Audit and Related Party Transaction (RPT) Committee

It is the policy of Globe to constitute and maintain an Audit and RPT Committee that shall provide assistance to the Board of Directors in fulfilling their oversight responsibility to the shareholders relating to:

  • The integrity of the financial statements and the financial reporting process and principles

  • Internal controls

  • The qualifications, independence, remuneration, and performance of the independent auditors

  • The staffing, focus, scope, performance, and effectiveness of the internal audit function

  • Risk management

  • Compliance with legal, regulatory, and corporate governance requirements

The Audit and RPT Committee Charter approved by the Board defines clearly the roles and responsibilities of the Audit and RPT Committee. The management, however, has primary responsibility for financial statements and reporting process, internal controls, legal and regulatory compliance, and risk management.

The Audit and RPT Committee is composed of four non-executive directors appointed by the Board, three of whom are independent directors including the chair of the Committee.

This committee meets at least four times during the year and invites the President and Chief Executive Officer (CEO), Chief Financial Officer (CFO) and concurrently the Treasurer and Chief Risk Officer (CRO), independent auditors, internal auditors, and other members of the management, as needed based on the meeting agenda.

During these meetings, the committee:

  • Reviews the financial statements and all related disclosures and reports prepared and presented by the CFO and released to the public and/or submitted to the Securities and Exchange Commission (SEC) for compliance with both the internal financial management handbook and pertinent accounting standards, including regulatory requirements. The committee, after its review of the quarterly unaudited and annual audited consolidated financial statements of Globe Telecom, Inc. and Subsidiaries, including key audit matters, endorses these to the Board for approval. The Board of Directors, in turn, reviews, approves, and affirms the true and fair representation of the annual audited consolidated financial statements and presents the same in the Annual Stockholders’ Meeting (ASM).

  • Approves the work plan of Globe Internal Audit (IA), as well as the overall scope and work plan of the independent auditors. The committee meets with the internal auditors and independent auditors to discuss the results of their audits, ensuring that management is taking appropriate corrective actions on internal control issues and areas for improvement in a timely manner.

  • Ensures tenders for independent audit services are conducted on a regular basis. The committee recommends the appointment, retention, or discharge of the independent auditors, and reviews and recommends audit fees or the remuneration of the independent auditors to the full Board. The Board, in turn, submits the appointment of the independent auditors and audit fees for approval of the stockholders at the ASM. The amount of audit fees is disclosed in the Annual Report.

  • Annually reviews the independent auditors’ performance and assesses the independent auditor’s qualifications, skills, resources, effectiveness, and independence. To limit the possible risk of conflict of interest, the committee also reviews and approves in advance, the proportion of audit services vs. non-audit services performed by the independent auditors; and the corresponding audit fees vs. non-audit fees paid to the independent auditors, in relation to the SEC regulation on “permitted” vs. “not permitted” services to be rendered by independent auditors and the significance of the fees to the total service revenues of the independent audit firm and the company’s total consultancy expenses, respectively.

  • Reviews the IA’s activities, staffing, organizational structure, and changes in their work plan, and assesses the effectiveness of the internal audit function.

  • Reviews the results of the management’s annual risk assessments based on reports provided by CRO covering information on risk exposures and risk management activities, and as supported by results of internal audit reviews.

  • Reviews and discusses with the management, the internal auditors, and the independent auditors; and reports to the Board of Directors, on an annual basis, the adequacy and effectiveness of the company’s internal controls system and risk management systems, in all material respects. 

The collective responsibility over our risk management oversight rests with the Board. To delineate the scope of such responsibility, the various Board committees are designated with oversight function on specific risks. The Executive Committee has oversight on corporate strategic risks, technology, and operational risk management, putting in place the infrastructure for risk management systems that assess risks on an integrated cross-functional approach; reviews and assesses the adequacy of our strategic, technology, and operational risk management processes, jointly with Management. The Finance Committee oversees our financial risk management, including risks related to capital structure, acquisitions and divestments, treasury activities, tax strategy and compliance. The Audit and RPT Committee provides oversight of the financial reporting and operational risks specifically on financial statement and reporting, internal controls, legal or regulatory compliance, corporate governance, risk management and fraud risks. The CRO provides the Audit and RPT Committee with periodic reports on risk exposures and risk management activities by management, while the IA provides assurance on the effectiveness of the risk management system and processes. Each Board Committee has their own Charter.

The Board designated the Audit and RPT Committee as the overall risks aggregator for all of the Board Committees enabling an integrated approach to an enterprise-wide risk management oversight at Board level and a coordinated view of risks across the enterprise. The Audit Committee reports regularly to the Board on our risk management efforts providing a more collaborative and effective review of risks across the company and assurance over our overall risk management, which aids the Board in making strategic decisions for the company.

With guidance provided by the Board, the management remains primarily responsible for the development of the design and implementation of risk management plans and frameworks, policies and systems intended to address the identified risks.

The Audit and RPT Committee reports after each meeting and provides a copy of the minutes of its meetings to the Board.

