Audit and Related Party Transaction (RPT) Committee

To support the Board in the discharge of its functions, primarily on internal controls, material RPTs and other key corporate governance matters, it is the policy of Globe to constitute and maintain a competent and working Audit and RPT Committee in fulfilling their oversight responsibility to the shareholders relating to: 

  • The integrity of the financial statements and disclosures, financial reporting principles, processes, policies and systems;
  • Internal controls;
  • Policies and processes on external/independent auditor’s appointment, enhancing independence and audit quality, remuneration, and assessment of the performance of the external auditors;
  • Adequacy and effectiveness of the internal audit function
  • Compliance with legal, regulatory, and corporate governance requirements
  • Assessment, review, approval, and disclosure of related party transactions according to Globe Telecom’s RPT policy.

Management, however, has primary responsibility for financial statements and disclosures, financial reporting process, internal controls, legal and regulatory compliance, and risk management.

The Audit and RPT Committee Charter approved by the Board defines clearly the roles and responsibilities of the Audit and RPT Committee.

The Audit and RPT Committee is composed of four (4) directors, three (3) are independent and non-executive including the Chairman. The Board appoints all members of the Committee.

The Audit and RPT Committee meets at least four (4) times during the year and invites the President and Chief Executive Officer (CEO), Chief Finance Officer (CFO) and concurrently the Treasurer and Chief Risk Officer (CRO), external auditors, internal auditors, and other members of 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 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 ASM.
  • The Committee approves the work plan of Globe Internal Audit (IA), as well as the overall scope and work plan of the external auditors. The Committee meets with the internal auditors and external 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.
  • The Committee ensures tenders for external audit services are conducted every five (5) years, or when the need arises as decided by the Audit and RPT Committee. The Committee recommends the appointment, retention, or discharge of the external auditors, reviews audit fees or the remuneration of the external auditors and endorses to the full Board. The Board, in turn, submits the appointment of the external auditors and audit fees for approval of the stockholders at the ASM. The amount of audit fees is disclosed in this Integrated Report.
  • The Committee reviews the external auditors’ performance and assesses the external auditor’s qualifications, skills, resources, effectiveness, and independence. To limit the possible risk of impairment of independence, the Committee also reviews and approves in advance, audit vs. non-audit services performed by the external auditors, and the corresponding fees paid, in relation to the SEC regulation on “permitted” vs. “not permitted” services and the significance of the fees to the external audit firm’s total service revenues and Globe Telecom’s total consultancy expenses, respectively.
  • The Committee assesses the adequacy and effectiveness of the internal audit function by reviewing and approving Globe IA’s scope of work, authority, independence, compliance to professional standards, reporting relationships, key responsibilities, and changes in their work plan.
  • The Committee reviews the results of management’s annual risk assessments based on reports provided by CRO covering information on risk exposures and risk management activities, and as supported by the results of internal audit reviews.
  • The Committee reviews and discusses with management, the internal and external auditors; and reports annually to the Board of Directors, the adequacy and effectiveness of the company’s internal controls in all material respects.
  • The Committee assesses, reviews, approves, and discloses all covered and material RPT defined in Globe Telecom’s RPT Policy, including write-off of exposures, policies on conflicts of interest (COI) or potential COI to the Board of Directors and ensures appropriate disclosure. Likewise, the Committee oversees the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPTs, and periodically reviews RPT policies and procedures. All relevant RPTs were reported to, reviewed, and approved by the Audit and RPT Committee last February 3, 2020. All RPTs are done at arm’s length and in accordance with the RPT policy. For a disclosure of the RPTs, please refer to the 2019 Audited Consolidated Financial Statements.

The overall responsibility over our risk management oversight rests with the Board of Directors. Various Board committees have been designated with oversight for specific risk areas. 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 and regulatory compliance, corporate governance, fraud risks, and related party transactions. The BROC was established and organized to assist the Board for the oversight of our Enterprise Risk Management (ERM) system to ensure its functionality and effectiveness. The CRO provides the Audit and RPT Committee with periodic reports on risk exposures and risk management activities by management, while Globe IA provides reasonable assurance on the effectiveness of internal controls and compliance systems and processes.

