Board Committees and Members

EXECUTIVE COMMITTEE

Chairman   Alan I. Claveria
Members   Ma. Melva E. Valdez
Felicidad V. Razon
Stefan Tong Wai Mun

 

CORPORATE GOVERNANCE & NOMINATION COMMITTEE (CGNC)
(Corporate Governance, Nomination & Compensation)

Chairman   Ramon J. Abejuela - Independent Director
Members   Celso P. Vivas - Lead Independent Director
Leonardo R. Arguelles, Jr - Independent Director
Stefan Tong Wai Mun

 

AUDIT, RISK AND COMPLIANCE COMMITTEE (ARCC)
(Audit, Enterprise Risk Management & Related Party Transactions)

Chairman   Celso P. Vivas - Lead Independent Director
Members   Ramon J. Abejuela - Independent Director
Leonardo R. Arguelles, Jr - Independent Director
Stefan Tong Wai Mun

 

COMPLIANCE OFFICER / CORPORATE INFORMATION OFFICER

Felicidad V. Razon

 

 

THE BOARD CHARTER

The Board Charter formalizes and clearly states the roles, responsibilities and accountabilities in carrying out the Board’s fiduciary duties. The Board Charter will serve as a guide to the directors in the performance of their functions.  

  1. The Board members will act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of KPHI and all shareholders.
     
  2. The Board will oversee the development of and approve KPHI’s business objectives and strategy, and monitor their implementation, in order to sustain KPHI’s long-term viability and strength.

    In discharging its duty to monitor and oversee management action and to ensure a high standard of best practice for KPHI, its stockholders and other stakeholders, the Board will conduct itself with honesty and integrity in the performance of, among others, the following duties and responsibilities:

    1. Implement a process for the selection to ensure a mix of competent directors and officers who can add value and contribute independent judgment to the formulation of sound corporate strategies and policies. Appoint competent, professional, honest and highly-motivated management officers. Adopt an effective succession planning program for directors, key officers and management to ensure growth and a continued increase in the shareholders’ value.
       
    2. Provide sound strategic policies and guidelines to KPHI on major capital expenditures. Establish programs that can sustain its long-term viability and strength. Periodically evaluate and monitor the implementation of such policies and strategies, including the business plans, operating budgets and Management's overall performance;
       
    3. Ensure KPHI’s faithful compliance with all applicable laws, regulations and best business practices;
       
    4. Establish and maintain an effective investor relations program that will keep the stockholders informed of important developments in KPHI. If feasible, the President or the Treasurer will exercise oversight responsibility over this program;
       
    5. Identify KPHI's stakeholders in the community in which it operates or are directly affected by its operations, and formulate clear policy of accurate, timely and effective communication with them;
       
    6. Adopt a system of check and balances within the Board. A regular review of the effectiveness of such system will be conducted to ensure the integrity of the decision-making and reporting processes at all times. There will be a continuing review of KPHI’s internal control system in order to maintain its adequacy and effectiveness.
       
    7. Formulate and implement policies and procedures that will ensure the integrity and transparency of related party transactions between and among KPHI and its parent company, joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and parents, and of interlocking director relationships by members of the Board.
       
    8. Endeavor to provide appropriate technology and utilize available resources to ensure a competitive position;
       
    9. Constitute an executive, audit and risk management, corporate governance and nomination, and such other committees it deems necessary to assist the Board in the performance of its duties and responsibilities and which will aid to the attainment of corporate goals;
       
    10. Establish and maintain an alternative dispute resolution system in KPHI that can amicably settle conflicts or differences between KPHI and its stockholders, and KPHI and third parties, including the regulatory authorities;
       
    11. Properly discharge Board functions by meeting regularly or frequently as may be needed, and the minutes of such meetings will be duly recorded. Independent views during Board meetings will be encouraged and given due consideration;
       
    12. Keep the activities and decisions of the Board within its authority under the Articles of Incorporation and By-laws, and in accordance with existing Laws, rules and regulations;
       
  3. The Board will be headed by a competent and qualified Chairperson.
     
  4. The Board will be responsible for ensuring and adopting an effective succession planning program for directors, key officers and management to ensure growth and a continued increase in the shareholders’ value. This will include adopting a policy on the retirement age for directors and key officers as part of management succession and to promote dynamism in KPHI.
     
