to as Group Internal Audit (GIA), continues to take the lead in setting the standards, initiatives and overall direction. A new
Information Systems audit team was formed within GIA to handle the review of the basic stack of potential technical subject areas such as networks, data center
facilities, system platforms, databases, applications and general controls. GIA remains as the single point of contact of the Board Audit Committee.
The decision to restructure the internal audit organization underwent careful and deliberate consideration after fully understanding the factors with the end
goal of promoting and improving the state of internal controls and adding value to the Company by recommending cost-effective solutions for addressing
issues via specific areas of expertise. The creation of resident audit teams would not only increase the scope and coverage of audits undertaken but would also
facilitate specialization and in-depth understanding of the business and and increase the visibility of internal audit in the different business units.
We reviewed and approved the annual audit program for the year which also covers the adequacy of resources, qualifications and competency of the staff and
independence of the internal auditor.
In our review of the performance of internal audit for 2012, we confirm that the internal auditors conducted their responsibilities objectively and in an unbiased
manner. GIA’s position in the organization was further strengthened by moving the administrative reporting line from the Chief Risk Management Officer to the
President and Chief Executive Officer effective July 2012. GIA continues to functionally report to the Board Audit Committee.
Also, based on audit reports and highlights presented to the Committee, we concur with GIA’s assessment that the system of internal controls in effect during
the year 2012, taken as a whole, provides reasonable assurance about the effectiveness of the Company’s internal control systems. The policies and procedures in
place serve as reasonable and effective safeguards of company resources and the integrity of its programs. Action plans to address control gaps and weaknesses
raised have been agreed, timelines set and regular status monitoring strengthened to ensure achievement of more efficient and effective processes as well as
general reduction of operational risks. With the synergy of all its control activities, the Company’s overall system of internal controls is adequate and is operating
Finally, we reviewed and endorsed for approval the revised Audit Committee Charter which was duly approved by the full Board in its meeting held September
27, 2012. Together with the revised Charter is the approval of the Board Audit Committee Self-Assessment Form. Based on the Self-Assessment conducted,
the Committee achieved a “Substantive” compliance rating of 98% for the year 2012. This rating indicates that the Committee substantially complies with the
requirements set forth in its charter. The Committee demonstrates evidence that its members are meeting most of the requirements set by global standards
The revised Audit Committee charter includes a new section on the joint duties and responsibilities of audit with the Board Risk and Reputation Committee.
Included in this new provision is our role to refer to the Risk and Reputation committee significant reports and findings by internal audit as well as regulatory
and government agencies with respect to risk management activities and compliance issues, together with management’s responses. Discussions on items
that have significant financial statement impact or required significant financial statement or regulatory disclosures; and other significant issues, including,
but not limited to, significant compliance issues, shall be covered during the joint meeting of the Board Audit Committee with the Board Risk and Reputation
We have approved the inclusion in the audit master plan for next year governance audits which includes the risk management process audit and validation of
the risk treatment plans committed by the different business units. These audits will give us a better picture of the adequacy and effectiveness of the risk
management processes within the organization.
In behalf of the Committee,