The Audit and RPT Committee reports regularly to the Board of Directors on our internal controls, material RPTs, compliance, and other key corporate governance matters.

With guidance provided by the Board, management remains primarily responsible for the development and implementation of risk management strategies, policies, and systems.

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, the Audit and RPT Committee also reviews and assesses the adequacy of its Charter annually, seeking Board approval for any amendments. The most recent Charter review and assessment were done on August 1 and the Audit and RPT Committee approved the retention of the existing Charter (approved by the Board on August 2, 2019).

To ensure the Audit and RPT Committee effectively fulfills its responsibilities according to global best practices and expectations set out in the approved charter, Globe Telecom’s Manual of Corporate Governance, SEC Memo Circular No. 4 (Series of 2012), ACGS and SEC Memo Circular 19 (Series of 2016) or Code of Corporate Governance for Publicly-Listed Companies, the Committee conducts an assessment of its performance and undergoes training, at least annually. The results of the assessment and any ensuing action plans are reported to the Board. On an annual basis, our President and CEO, CFO, and CAE provide written certification to the Audit and RPT Committee confirming the reliability of financial statements for the year; full compliance with financial, legal, and regulatory requirements and reporting; attestation on Globe Telecom’s sound internal controls and compliance system; and confirmation that the CAE reports functionally to the Audit and RPT Committee and administratively to the CEO allowing Internal Audit to independently fulfill its responsibilities.

Internal Audit

The establishment of an Internal Audit (IA) function is a fundamental part of Globe Telecom’s CG practices and policies. An IA Charter, approved by the Audit and RPT Committee/Board, establishes the mission, scope of work, authority, independence, compliance to professional standards, reporting relationships, and key responsibilities of the IA function.

IA is a service, providing independent and objective assurance and consulting function within Globe that shares our common goal of creating and enhancing shareholder value and improving the company’s operations. This is done through a systematic, disciplined, and risk-based approach in evaluating and improving the effectiveness of risk management, control, and governance processes. Globe IA provides reasonable assurance to the Board, management and the stockholders on the adequacy and effectiveness of controls encompassing Globe Telecom’s governance of operations, information systems, reliability and integrity of financial and management information, effectiveness and efficiency of operational systems and processes, safeguarding of resources and effective utilization, and compliance with laws, rules, and regulations.

To perform its auditing functions effectively, Globe IA maintains its independence from management and controlling shareholders by reporting functionally to the Board, through the Audit and RPT Committee and administratively, to the President and CEO. The Audit and RPT Committee, having appointed the CAE, also concurs in his/her replacement, reassignment, or dismissal.

Working closely with the Audit and RPT Committee, the CAE maintains an effective internal audit function by managing the entire operations, and strongly supports the attainment of corporate objectives through coverage of the most critical processes in the conduct of risk-based assurance reviews. The CAE reports the results of audit reviews and other activities in a manner that helps management take appropriate action on identified risks/issues within a reasonable period of time. 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) of the Institute of Internal Auditors (IIA) and ensures alignment to global best practices. Among other responsibilities, the CAE strengthens leadership and talent bench, uplifts performance management, and manages internal costs.

Globe IA maintains, reviews, and assesses the adequacy of its Charter annually to ensure conformance with the Standards and SEC regulations.  The result of the periodic assessment and any arising revisions are reviewed and approved by the Audit and RPT Committee, with concurrence by the Board.  The latest charter review was performed on August 1.  

Globe IA governs its internal audit activities in conformance with the IIA’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, 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. The last external QAR was done in 2018, where Globe IA obtained “Generally Conforms”, the highest rating that can be given in an external QAR process. The Standards require an external assessment at least once every five (5) years.

Globe IA adopts a risk-based audit approach in developing its annual work plan ensuring that risks, mapped to eTOM (enhanced telecommunications operations map) based processes, with integrated risk assessments for processes across the enterprise, are captured in the audit universe. Globe IA’s annual work plan is reassessed quarterly or earlier 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. The Audit and RPT Committee also ensures that audit resources are allocated adequately and focused on the areas of highest risks.

