BP 2015 Annual Report Download - page 249

determined that BP’s internal control over financial reporting as of
31 December 2015 was effective.
The company’s internal control over financial reporting includes policies
and procedures that pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect transactions and
dispositions of assets; provide reasonable assurances that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with IFRS and that receipts and expenditures are being made
only in accordance with authorizations of management and the directors
of BP; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of BP’s assets
that could have a material effect on our financial statements. BP’s
internal control over financial reporting as of 31 December 2015 has been
audited by Ernst & Young, an independent registered public accounting
firm, as stated in their report appearing on page 101 of BP Annual Report
and Form 20-F 2015.
Changes in internal control over financial reporting
There were no changes in the group’s internal control over financial
reporting that occurred during the period covered by the Form 20-F that
have materially affected or are reasonably likely to materially affect our
internal controls over financial reporting.
Principal accountants’ fees and services
The audit committee has established policies and procedures for the
engagement of the independent registered public accounting firm,
Ernst & Young LLP, to render audit and certain assurance and tax
services. The policies provide for pre-approval by the audit committee of
specifically defined audit, audit-related, tax and other services that are not
prohibited by regulatory or other professional requirements. Ernst &
Young are engaged for these services when its expertise and experience
of BP are important. Most of this work is of an audit nature. Tax services
were awarded either through a full competitive tender process or
following an assessment of the expertise of Ernst & Young relative to
that of other potential service providers. These services are for a fixed
term.
Under the policy, pre-approval is given for specific services within the
following categories: advice on accounting, auditing and financial
reporting matters; internal accounting and risk management control
reviews (excluding any services relating to information systems design
and implementation); non-statutory audit; project assurance and advice
on business and accounting process improvement (excluding any
services relating to information systems design and implementation
relating to BP’s financial statements or accounting records); due diligence
in connection with acquisitions, disposals and joint arrangements*
(excluding valuation or involvement in prospective financial information);
income tax and indirect tax compliance and advisory services; employee
tax services (excluding tax services that could impair independence);
provision of, or access to, Ernst & Young publications, workshops,
seminars and other training materials; provision of reports from data
gathered on non-financial policies and information; and assistance with
understanding non-financial regulatory requirements. BP operates a two-
tier system for audit and non-audit services. For audit related services,
the audit committee has a pre-approved aggregate level, within which
specific work may be approved by management. Non-audit services,
including tax services, are pre-approved for management to authorize per
individual engagement, but above a defined level must be approved by
the chairman of the audit committee or the full committee. The audit
committee has delegated to the chairman of the audit committee
authority to approve permitted services provided that the chairman
reports any decisions to the committee at its next scheduled meeting.
Any proposed service not included in the approved service list must be
approved in advance by the audit committee chairman and reported to
the committee, or approved by the full audit committee in advance of
commencement of the engagement.
The audit committee evaluates the performance of the auditors each
year. The audit fees payable to Ernst & Young are reviewed by the
committee in the context of other global companies for cost
effectiveness. The committee keeps under review the scope and results
of audit work and the independence and objectivity of the auditors.
External regulation and BP policy requires the auditors to rotate their lead
audit partner every five years. (See Financial statements – Note 35 and
Audit committee report on page 68 for details of fees for services
provided by auditors.)
Directors’ report information
This section of BP Annual Report and Form 20-F 2015 forms part of, and
includes certain disclosures which are required by law to be included in,
the Directors’ report.
Indemnity provisions
In accordance with BP’s Articles of Association, on appointment each
director is granted an indemnity from the company in respect of liabilities
incurred as a result of their office, to the extent permitted by law. These
indemnities were in force throughout the financial year and at the date of
this report. In respect of those liabilities for which directors may not be
indemnified, the company maintained a directors’ and officers’ liability
insurance policy throughout 2015. During the year, a review of the terms
and scope of the policy was undertaken. The policy was renewed during
2015 and continued into 2016. Although their defence costs may be met,
neither the company’s indemnity nor insurance provides cover in the
event that the director is proved to have acted fraudulently or
dishonestly. Certain subsidiaries are trustees of the group’s pension
schemes. Each director of these subsidiaries*is granted an indemnity
from the company in respect of liabilities incurred as a result of such a
subsidiary’s activities as a trustee of the pension scheme, to the extent
permitted by law. These indemnities were in force throughout the
financial year and at the date of this report.
Financial risk management objectives and policies
The disclosures in relation to financial risk management objectives and
policies, including the policy for hedging, are included in Our
management of risk on page 51-52, Liquidity and capital resources on
page 219 and Financial statements – Notes 28 and 29.
Exposure to price risk, credit risk, liquidity risk and cash flow risk
The disclosures in relation to exposure to price risk, credit risk, liquidity
risk and cash flow risk are included in Financial statements – Note 28.
Important events since the end of the financial year
Disclosures of the particulars of the important events affecting BP which
have occurred since the end of the financial year are included in the
Strategic report as well as in other places in the Directors’ report.
Likely future developments in the business
An indication of the likely future developments of the business is
included in the Strategic report.
Research and development
An indication of the activities of the company in the field of research and
development is included in Our business model and strategy on
pages 12-17.
Branches
As a global group our interests and activities are held or operated through
subsidiaries, branches, joint arrangements*or associates*established
in – and subject to the laws and regulations of – many different
jurisdictions.
Employees
The disclosures concerning policies in relation to the employment of
disabled persons and employee involvement are included in Corporate
responsibility – Employees on pages 49-50.
Employee share schemes
Certain shares held as a result of participation in some employee share
plans carry voting rights. Voting rights in respect of such shares are
exercisable via a nominee. Dividend waivers are in place in respect of
unallocated shares held in employee share plan trusts.
Change of control provisions
On 5 October 2015, the United States lodged with the district court in
MDL 2179 a proposed Consent Decree between the United States, the
Gulf states, BP Exploration & Production Inc., BP Corporation North
America Inc. and BP p.l.c., to fully and finally resolve any and all natural
resource damages claims of the United States, the Gulf states and their
respective natural resource trustees and all Clean Water Act penalty
claims, and certain other claims of the United States and the Gulf states.
Concurrently, BP entered into a definitive Settlement Agreement with
the five Gulf states (Settlement Agreement) with respect to state claims
for economic, property and other losses. The proposed Consent Decree
Additional disclosures
*Defined on page 256. BP Annual Report and Form 20-F 2015 245