  5. The Board will align the remuneration of key officers and board members with the long-term interests of KPHI.  In doing so, it will formulate and adopt a policy specifying the relationship between remuneration and performance.  Further, no director will participate in discussions or deliberations involving his own remuneration. 

    The directors’ compensation will always be in accordance with the By-laws of KPHI and/or as approved by the stockholders during the annual stockholders’ meeting.  The Board will, from time to time, approve reasonable per diem that a director may receive for attendance in the Board and Board Committee meetings.
     
  6. The Board, through its Corporate Governance and Nomination Committee, will have a formal and transparent board nomination and election policy that will include how it accepts nominations from minority shareholders and reviews nominated candidates. The policy will also include an assessment of the effectiveness of the Board’s processes and procedures in the nomination, election, or replacement of a director. In addition, its process of identifying the quality of directors will be aligned with the strategic direction of KPHI.
     
  7. The Board will have the overall responsibility in ensuring that there is a group-wide policy and system governing related party transactions (RPTs) and other unusual or infrequently occurring transactions, particularly those which pass certain thresholds of materiality.  The policy will include the appropriate review and approval of material or significant RPTs, which guarantee fairness and transparency of the transactions.  The policy will encompass all entities within the group, taking into account their size, structure, risk profile and complexity of operations.
     
  8. The Board will be primarily responsible for approving the selection and assessing the performance of the Management led by the Chief Executive Officer (CEO) or the President, and control functions led by their respective heads.
     
  9. The Board will establish an effective performance management framework that will ensure that the Management, including the President, and personnel’s performance is at par with the standards set by the Board and Senior Management.
     
  10. The Board will oversee that an appropriate internal control system is in place, including setting up a mechanism for monitoring and managing potential conflicts of interest of Management, board members, and shareholders.
     
  11. The Board will oversee that a sound enterprise risk management (ERM) framework is in place to effectively identify, monitor, assess and manage key business risks. The risk management framework will guide the Board in identifying units/business lines and enterprise-level risk exposures, as well as the effectiveness of risk management strategies. This function will be undertaken by the Audit and Risk Management Committee.

  

THE BOARD COMMITTEE CHARTER

Board committees are set up to the extent possible to support the effective performance of the Board’s functions, particularly with respect to audit, risk management, related party transactions, and other key corporate governance concerns, such as nomination and compensation. These committees shall focus on specific board functions to aid in the optimal performance of its roles and responsibilities.

THE EXECUTIVE COMMITTEE

The Executive committee will have at least three (3) members, consisting of the President, other officers and/or directors of KPHI.

The Committee will perform tasks delegated to it from time to time by the Board of Directors, subject to applicable laws and except on the following matters:

  1. Approval of any action for which shareholders’ approval is also required;
     
  2. The filling of vacancies in the board;
     
  3. The amendment or repeal of by-laws or the adoption of new by–laws;
     
  4. The amendment or repeal of any resolution of the board which by its express terms are not so amenable or repealable; and
     
  5. A distribution of cash dividends to the shareholders.
     

THE CORPORATE GOVERNANCE AND NOMINATION COMMITTEE (CGNC)

The CGNC will be composed of at least three (3) members, all of whom will be independent directors, including the Chairman.

The CGNC has the following functions:

  • Corporate Governance 
  • Nomination 
  • Compensation
     

Corporate Governance Functions:

The Committee is tasked in ensuring compliance with and proper observance of corporate governance principles and practices.  

The Corporate Governance functions are as follows:

  1. Oversee the implementation of the corporate governance framework and periodically reviews the said framework to ensure that it remains appropriate in light of material changes to KPHI’s size, complexity and business strategy, as well as its business and regulatory environments;
     
  2. Oversee the periodic performance evaluation of the Board and its committees as well as executive management, and conduct an annual self-evaluation of its performance;
     
  3. Ensure that the results of the Board evaluation are shared, discussed, and that concrete action plans are developed and implemented to address the identified areas for improvement;
     
  4. Recommend continuing education/training programs for directors, assignment of tasks/projects to board committees, succession plan for the board members and senior officers, and remuneration packages for corporate and individual performance; 
     
  5. Adopt corporate governance policies and ensures that these are reviewed and updated regularly, and consistently implemented in form and substance; 
     
  6. Propose and plan relevant trainings for the members of the Board.  
     

Nomination Functions:

Determine the nomination and election process for KPHI’s directors and has the special duty of defining the general profile of board members that KPHI may need and ensuring appropriate knowledge, competencies and expertise that complement the existing skills of the Board.