To ensure compliance with regulatory requirements and assess the appropriateness of the existing Charter for enabling good Corporate Governance (CG), the Committee also reviews and assesses the adequacy of its Charter annually, seeking Board approval for any amendments. The most recent Charter review was done early in 2017 in compliance with the new SEC Code of Corporate Governance.

In compliance with our Manual of Corporate Governance, SEC Memo Circular No. 4 (Series of 2012), and aligned with the ASEAN Corporate Governance Scorecard (ACGS) and the new SEC Code of Corporate Governance, the committee conducts an annual assessment of its performance to benchmark its practices against the expectations set out in the approved Charter. The results of the self-assessment and any ensuing action plans to ensure that the Committee will continue to meet Board’s, management’s, and shareholders’ expectations are reported to the Board.

On annual basis, our President and CEO, CFO, and Chief Audit Executive (CAE) provide a written certification to the Audit and RPT Committee confirming the reliability of financial statements for the year; full compliance with financial and CG regulatory requirements and reporting; and attesting that the company has sound internal controls and compliance system in place.

Internal Audit

An IA function is established as a fundamental part of Globe's CG practices. An Internal Audit Charter, approved by the Audit and RPT Committee, establishes the purpose, authority, responsibility, organizational structure, and reporting relationships of the internal audit function.

Internal Audit is a service, providing independent and objective assurance and consulting function within Globe that shares our common goal of creating and enhancing shareholder value through a systematic, disciplined, and risk-based approach in evaluating and improving the effectiveness of risk management, control, and governance processes. The IA provides reasonable assurance to the Board, management, and the stockholders on the integrity of the financial statements and financial reporting processes and principles against material misstatements; effectiveness and appropriateness of internal controls on the safeguarding of assets, operations, and information systems; and compliance with laws, rules and regulations.

Internal Audit also assists and supports management in continuously instilling and nurturing Control Self-Assessment (CSA) environment at Globe through the facilitation of self-assessment activities among various business groups. The Audit and RPT Committee regards its relationship with IA as having a vital role in supporting the effective discharge of its oversight role and responsibilities.

Internal Audit performs its auditing functions faithfully by maintaining independence from the management and controlling shareholders as it reports functionally to the Board, through the Audit and RPT Committee, and administratively, to the President and CEO. The committee, having appointed the CAE, also concurs in his/her replacement, reassignment, or dismissal.

The CAE works closely with the Audit and RPT Committee in maintaining an effective internal audit function by managing the entire operations, and strongly supports the attainment of corporate objectives through coverage of most critical processes in the conduct of risk-based assurance reviews. The CAE ensures risks/issues are timely called-out, escalated, and monitored while management remains primarily responsible for resolving the risks/issues. The CAE continuously improves the internal audit operating process and standards and ensures strict compliance with International Standards for the Professional Practice of Internal Auditing (the Standards) and global best practices. Additional responsibilities include, among others, strengthening leadership and talent bench, uplifting performance management and managing internal costs.

Globe IA maintains, reviews, and assesses the adequacy of its Charter annually to ensure conformance with the Standards and appropriateness for enabling good CG. The result of the periodic assessment and any arising revisions are communicated and approved by the Audit and RPT Committee, with concurrence by the Board. The latest charter review was performed on August 6, 2018.

Globe IA governs its internal audit activities in conformance with the IA’s Code of Ethics, and Globe Telecom's Code of Conduct. The CAE is responsible for overall conformance with the Standards. To assess whether the purpose, authority, and responsibility of internal audit, as defined in the IA Charter continue to be adequate and effective in enabling the internal audit function, the CAE develops, maintains, and communicates an appropriate and effective quality assurance and improvement program (QAIP) that covers all aspects of internal audit reviews and activities. The Audit and RPT Committee also receives periodic reports on the status of internal audit activities, the achievement of key performance indicators, and QAIP. Globe IA periodically undergoes an independent external Quality Assurance Review (QAR) to ensure consistent conformance with the Standards. Globe IA achieved the highest “Generally Conforms” rating from its external QAR in 2018, a demonstration that Globe IA truly lives its purpose of helping the organization accomplish its objectives through its leading practices in the conduct of various audits and consulting services.

Globe IA adopts a risk-based audit approach in developing its annual work plan ensuring that all risks, mapped to an eTOM (enhanced telecommunications operations map) based processes, with integrated risk assessments for processes across the enterprise, are captured in the audit universe. The IA's annual work plan is reassessed quarterly to consider emerging risks and the changing dynamics of the telecommunications business, thereby allowing maximum and timely coverage of key/ critical risk areas. The Audit and RPT Committee reviews and approves the annual work plan and all deviations; and also ensures that audit resources are adequately allocated to and focused on the areas of highest risk.

To  instill excellence, Globe IA provides for continuing professional and personal development for all internal auditors to equip them in the conduct of reviews, with focus on acquiring expertise on our business processes, network and IT systems, internal controls, new accounting and auditing standards, and regulatory updates. The audit team is composed of professionally certified accountants, internal auditors, IT and information security auditors, control self-assessors, and licensed engineers, among others. In addition, Globe IA has been actively participating in the Ayala Group and Singtel Internal Audit Networks to benchmark and share knowledge on leading global best practices including information on methodology, process improvement and audit tools to develop a network of world-class, multi-skilled, internal audit professionals.

