Metalloinvest
Annual Report 2019

Internal control system

The Company’s internal control system (ICS) deals with risk identification and assessment, and its work includes elaborating recommendations to reduce the negative impacts of risk on the Company’s business, and introducing and enhancing internal control procedures.

In 2019, an internal assessment of the quality of internal audit was carried out in accordance with the Program for ensuring and improving the quality of internal audit. Based on the results of the assessment, a plan for developing the internal audit function in 2020 was established.

INTERNAL CONTROL SYSTEM

The main work of the ICS takes place within the ERP system. This includes supporting a shared process model; documenting key business process risks; and the introduction, regulation, and monitoring of control procedures. Through the ICS the Company seeks to optimise and automate control procedures in order to boost the effectiveness and transparency of business processes, reduce the influence of the “human factor”, lower the risk of fraud, and increase smart working practices. The Company, within the system’s framework, centrally manages risks related to conflict of competences among managers and employees, both inside and outside ERP systems.

INTERNAL AUDIT SYSTEM

Internal audits help the Company attain its goals through embracing a systematic and consistent approach to assessing and enhancing the effectiveness of risk management and control and corporate governance processes.

The independence and objectivity of internal audits are ensured through subordination to the Audit Committee of the Board of Directors, which is headed by an independent director.

The internal audit departments of controlled companies, located on the sites of Company business units, are submitted to an internal audit director.

Internal audit departments are regulated by International Internal Audit Standards and comply with the Code of Ethics of Internal Auditors.

The goals, powers, and responsibilities of internal audit departments are established by the Internal Audit Regulation, which has been approved by the Board of Directors.

The Audit Committee reviews reports on the activities of the internal audit department twice a year, submits recommendations to the Board of Directors on the approval of internal audit plans and the structure, size, and budget necessary for their implementation, and regularly discusses current issues with the Director of Internal Audit.

Recommendations for improving specified processes are developed based on the results of the assessment and implementation of the recommendation is closely monitored. A risk-focused approach is used to identify priority areas of audit.

  • Audits were conducted in the following areas in 2019:
  • the management of operating efficiency
  • the management of investment activity
  • supply management
  • cost accounting/reporting

Based on the results of inspections, recommendations are developed to improve information on improving the efficiency of these processes and monitoring the implementation of recommendations.

Internal audit system structure

EXTERNAL AUDITOR

Metalloinvest’s financial statements are prepared in accordance with Russian and international accounting standards (RAS and IFRS). The Company engages an external auditor to conduct an independent audit of its financial and accounting statements.

The auditor is selected in accordance with the Auditor Selection Regulations of Holding Company Metalloinvest, which has been approved by the General Meeting. The main selection criteria are quality and the service fee.

In 2019 financial statements prepared in accordance with IFRS and accounting statements prepared in accordance with RAS were audited by PricewaterhouseCoopers (PwC). PwC has an extensive network of branches covering all major emerging and existing markets, and representative offices in 155 countries with over 276 thousand people working in the company all over the world.