BP 2012 Annual Report Download - page 124

Corporate governance
BP Annual Report and Form 20-F 2012
122
services consisted of tax compliance services, tax advisory services and
services relating to corporate finance transactions. The audit committee is
satisfied that this level of fee is appropriate in respect of the audit services
provided and that an effective audit can be conducted for such a fee.
During the year, the committee considered the outcome of the Financial
Reporting Council consultation on the UK Corporate Governance Code and
Guidance on Audit Committees, with particular focus on provisions for
tendering the external audit. The committee has undertaken preparatory
work to understand the potential for other audit firms to participate in a
tender should this be triggered by criteria which has been agreed with
management, including independence, quality of service, audit quality, value
for money and regulatory changes. The committee will keep this under
review going forward.
The effectiveness of the external auditors is evaluated by the audit
committee each year. The auditor assessment tool is completed on an
annual basis and examines five main performance criteria – robustness of
the audit process, independence and objectivity, quality of delivery, quality of
people and service, and value-added advice. The composition of the audit
team is reviewed annually and the committee has the opportunity to assess
specific technical capabilities in the audit firm when addressing specialist
topics, such as tax and trading.
The committee has recommended to the board that the reappointment of
Ernst & Young as the company’s external auditors be proposed to
shareholders at the 2013 AGM.
Internal audit
The committee receives quarterly reports from the general auditor which
outline the planned schedule of audits as well as tracking key findings and
any material actions that are overdue or have been rescheduled. In reviewing
the audit programme proposed each year, the committee looks at whether it
believes key risks facing the company have been appropriately addressed.
The forward programme of internal audit work was reviewed by the audit
and SEEA committees during the year.
The general auditor met privately with the committee once during the year,
without the presence of executive management or the external auditors. In
addition, the committee chair holds regular meetings with the general
auditor between committee meetings.
The committee reviewed with the general auditor the number and expertise
of his team’s staff resources. The committee was satisfied that internal audit
had resources sufficient to fulfil the function’s role, that it had the appropriate
access it required to information and that management had responded to the
results of audit findings in a timely manner.
Other activities
One of the joint meetings with the SEEAC was held to review the annual
certification report of compliance with the BP code of conduct which is
signed by the group chief executive. During the year the committee monitors
non-compliance with the BP code of conduct through quarterly reports by
the group ethics and compliance officer. At a further joint meeting with the
SEEAC, the committee reviewed the work of the ethics and compliance
function and its programme for 2013.
The company’s employee concerns programme, OpenTalk, has been
adopted by the committee for whistle-blower monitoring, and all financial
issues that have been flagged through the programme are reviewed by the
committee. The committee also receives quarterly updates on fraud and
misconduct.
Committee evaluation
Each year the audit committee examines its performance and effectiveness.
In 2012, the committee used a survey covering similar questions to 2011 in
order to identify trends. Key areas covered included the clarity of its role and
responsibilities, the balance of skills and knowledge among its members and
the quality and timeliness of information received. Specific areas identified
for focus in 2013 included committee training and focus on the length and
format of materials.
Safety, ethics and environment assurance
committee (SEEAC)
Chairman’s introduction
The SEEAC remains committed to monitor closely and provide
constructive challenge to management in its drive for safe and reliable
operations at all times. The SEEAC has spent considerable time over the
past year both in terms of understanding and monitoring key group risks
as described below. Additionally it continued to monitor the group’s
response to the 26 recommendations that were made in BP’s
investigation report (the Bly Report) into the tragic accident in April 2010
and visited upstream and downstream operations in the US and Angola
and downstream sites in the US and UK.
In particular, we would highlight our reviews of key group risks, and
associated risk management in: drilling and maintenance of wells;
contractor management; non-operated joint ventures; fire and explosion
risk at facilities and pipelines and shipping. These in-depth reviews have
taken place during our regular meetings with executive management.
In the Upstream we have looked at risks and environmental issues arising
in connection with, ‘fracking’ operations during a visit to our East Texas
onshore operations. Other visits have been made to offshore Gulf of
Mexico, Houston and Angola. In the Downstream, members of the
committee have visited the company’s paraxylene manufacturing facility
in Texas, the Texas City refinery and the Buncefield terminal in the UK.
Duane Wilson’s independent perspective of the company’s response to
the Baker Panel’s recommendations following the fire and explosion at the
Texas City refinery in 2005 was completed in May when he delivered his
final report to SEEAC. We were pleased to engage him to work, in a
global capacity, with the Downstream business. He continues to deliver
reports to SEEAC when requested.
We were pleased to complete the engagement of Carl Sandlin in June to
report independently to SEEAC on the implementation of the Bly Report
recommendations. Carl Sandlin brings a vast amount of experience from
his management of drilling operations during his career at ExxonMobil. He
will also report to the committee on his observations of process safety
culture in the Upstream.
We also welcomed Professor Dame Ann Dowling who brings deep
experience in technology and engineering to the committee from
February 2012.
Paul Anderson
Committee chair
SEEAC has spent considerable time over the
past year both in terms of understanding and
monitoring key group risks.