The Nomination functions are as follows:  

  1. Pre-screen and shortlist all candidates to the Board and other appointments that require Board approval, in accordance with the qualifications and disqualifications enumerated provided under this Manual, the Corporation Code, Securities Regulations Code, and other pertinent rules and regulations;
     
  2. Assess the effectiveness of the Board's processes and procedures in the election or replacement of directors;
     
  3. In consultation with the Executive Committee, re-define the role, duties and responsibilities of the President by integrating the dynamic requirements of the business as a going concern and future expansionary prospects within the realm of good corporate governance at all times;
     
  4. Ensure compliance and proper observance by the directors of the corporate governance principles and practices;
     
  5. Oversee the periodic performance evaluation of the Board and its Committees as well as executive management and conduct an annual self-evaluation of its performance;
     
  6. Ensure that the results of the Board evaluation are shared, discussed, and that concrete action plans are developed and implemented to address the identified areas for improvement; and
     
  7. Ensure the nomination and election process are complied with.
     

    The nomination and election process include the review and evaluation of the qualifications of all persons nominated to the Board, in relation to criteria set forth in KPHI’s Manual on Corporate Governance, By-laws, and applicable regulations, including whether the candidate:

    • Possesses the knowledge, skills, experience;
    • Has independence of mind, especially to the NED, given their responsibilities to the Board;
    • Has a record of integrity and good repute;
    • Has sufficient time to carry out the responsibilities; and
    • Has the ability to promote smooth interaction between board members.

      The Corporate Governance Committee may secure the assistance of an executive search firm, if necessary, for this purpose.

      The process includes monitoring the qualifications of the directors and the grounds for disqualification whether permanent or temporary.

 

 Qualifications of a Candidate as a Director

  • Holder of at least one (1) share of stock of KPHI;
  • At least a college graduate or holder of equivalent academic degree;
  • At least twenty-one (21) years old;
  • Membership in good standing in relevant industry, business or professional organizations;
  • Practical understanding of the business of KPHIand sufficient experience in managing the business to substitute for such formal education;
  • Proven to possess integrity and probity, assiduous, and
  • Such other qualifications as the Nomination Committee may reasonably require based on the nature and requirements of the position at stake

 

Grounds for Disqualification of a Director:

Permanent Disqualification:

  • Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that: (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as an affiliated person of any of them;
     
  • Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the SEC, Bangko Sentral ng Pilipinas (BSP) or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in sub-paragraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities;
     
  • The disqualification will also apply if (a) such person is the subject of an order of the SEC, BSP or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the SEC or BSP, or under any rule or regulation issued by the Commission or BSP; (b) such person has otherwise been restrained to engage in any activity involving securities and banking; or (c) such person is the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;
     
  • Any person convicted by final judgment or order by a court, or competent administrative body of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;
     
  • Any person who has been adjudged by final judgment or order of the SEC, BSP, court, or competent administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law, rule, regulation or order administered by the SEC or BSP;
     
  • Any person judicially declared as insolvent;
     
  • Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated previously;
     
  • Conviction by final judgment of an offense punishable by imprisonment for more than six years, or a violation of the Corporation Code committed within five years prior to the date of his election or appointment; and
     
  • Other grounds as the SEC may provide.
     

Temporary Disqualifications: 

  • Refusal to comply with the disclosure requirements of the Securities Regulation Code and its implementing rules and regulations.  The disqualification will be in effect for as long as the refusal persists.
     
  • Absence in more than fifty percent (50%) of all regular and special meetings of the Board during his incumbency, or any twelve (12)-month period during the said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. The disqualification will apply for purposes of the succeeding election;
     
  • Dismissal or termination for cause as director of any publicly-listed company, public company, registered issuer of securities and holder of a secondary license from the Commission. The disqualification will be in effect until he has cleared himself from any involvement in the cause that gave rise to his dismissal or termination;
     
  • If the beneficial equity ownership of an independent director in KPHI or its subsidiaries and affiliates exceeds two percent (2%) of its subscribed capital stock.  The disqualification from being elected as an independent director is lifted if the limit is later complied with; and
     
  • If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final.
     

