Internal Control and Audit

Internal control and audit is part of PhosAgro’s corporate governance process. It is incorporated into our ongoing activities and is aimed at improving the risk management, control and corporate governance, so as to achieve the following:

Efficient operations

  • Implementation of strategy and business plan
  • Protection of the Company’s assets, cost-effective and efficient use of its resources
  • Timely identification and analysis of risks
  • Planning and risk management, including facilitating timely and appropriate decisions to mitigate any risks the Company faces
  • Establishing and maintaining PhosAgro’s good reputation in the business community and among customers and investors

Effective reporting

  • Reliability, accuracy and completeness of financial and operational information for accounting records, financial statements and management data
  • Up-to-date data for management reporting and decision-making
  • Timely external reporting on results

Legal compliance

  • Monitoring for compliance with current legislation and internal policies, standards and procedures

One of the key components of our internal control system is the corporate IT platform based on the Oracle E-Business Suite software. This system enables PhosAgro quickly to generate management accounting, and to prepare efficiently information for internal and external auditors as needed.

Planning and budgeting
Inventory Account Payable Accounts Receivables Cash Flow
Maintenance Manufacturing Fixed Assets Projects
Cost Management General Ledger
Report System Business Intelligence
Manufacturing Executive System HRMS

We began the introduction of this system in 2007, and have consistently expanded its integration into our operations since then. In 2012 one of the key achievements was implementation of a business intelligence project for top managers, which enables users to view key production and financial data from all of the enterprises where the system has been implemented, updated on a daily basis.

Progress installing Oracle e-Business Suite
By the end of 2012 all of our production
subsidiaries had integrated the Oracle
E-Business Suite into their operations.
Development plan:
  • Include additional companies into ERP instance
  • Improve solutions for mobile services
  • Automate KPIs calculation
  • Upgrade software version to R12
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
3rd rollout
Metachem
Business intelligence
project for top
managers
2nd rollout project
Agro-Cherepovets
BMF
Business intelligence
project. Dashboards
for plants managers
1st rollout project
Ammophos
Cherepovetskiy Azot
Implementation project
Apatit

Primary internal control responsibilities are implemented by:

Internal control body Review Committee Audit Committee of the Board of Directors Board of Directors Chief Executive Officer Internal Audit Department External Auditor
Appointed by General Shareholders’ Meeting Board of Directors General Shareholders’ Meeting Board of Directors Board of Directors General Shareholders’ Meeting
Reports to General Shareholders’ Meeting Board of Directors Shareholders Board of Directors Functional: Audit Committee Administrative: CEO Audit Committee
Functions
  • Prepares a report on the results of operations of the Company for the prior year ahead of the Annual General Shareholders’ Meeting, and gives its opinion on whether the Company’s financial statements are true and accurate.
  • Internal audit procedures
  • Ensure compliance with Russian Accounting Standards (RAS)
  • Monitor compliance with current legislation, company charter and internal regulations
  • Improves efficiency and quality of work of the Board of Directors in the area of internal control
  • Considers issues and provides recommendations to the Board of Directors in areas like:
    • external audit, internal audit;
    • the accuracy and efficiency of internal control procedures;
    • management accounting and financial reporting;
    • risk management procedures and systems
    • how risks are reflected in the Company’s reporting.
  • Supervises the Internal Audit Department.
  • Determines how the internal control system operates and approves various actions and policies relating to it
  • Reports annually to the General Shareholders Meeting on the reliability and efficiency of PhosAgro’s internal control system
  • Responsible for the functioning of PhosAgro’s internal control system.
  • Implements internal control procedures, and ensures that they are put into practice.
  • Promptly informs the Board of Directors of any significant risks faced by the Company or any major weaknesses in the Company’s internal control system.
  • Tells the Board what measures have been or will be taken to address issues and the results of these actions.
  • Independent and objective assessment of the Company’s internal control and risk management systems.
  • Oversight of compliance of PhosAgro’s financial and economic operations with Russian legislation and the Company’s Charter.
  • Ensuring the completeness and reliability of the Company’s accounting and financial reports.
  • Evaluation of the efficiency and effectiveness of business processes, including use of resources.
  • Participates in creation and development of unified elements of the control system within PhosAgro.
  • Develops recommendations on strategic changes within the Company related improving the internal control system, risk management and corporate governance.
  • Develops and promotes corporate internal control policies.
  • Verification of the compliance, in terms of accuracy and completeness, of the Company’s annual financial statements with IFRS.
  • Inspection of the financial and commercial operations of the Company and the internal control systems.
  • Preparation of a report, which is submitted to the Audit Committee at least once a year
  • In case of a disagreement between the management of the Company and the independent auditor, the Audit Committee oversees the resolution of the disagreement.
  • ZAO KPMG is currently PhosAgro’s external auditor.
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