Internal Control System

MegaFon has put special emphasis on internal control issues. The Board of Directors, the bodies responsible for internal and external audit and the Revision Commission are all important elements of the internal control system.

Revision Commission

As at 31 December 2016, the composition of the Revision Commission was as follows:

По состоянию на 31 декабря 2016 года в состав Ревизионной комиссии входят:

• Pavel Kaplun (Chairman), Managing Director, Head of the Investment and Analytical Department at LLC USM Management;
• Yuri Zheimo, Internal Audit Director at MegaFon;
• Sami Haavisto, Senior Business Controller at TeliaSonera Eurasia.

Internal audit

The internal control function is led by the Internal Audit Director, reporting to the Company’s Board of Directors.

The Internal Audit team assesses the performance of the internal control, risk management, and corporate governance systems. The Internal Audit team also provides assurance to and advises on the Company’s operational processes, including procurement, investment, construction, customer service, processes for external and internal reporting, and IT and information security systems, as well as participates in the development of various internal procedures.

Internal control over financial reporting

The internal control system (ICS) in place at MegaFon is a set of organisational measures, policies, instructions and control procedures designed to ensure the preparation of reliable financial statements in compliance with applicable laws and regulations. The ICS effectiveness is maintained through the following actions:

• updating codes and standards relating to the internal control system and ensuring compliance therewith;
• regular monitoring of the quality of control procedures execution;
• regular surveys of key process owners on the effectiveness of internal controls;
• analysis of business processes and related risks to verify the effectiveness of internal controls embedded in these processes;
• annual testing of key control procedures on a sample basis.

In 2016, MegaFon continued to develop its ICS to incorporate the corporate and organisational changes aimed at improving the existing operational processes, including the establishment of the Shared Services Centre to co-locate accounting and other functions.