To promote 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 Globe Telecom’s business processes, network and IT systems, internal controls, new accounting and auditing standards, data analytics, and regulatory updates. The audit team is composed of professionally certified accountants, internal auditors, IT and information security auditors, control self-assessors, licensed engineers, and data experts, among others. In addition, Globe IA has been actively participating in Ayala Group and Singtel Internal Audit Networks and learning from international knowledge and thought experts to benchmark and adopt leading-edge global best practices on methodology, process improvement and audit tools for digitalization to develop a team 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), Simple, Digital, Agile (SDA) auditing, among others, to improve overall audit efficiency and enhance organizational value.

Globe IA also continuously facilitates self-assessment activities among various business groups to aid management and to foster increasing controls awareness and maturity at Globe.

The Audit and RPT Committee regards Internal Audit as vital support in the effective discharge of the Committee’s oversight role and responsibilities.

Amidst the COVID-19 situation, IA continues to fully deliver its work plan and carry out its mandate through work-from-home arrangements, identification and assessment of the company's emerging risks, and high-level analysis of  business impact and corresponding management initiatives and responses to provide reasonable assurance to the Board, stockholders, and other stakeholders that such risks are effectively addressed by Management. These are done through maximized use of relevant technology (e.g. use of laptops, mobile phones, data analytics softwares, secured network access to Globe’s financial and operational systems, use of various communication and teleconferencing software in conducting virtual meetings, town halls, webinars, trainings, performance discussions, check-ins and closer alignment with Management, etc.)

IA  participated in Globe's first virtual Annual Stockholder Meeting and ensured its success through validation of shareholder votes from proxies and Voting in Absentia platforms.  Significant assistance was also provided in the virtual onboarding of Globe Group's newly appointed external auditors for 2020.

Moreover,  the team has actively supported the Company’s Business Continuity Planning initiatives through volunteer hours spent on Customer Experience Management’s quality assurance of subscriber applications to ensure correct plan specifications; and donations through Globe and Ayala fund-raising programs during COVID-19 pandemic.

External Audit

The Audit and 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 Committee 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 Q2 2019. 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 on the company’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 prohibited expressly 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 in appearance.

In the ASM last April 23, the shareholders voted to appoint 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, Inc. and Subsidiaries (Globe Group) for the calendar year 2019. 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 2019.

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 2019 and 2018 amounts to ₱20.16 million and ₱55.38 million respectively, inclusive of 7.5% out-of-pocket expenses (OPE).

In addition to performing the audit of Globe Group’s financial statements and audit-related services, NA/DP was also contracted to provide tax and non-audit services in accordance with established procurement policies.

The aggregate fees billed by NP/DP are shown below:

(Amount in millions of pesos)
Audit and Audit-Related Fees*₱20.16₱55.38
Tax and Non-Audit Fees₱30.52₱6.89

*Excludes 2019 audit fees rendered by external auditors other than NA/DP: GTI HK, ₱730K (₱640K in 2018) performed by Deloitte HK; GT EU, ₱349K (₱249K in 2018) performed by Wellden and Turnbull LLP; GT SG ₱304K (₱307K in 2018) performed by Ardent; Taodharma, Inc., ₱345K (₱288K in 2018) performed by Punongbayan and Araullo; and ECPAY Inc., ₱357K performed by Punongbayan and Araullo

  • Audit Fees

    Audit Fees represent the 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 2019 and 2018.

  • Audit-Related Fees

    NA/DP was not engaged to perform audit-related services for 2019. Audit-related fees in 2018 represent quality assurance review of data clean-up activity performed by a third party for Globe.

  • Tax Fees

    Tax Fees in 2019 amounting to ₱0.78 million refers to tax advisory services for Kickstart Ventures, Inc. There were no tax fees incurred for 2018.

  • Non-Audit Fees

    Non-Audit Fees represent services rendered for the Finance Transformation and Ariba Phase 2 projects in 2019, totaling ₱29.74 million. Non-audit fees in 2018 pertain to services rendered in relation to the adoption of 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 has confirmed to the Committee that the 2019 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.