A temporary disqualified director will, within sixty (60) business days from such a disqualification, take the appropriate action to remedy or correct the disqualification.  If he fails, or refuses to do so for unjustified reason, the disqualification will become permanent.

Compensation Functions:

This function will establish a formal and transparent procedure to develop a policy for determining the remuneration of directors and officers that is consistent with KPHI’s culture and strategy as well as the business environment in which it operates.

The Compensation functions are as follows:

  1. Establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of corporate officers and directors, and provide oversight over remuneration of senior management and other key personnel, ensuring that compensation is consistent with KPHI’s culture, strategy and control environment;
     
  2. Designate amount of remuneration, which will be in a sufficient level to attract and retain directors and officers who are needed to run KPHI successfully;
     
  3. Develop a form on Full Business Interest Disclosure as part of the pre-employment requirements for all incoming officers, which among others compel all officers to declare under the penalty of perjury all their existing business interests or shareholdings that may directly or indirectly conflict in their performance of duties once hired;
     
  4. Disallow any director ensuing to decide his or her own remuneration;
     
  5. Provide in KPHI's annual reports, information and proxy statements a clear, concise and understandable disclosure of compensation of its executive officers for the previous fiscal year and the year;
     
  6. Review (if any) of the existing Human Resources Development or Personnel Handbook, to strengthen provisions on conflict of interest, salaries and benefits policies, promotion and career advancement directives and compliance of personnel concerned with all statutory requirements that must be periodically met in their respective posts, and
     
  7. In the absence of such Personnel Handbook, cause the development of such, covering the same parameters of governance stated above.
     

AUDIT AND RISK MANAGEMENT COMMITTEE (ARMC)

The ARMC will be composed of at least three (3) appropriately qualified non-executive directors, the majority of whom, including the Chairman, will be independent. All of the members of the committee must have relevant background, knowledge, skills, and/or experience in the areas of accounting, auditing and finance.  The Chairman of the ARMC will not be the chairman of the Board or of any other committees.  

The ARMC has the following functions:

  • Audit
  • Enterprise Risk Management
  • Related Party Transaction

Audit Functions:

The ARMC will enhance its oversight capability over KPHI’s financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations.  It will be responsible for overseeing the senior management in establishing and maintaining an adequate, effective and efficient internal control framework.  It ensures that systems and processes are designed to provide assurance in areas including reporting, monitoring compliance with laws, regulations and internal policies, efficiency and effectiveness of operations, and safeguarding of assets.

The Audit functions are as follows:

  1. Recommend the approval of the Internal Audit Charter (IA Charter), which formally defines the role of Internal Audit and the audit plan as well as oversees the implementation of the IA Charter;
     
  2. Even if KPHI has no Internal Audit Department, the Internal Audit functions will be outsourced.  It will monitor and evaluate the adequacy and effectiveness of KPHI’s internal control system, integrity of financial reporting, and security of physical and information assets. Well-designed internal control procedures and processes that will provide a system of checks and balances will be in place in order to (a) safeguard KPHI’s resources and ensure their effective utilization, (b) prevent occurrence of fraud and other irregularities, (c) protect the accuracy and reliability of KPHI’s financial data, and (d) ensure compliance with applicable laws and regulations;
     
  3. Oversee the outsourcing of internal audit services.  It will recommend the appointment and/or grounds for approval of the terms and conditions for outsourcing internal audit services;
     
  4. Establish and identify the reporting line of the Internal Auditor (Outsourced) to enable him to properly fulfill his duties and responsibilities. For this purpose, he will directly report to the Committee;
     
  5. Review and monitor Management’s responsiveness to the Internal Auditor’s findings and recommendations;
     
  6. Prior to the commencement of the audit, discuss with the External Auditor the nature, scope and expenses of the audit, and ensure the proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts;
     
  7. Evaluate and determine the non-audit work, if any, of the External Auditor, and periodically reviews the non-audit fees paid to the External Auditor in relation to the total fees paid to him and to KPHI’s overall consultancy expenses. The Committee will disallow any non-audit work that will conflict with his duties as an External Auditor or may pose a threat to his independence.  The non-audit work, if allowed, will be disclosed in KPHI’s Annual Report and Annual Corporate Governance Report;
     
