Internal Audit and Audit Commission

In accordance with Rosneft’s Charter, the Audit Commission is entrusted with the control over the Company’s financial and economic activities.

The Audit Commission is an integral part of Rosneft’s financial and economic control system, along with the Board’s Audit Committee, the independent auditor, the executive bodies, the Company management, and the Internal Audit. The Commission’s primary function is to control the execution of the Company’s financial and economic plan approved by the Board of Directors.

The Audit Commission’s activities are governed by the following documents:

Rosneft’s Charter

Regulations on the Audit Comission

Rosneft’s Corporate Governance Code

Более подробную информацию о деятельности Ревизионной комиссии и иных органов, входящих в систему внутреннего контроля и аудита можно посмотреть в Годовом отчете ОАО «НК «Роснефть».

Structure of the Board Audit Committee:

• Aleksander D. Nekipelov (Chairman of the Committee)
• Hamad Rashid Al-Mohannadi
• Viktor G. Martynov

Committee’s objectives and functions

Main objective of the Committee is to provide assistance to the Board of Directors in ensuring protection of the shareholders' interests by way of monitoring completeness and accuracy of financial and other reporting of the Company, reliability and efficiency of the internal controls and risk management, compliance, internal audit and corporate governance system.

Key functions of the Committee are as follows:

• control completeness, accuracy and reliability of the accounting (financial statements) reporting of the Company;

• ensure independence and objectivity of the external and internal audit as well as ensure effective interaction of the external auditor with the Company;
• control operating effectiveness and reliability of the internal controls and risk management system;
• monitor Company' corporate governance system, evaluate corporate governance practice and develop recommendations on improving corporate governance system;
• regular interaction with Audit Commission;
• control performance of the Fraud Early Warning System that informs about potential fraud of Rosneft employees (incl. wrongful use of insider information) and third parties and other noncompliance issues of the Company activities;
• ensure regular interaction of the Board of Directors with the executive bodies, structural units of finance and economic function, structural units responsible for the matters of internal audit, internal control and risk management, Audit Commission.

The Committee’s functions and mechanisms of interaction with other corporate bodies are governed by the Regulation of Rosneft Oil Company On Rosneft Board Comittees.

Более подробную информацию о деятельности Ревизионной комиссии и иных органов, входящих в систему внутреннего контроля и аудита можно посмотреть в Годовом отчете ОАО «НК «Роснефть».

The units directly reporting to the Vice President - Head of Internal Audit Service are the Operational Audit Department, the Corporate Audit Department, the Regional Audit Department, Internal Audit Methodology and Organization Division, Economic and Organizational Analysis Division (hereinafter, the Structural units of Internal Audit Service).

The key objectives of the Structural units of Internal Audit Service are:

• assistance to the Company’s executive authorities and the Company's employees  with development and monitoring of fulfillment of the procedures and activities aimed at improvement of the risk management and internal control system, the Company's corporate governance by assessing the reliability and efficiency of the risk management, internal control system and corporate governance, and ensuring:
• truthfulness and integrity of provided information about financial and business activities of the Company, including Group Subsidiaries;
• efficiency and productivity of the activities carried out by the Company, including Group Subsidiaries;
• identification of internal resources to improve the efficiency of financial and business activities of the Company, including Group Subsidiaries;
• safety of the Company’s assets, including Group Subsidiaries;
• coordination of the activities with the External Auditor, with Rosneft Audit Commission, with Audit Commissions of Group Subsidiaries, counterparties providing consulting services in the area of Company risk management, internal control and corporate governance;
• performance of internal audit of Rosneft and of  the Group Subsidiaries;
• independent audit of the efficiency of the Quality Management System (inter alia, in the area of capital construction, including assessment of compliance with ISO requirements);
• verify compliance of the members of executive bodies of Rosneft and Group Subsidiaries and Company’s employees with the provisions of the existing legislation and internal documents of the Company related to insider information and combatting corruption, observance of requirements stipulated by the Rosneft Business and Corporate Ethics Code;
• preparation and provision to the Board of Directors of Rosneft and executive authorities of Rosneft and Group Subsidiaries internal audit reports (including, among other things, information about significant risks, violations / deficiencies, results and effectiveness of implementation of recommendations and proposals formulated by internal audit based on the findings of audits in terms of elimination of identified violations/deficiencies, results of implementation of the internal audit plan, results of assessment of the actual state, reliability and efficiency of RM&ICS and corporate governance);
• improving the quality of conducted audits and timely response to changes, connected with development of Rosneft business.