To keep up with the dynamic risk environment and rapidly changing regulatory and industry requirements, Globe IA has also adopted technology driven audit processes such as Continuous Auditing (CA), Robotics Process Automation (RPA), agile auditing, among others, to improve overall audit efficiency and enhance organizational value.

External Audit

The Audit and Related Party Transactions (RPT) Committee ensures that Globe has set appropriate policies and processes that strengthen the external auditor’s independence and improve its audit quality. The external auditors are directly responsible to the Audit and RPT Commnc. and Subsidiaries (Globe Group) for the calendar year 2018. NA/DP has been the external auditor of Globe Group since 2015. In accordance with regulations issued by the SEC and the Audit and RPT Committee Charter, the audit partner principally handling the company’s account shall be rotated every five (5) years or sooner. The most recent rotation occurred in 2017.

There were no disagreements with NA/DP on any matter of accounting principles or practices, financial statement disclosures, auditing scope and procedures.

Fees approved in connection with the audit and audit-related services rendered by NA/DP pursuant to the regulatory and statutory requirements for the years ended 31 December 2018 and 2017 amounts to ₱55.38 million and ₱20.62 million respectively, inclusive of 7.5% out-of-pocket expenses (OPE).

In addition to performing the audit of Globe Group’s financial statements, NA/DP was also contracted to provide non-audit services in accordance with established procurement policies in 2018.ittee in helping ensure the integrity of the company’s financial statements and reporting process.

The last tender bid process for the external auditor’s annual statutory audit was conducted in Q4/2014. The Audit and RPT Charter requires bid tenders every five (5) years or as the need arises as decided by the Audit and RPT Committee. Annually, the company conducts an external auditors’ performance appraisal.

From the results, the Audit and RPT Committee evaluates and proposes to the Board for endorsement and approval of the stockholders, the appointment of the external auditors. The endorsement is presented to the stockholders for approval at the ASM. Representatives of the external auditors are expected to be present at the ASM to have the opportunity to make a statement Globe Telecom’s financial statements and results of operations and be available to respond to appropriate questions during the meeting.

In line with Globe Telecom’s Manual of Corporate Governance, the Audit and RPT Committee has an existing policy to review and pre-approve the audit and non-audit services rendered by Globe Group’s external auditors.

It does not allow the Globe Group to engage the external auditors for non- audit services expressly prohibited by SEC regulations to be performed by external auditors for its audit clients. This is to ensure that the external auditors maintain the highest level of independence from the Globe Group, both in fact and appearance.

In the ASM last April 17, 2018, the shareholders appointed the accounting firm of Navarro Amper & Co./Deloitte Philippines (NA/DP), an affiliate of Deloitte Southeast Asia Ltd. (a member firm of Deloitte Touche Tohmatsu Limited) as the external auditor of Globe Telecom, I

Below are the aggregate fees billed by NA/DP in millions of Pesos:

Audit and Audit-Related Fees*₱55.38₱20.62
Non-Audit Fees₱6.89-

*Excludes 2018 audit fees rendered by external auditors other than NA/DP: GTI HK, ₱640K (₱637K in 2017) performed by Deloitte HK; GT EU, ₱249K (₱263K in 2017) performed by Wellden and Turnbull LLP; GT SG ₱307K (₱247K in 2017) performed by Ardent, and; Taodharma, Inc., ₱288K (₱431K in 2017) performed by Punongbayan and Araullo.

  • Audit Fees

    These represent audit of Globe Group’s annual financial statements and review of quarterly financial statements in connection with statutory and regulatory filings or engagements for the years ended 2018 and 2017.

  • Audit-Related Fees

    In 2018, these represent quality assurance review on data clean- up activity performed by a third party for Globe. 2017 audit-related fees pertain to services related to financial and tax due diligence procedures for a planned company acquisition.

  • Tax Fees

    Globe has not engaged NA/DP for any tax-related services for the years ended 2018 and 2017. There were no tax fees incurred for the said years.

  • Non-Audit Fees

    In 2018, these pertain to services rendered in relation to Philippine Financial Reporting Standards (PFRS) 16: Leases which includes trainings, impact assessment, advisory services (e.g., guidance and recommendations with regard to its implementation) and agreed-upon procedures on data gathering from existing lease contracts as part of the pre-implementation activities. NA/DP was not engaged to perform non-audit services for 2017.

    NA/DP has confirmed to the Committee that the 2018 non-audit services rendered by them are allowed to be provided to an audit client under existing SEC regulations and the Code of Ethics of Professional Accountants in the Philippines and do not conflict with their role as Independent Auditors of the company.

The fees presented above include out-of-pocket expenses incidental to the independent auditors services.

Other Management Practices

Enterprise Risk Management

At Globe, we ensure decisions are made as Risk Management remains our core capability and an integral part the process.

Related Party Transaction Policy

We institutionalize the protection of shareholders and all stakeholders, which also reinforces corporate governance.