  8. Review and approve the Interim and Annual Financial Statements before their submission to the Board, with particular focus on the following matters:
     
    • Any change/s in accounting policies and practices
    • Areas where a significant amount of judgment has been exercised
    • Significant adjustments resulting from the audit
    • Going concern assumptions
    • Compliance with accounting standards
    • Compliance with tax, legal and regulatory requirements
       
  9. Review the disposition of the recommendations in the External Auditor’s management letter;
     
  10. Perform oversight functions over KPHI’s Internal and External Auditors; ensure the independence of Internal and External Auditors, and that both auditors are given unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions;
     
  11. Coordinate, monitor and facilitate compliance with laws, rules and regulations;
     
  12. Recommend to the Board the appointment, reappointment, removal and fees of the External Auditor, duly accredited by the Commission, who undertakes an independent audit of KPHI, and provide an objective assurance on the manner by which the financial statements will be prepared and presented to the stockholders; and
     
  13. Meet with the Board at least every quarter without the presence of the President or other management team members, and periodically meets with the head of the internal audit.  The Committee may invite the President or other management team if deemed necessary to answer queries raised by the Committee.
     

Enterprise Risk Management (ERM) Functions:

The ARMC will ensure the functionality and effectiveness of enterprise risk management frameworks.

The ERM functions are as follows:

  1. Develop a formal enterprise risk management plan which contains the following elements: (a) common language or register or risk, (b) well-defined risk management goals, objectives and oversight, (c) uniform processes of assessing risk and developing strategies to manage prioritized risk, (d) designing and implementing risk management strategies, and (e) continuing assessments to improve risk strategies, processes and measures;
     
  2. Oversee the implementation of the enterprise risk management plan.  The Committee conducts regular discussions on KPHI’s prioritized and residual exposures based on regular risk management reports and assesses how the concerned units or offices are addressing and managing these risks;
     
  3. Evaluate the risk management plan to ensure its continued relevance, comprehensiveness and effectiveness.  The Committee revisits defined risk management strategies, looks for emerging or changing material exposures, and stays abreast of significant developments that seriously impact the likelihood of harm or loss;
     
  4. Advise the Board on its risk appetite levels and risk tolerance levels;
     
  5. Review annually KPHI’s risk appetite levels and risk tolerance limits based on changes and developments in the business, the regulatory framework, the external economic and business environment, and when major events occur that are considered to have major impacts on KPHI;
     
  6. Assess the probability of each identified risk becoming reality and estimates its possible significant impact and likelihood of occurrence.  Priority areas of concern are those risks that are the most likely to occur and to impact the performance and stability of KPHIand its stakeholders;
     
  7. Provide oversight over Management’s activities in managing credit, market liquidity, operational, legal and other risk exposures of KPHI.  This function includes regularly receiving information on risk exposures and risk management activities from Management, and
     
  8. Report to the Board on a regular basis, or as deemed necessary, KPHI’s material risk exposures, the actions taken to reduce the risks, and recommends further action or plans, as necessary.
     
  9. Further details on internal control and risk management framework can be found on Article 5.
     

Related Party Transactions (RPT) Functions:

As one of the functions of the ARMC, the Committee is tasked in general to review all material related party transactions of KPHI to ensure that it is an arms-length, market based and in compliance with all applicable laws.

The RPT functions are as follows:

  1. Evaluate on an ongoing-basis the existing relations between and among businesses and counterparties to ensure that all related parties are continually identified, RPT’s are monitored, and subsequent changes in relationships with counterparties (from non-related to related and vice versa) are captured.  Related parties, RPTs and changes in relationships will be reflected in the relevant reports to the Board and regulators/supervisors;
     
  2. Evaluate all material RPTs to ensure that these are not undertaken on more favorable economic terms (e.g., price, commissions, interests rates, fees, tenor, collateral requirement) to such related parties than similar transactions with non-related parties under similar circumstances and that no corporate or business resources of KPHI are misappropriated or misapplied, and to determine any potential reputational risk issues that may arise as a result of or in connection with the transactions.  In evaluating RPTs, the Committee takes into account, among others, the following:
     
    • The related party’s relationship to KPHIand interest in the transaction;
    • The material facts of the proposed RPT, including the proposed aggregate value of such transaction;
    • The benefits to KPHIof the proposed RPT;
    • The availability of other sources or comparable products or services; and
    • An assessment of whether the proposed RPT is on terms and conditions that are comparable to the terms generally available to an unrelated party under similar circumstances.  KPHI will have an effective price discovery system in place and exercise due diligence in determining a fair price for RPTs.
       