The key functions of the Structural units of Internal Audit Service are:

• assess reliability and efficiency of the risk management and internal control system, its conformance to scale and complexity of the Company  business;
• assess corporate governance;
• organize and carry audits on the internal audit activity plan approved by Rosneft Chief Executive Officer and consented by the Audit Committee of Rosneft Board of Directors;
• carry out other audits, perform other assignments as requested /instructed by the Board of Directors of Rosneft (Audit Committee of the Board of Directors) and/or of Rosneft Chief Executive Officer within the limits of competence including based on the information received at the Security Hot Line;
• perform comprehensive audits of activities of audit targets in the form of documentary of physical verification of legality of completed financial and business transactions, reliability and correctness of their reflection in accounting (financial) reports, exercise follow-up control of financial and business activities of audit targets;
• analyze the audit items in order to examine specific aspects of the activity and assessment of the condition of the specific sphere of the object of such audit;
• Provide consultations to the Company’s executive authorities on risk management, internal control and corporate governance matters (subject to preservation of independence of internal audit);
• Monitor implementation of recommendations and proposals of the internal auditors aimed at improvement of the Risk Management and Internal Control System, Corporate Governance, remediation violations and deficiencies identified in the course of audits;
• exercise internal audit quality assurance and assessment of the audit results and audit activities;

Internal Audit Service subordination and reporting lines

The Vice President - Head of Internal Audit Service of Rosneft shall be appointed and dismissed by the Chief Executive Officer of Rosneft on the basis of a decision by the Board of Directors of Rosneft. The Vice President - Head of the Internal Audit Service of Rosneft shall be administratively reports directly to the Chief Executive Officer of Rosneft and functionally to the Board of Directors of Rosneft.

Interaction of Internal Audit Service with the executive bodies and the Board of Directors of Rosneft

The goal of Internal Audit (Vice President - Head of the Internal Audit Service of Rosneft, structural units of Internal Audit Service of Rosneft) is assistance to the Board of Directors of Rosneft and executive authorities of Rosneft and Group Subsidiaries in improving effectiveness of management system in the Company, improving its financial and business activities through application of a systematical and consistent approach to analysis and evaluation of the Risk Management and Internal Control System and corporate governance as tools for ensuring reasonable assurances of attainment of the goals set before the Company.

Jointly with the structural unit leaders decisions are prepared to eliminate identified violations and deficiencies, and risk prevention actions are developed.

The Board of Directors reviews the Internal Audit Service reports. The existing scheme of the Vice President – Head of Internal Audit Service subordination to the Board of Directors and executive bodies of the Company ensures sufficient independence for fulfilling the internal audit functions and conforms to international standards and best practices in the field of internal audit.

The key documents regulating the Internal Audit activities are:

• Company policy on internal audit;
• Company policy risk management and internal control system;
• Regulation of Rosneft Oil Company On Rosneft Board Committees  as related to the interaction of Board Audit Committee of Rosneft with the Internal Audit Service.

Following the external assessment carried in 2021 a conclusion was made that as of September 2021, the organisation and functioning of Rosneft Internal Audit was generally compliant with the International Standards for the Professional Practice of Internal Auditing and the Code of Ethics of the Institute of Internal Auditors, which is the highest possible assessment score.

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Ernst&Young LLC  is selected  as the Auditor of Rosneft Oil Company (a legal entity) for  2019-2021.

Ernst&Young LLC was selected as an Auditor for Rosneft for 2019-2021 based on the outcome of the tender procedure performed at the end of  2018  for «Provision of services of statutory audit of RAS accounting (financial) statements and IFRS consolidated financial statements for Rosneft and its Subsidiaries material for the purposes of consolidation in 2019-2021", arranged in accordance with the current legislation of Russia and internal normative documents of the Company.

In accordance with Subclause 10, Clause 1, Article 48 of the Federal Law On Joint Stock Companies and Subclause 9.2.2 (3), Clause 9.2, Article 9 of Rosneft Charter, approval of the Company's Auditor is within the authority of the Annual General Shareholders Meeting.  The Annual General Shareholders Meeting approved Ernst&Young LLC as the Auditor of Rosneft Oil Company on June 1, 2021.

Ernst&Young LLC, the participants are Russian residents, was incorporated under the laws of the Russian Federation. Ernst&Young LLC is an independent member of the global EY network providing the audit and consulting services, consultations on taxation and business practices.  Ernst&Young LLC is the member of the “Big Four” largest audit companies.

Rosneft and Ernst&Young LLC have been successfully cooperating since 2004. The Auditor of Rosneft Oil Company (legal entity) currently provides the following services:

• statutory audit of accounting (financial) statements of Rosneft (legal entity) prepared under the Russian Accounting Standards (RAS);
• statutory audit of consolidated financial statements of Rosneft (Group reporting) prepared under the International Financial Reporting Standards (IFRS);
• quarterly overview audits of Rosneft IFRS interim consolidated financial statements;
• providing audit-related services.

Ernst&Young LLC is also the auditor of a number of Rosneft major domestic and international subsidiaries.

Information on Rosneft's external auditor's remuneration for 2020

The amount of remuneration for the services rendered by the Auditor in 2020 amounted to 105,777,630 rubles, all amounts include VAT, (which is below the amount of such expenses for 2019), including:

• for the audit of accounting (financial) statements of Rosneft (legal entity) for 2020 prepared under the Russian Accounting Standards (RAS) – 7,200,000 rubles;
• for the audit of consolidated financial statements of Rosneft for 2020prepared under the International Financial Reporting Standards (IFRS) including quarterly overview audits of IFRS interim consolidated financial statements  79,412,550 rubles;
• for other services rendered by the Auditor during the reporting year  – 19,165,080 rubles (18.1% оf the total amount of the auditor's remuneration).

Более подробную информацию о деятельности Ревизионной комиссии и иных органов, входящих в систему внутреннего контроля и аудита можно посмотреть в Годовом отчете ОАО «НК «Роснефть».