Internal Controls and Audit
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities over the company’s system of internal control. It is responsible for monitoring, overseeing, and evaluating the duties and responsibilities of management, the internal audit activity, and the external auditors as those duties and responsibilities relate to the organization’s processes for controlling its operations.
The internal control framework of the company is embodied in the Management Control Policy. This policy defines the roles and responsibilities of the Management, the Internal Audit, and the Audit Committee relating to controls over the organization’s processes. It also describes the responsibility for a system of checks and balances and emphasizes the importance of internal control processes.
Management is charged with the responsibility for establishing a network of processes with the objective of controlling the operations of the company in a manner which provides the Board of Directors reasonable assurance that:
- Data and information published either internally or externally is accurate, reliable, and timely;
- The actions of directors, officers, and employees are in compliance with the organization’s policies, standards, plans and procedures, and all relevant laws and regulations;
- The organization’s resources are adequately protected against loss, fraud, misuse, and damage;
- Resources are acquired economically and employed profitably; quality business processes and continuous improvement are emphasized; and
- The organization’s plans, programs, goals, and objectives are achieved.
Internal control is an integral part of MERALCO’s governance system and risk management. It is the responsibility of managers at all levels of the organization to:
- Identify and evaluate the exposures to loss which relate to their particular sphere of operations
- Specify and establish policies, plans, operating standards, procedures, systems, and other disciplines to be used to minimize, mitigate, and/or limit the risks associated with the exposures identified.
- Establish practical controlling processes that require and encourage officers and employees to carry out their duties and responsibilities in a manner that achieves the control objectives of the Organization
- Maintain the effectiveness of the controlling processes that have been established and foster continuous improvement to these processes.
The purpose of Internal Audit is to provide risk-based and objective assurance, advice, and insight designed to add value and improve the organization’s operations. It helps the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Internal Audit services are performed in accordance with the International Standards for the Professional Practice of Internal Auditing.
The Internal Audit group is led by the Chief Audit Executive and includes twenty-one highly qualified professionals with certifications, which include Certified Internal Auditors, Certified Information Systems Auditor, Certified Public Accountants and Registered Electrical Engineers.
The Chief Audit Executive reports functionally to the Audit Committee and administratively to the President & CEO. Internal Audit has the right to fully and freely communicate and interact with the Audit Committee, in a manner outlined in the Internal Audit Charter.
Annually, a risk-based audit plan is prepared by Internal Audit audits covering various operational units of the Meralco and its subsidiaries including specific areas of concern identified by Management. The audit plan is reviewed and approved by the Audit Committee.
|Revised Internal Audit Charter||218 KB||Download PDF|
SyCip Gorres Velayo & Co. (SGV & Co.) was reappointed as the independent external auditor of the Meralco through the recommendation of the Audit Committee and the approval of the Board. The official appointment of SGV was confirmed by the stockholders in the Annual Stockholders’ Meeting held on May 30, 2017.
The Audit Committee reviews and confirms the independence of the external auditor by obtaining statements from the auditors on relationships between the auditors and the Company, and evaluate any relationships or services disclosed that may affect the objectivity, independence, or quality of services of the external auditors. Any non-audit service to be performed by the external auditor, if allowed or approved, are disclosed in the Company’s Annual Report and Annual Corporate Governance Report.
During the year, SGV provided the following non-audit services to MERALCO subsidiaries, namely CIS Bayad Center and Meralco PowerGen.
Mr. Martin C. Guantes, who has extensive accounting and auditing experience is the SGV lead engagement partner for the external audit of MERALCO for 2017. Mr. Guantes is serving his 5th year as SGV lead engagement partner for the audit of MERALCO. The lead engagement partner for the audit will be rotated next year following SEC regulation on the qualification of external auditors.
There has been no disagreement with the external auditors on any matter of accounting principles, practices or auditing scope or procedure, nor on financial statement disclosure.