Each year the Company hires a professional auditing firm that is not associated with the Company through property interests or its shareholders from among the top international auditing companies to audit and confirm the accuracy of its annual financial statements.
The auditor is selected through a tender based on an assessment of the following criteria:
- The participant’s qualification and experience based on the subject for which it is being selected, including experiencing with auditing oil and gas industry companies.
- Ensuring the protection of the data and requirements of credit agreements (including ratings agencies):
- Ensuring the protection of the client’s information (existence of a Federal Security Service licence)
- Written endorsement from credit agents on the current credit agreements of Gazprom Neft PJSC confirming that the audit company is an internationally recognised auditor;
- The IFRS statement audited by the audit company was fully used in the prospectus for issuing debt instruments when obtaining a rating from international ratings agencies (Moody’s, Fitch, S&P)
- Financial parameters: cost of services, payment terms.
- Independence: the auditor’s independence is not jeopardised unless revenue per one client exceeds 15% of the auditor’s total revenue (according to the requirement of the Russian Ministry of Finance – clause 2.112 ‘Rules for the independence of auditors and audit organisations’ and international requirements – clause 290.219 from the IESBA Code of Ethics).
The Company’s auditor is approved by the General Meeting of Shareholders based on a proposal from the Board of Directors. A preliminary assessment of auditor candidates is conducted by the Audit Committee.
In order to assess the quality of work performed by the external auditor, the Audit Committee reviews reports by the external auditor and statements from management and also conducts in-person meetings with representatives of the auditors. The Audit Committee conducted three meetings throughout 2016 with the Company’s auditor and considered the following issues:
- An assessment of the audit report based on the Gazprom Neft PJSC accounting statement for 2015 prepared by PricewaterhouseCoopers Audit JSC.
- The consideration of the performance results of the external auditor of Gazprom Neft PJSC for 2015.
- The consideration of the IFRS consolidated statement of Gazprom Neft PJSC for 2015.
- The candidacy of the external auditor of Gazprom Neft PJSC for 2016.
- The approaches to the external audit and the plan and procedures for the external audit of Gazprom Neft PJSC for 2016.
- The determination of the remuneration amount for the auditor’s services for 2016.
- The new form of the audit report for 2016. Key audit issues that will be included in the audit report.
- The policy for the external auditor’s provision of non-audit services to Gazprom Neft PJSC.
PricewaterhouseCoopers Audit JSC (PwC) was re-elected as the Company’s auditor at the General Meeting of Shareholders in June 2016.
The Board of Directors set payment for the audit services of the Gazprom Neft PJSC financial (accounting) statements for 2016 at RUB 39,060,000 (excluding VAT), including:
- RUB 6.06 million – audit services for Gazprom Neft statements according to Russian Accounting Standards (RAS);
- RUB 33 million – audit services for the consolidated statements according to International Financial Reporting Standards (IFRS), including services involving the audit of interim statements.
The external audit policy of Gazprom Neft PJSC contains a requirement on the management of conflicts of interest (threats of ‘self-assessment’) regarding an external auditor’s non audit-related services. The risk of ‘self-assessment’ is understood as a situation where the same contractor provides a service (for example, accounting), and then conducts an external audit expressing an opinion on the reliability of the financial statements. Such risks are assessed at Gazprom Neft PJSC and precautionary measures are taken to reduce such risks to an acceptable level. If the risk of self-assessment cannot be reduced, the Company selects another candidate to provide services.
PricewaterhouseCoopers Audit JSC, the company that audits the financial statements of Gazprom Neft PJSC in accordance with international and Russian financial reporting standards, only provides the Company with audit services. PricewaterhouseCoopers Consulting LLC provides the Gazprom Neft Group with consulting services unrelated to accounting and the preparation of the financial statement. In this case, the principles of the auditor’s independence are observed: consulting services are provided by an organisation that is not an auditor of Gazprom Neft PJSC; the employees providing audit services are not involved in providing consulting services; and revenue per one client does not exceed the permissible values.