  3. Ensure that appropriate disclosure is made, and/or information is provided to regulating and supervising authorities relating to KPHI’s RPT exposures, and policies on conflicts of interest or potential conflicts of interest.  The disclosure will also include information on the approach to managing material conflicts of interest that are inconsistent with such policies and conflicts that could arise as a result of KPHI’s affiliation or transactions with other related parties;
     
  4. Report to the Board of Directors on a regular basis, status and aggregate exposures to each related party, as well as the total amount of exposures to all related parties;
     
  5. Ensure that transactions with related parties, including write-off of exposures are subject to a periodic independent review or audit process; and
     
  6. Oversee the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPT’s, including periodic review of RPT policies and procedures.
      

INTERNAL AUDIT CHARTER

MISSION

The Internal Audit function aims to strengthen the organization’s internal control structure, identify opportunities for process and control improvements, monitor compliance with standards, laws and regulations and share best practices throughout the company.

It also aims to assist the Management in the effective discharge of its responsibilities and attainment of its objectives by using a systematic and disciplined approach to evaluate and improve the effectiveness of controls and governance processes.

It also serves to assist the Audit and Risk Management Committee (ARMC) in meeting the requirements of the company’s manual of good governance.
 

ORGANIZATION STRUCTURE AND REPORTING

The Internal Audit Department (IAD) shall be composed of at least one (1) internal audit staff and the Internal Audit Manager (IAM).  To provide and maintain its independence, IAD personnel reports to the IAM who in turn reports functionally to the ARMC and administratively to the Group Internal Audit and Risk Manager.
 

AUTHORITY

The IAD derives its authority directly from the ARMC to carry out its functions.  IAD will have complete, free and unrestricted access to all the company activities, records, physical properties and personnel relevant to the performance of audit at any location.  Where appropriate, special arrangements will be made for the examination of confidential information.

IAD is independent of the activities audited.  It should have no executive role or responsibilities for the development, implementation, control and related matters due to the need to maintain objectivity and resource constraints.  The responsibility for maintaining an adequate system of internal controls rests with the Management and the personnel of the activity or department audited.

IAD functions and operates in an advisory capacity.  It exercises no direct authority over the operating activities or functions it reviews.  The work of the IAD does not relieve the operating personnel of their assigned responsibilities.   Departments of activities being audited shall render, wherever possible, assistance to facilitate the audit process.
 

RESPONSIBILITY

The IAD have the responsibility to:

  • Develop a flexible annual plan using an appropriate risk-based methodology, including any risks or control concerns identified by Management and submit that plan to the ARMC for review and approval as well as periodic updates.
  • Implement the annual audit plan, as approved, including as appropriate any special tasks or projects requested by Management and ARMC.
  • Periodically provide information on the status and results of the annual audit plan and the sufficiency of department resources.
  • Provide annually an assessment on the adequacy and effectiveness of the organization’s processes for controlling its activities and managing its risks.
  • Report significant issues related to the processes for controlling the activities of the organization and its affiliates, including potential improvements to those processes and provide information concerning such issues through resolution.
  • Coordinate with and provide oversight of other control and monitoring functions (risk management, compliance, security, legal, ethics, environmental, external audit.
  • Maintain a professional audit staff with sufficient knowledge skills, experience and professional certifications to meet the requirements of this charter.
  • Issue periodic reports to the ARMC and management summarizing results of audit activities.
  • Keep the ARMC informed of emerging trends and successful practices in internal auditing.
  • Provide a list of significant measurement goals and results to the ARMC.
  • Assist in the investigation of significant suspected fraudulent activities within the organization and notify Management and the ARMC of the results.
  • Consider the scope of work of the external auditors and other outside agencies as appropriate, for the purpose of providing optimal audit coverage to the organization at a reasonable overall cost.
     

SCOPE

The scope of internal auditing encompasses the examination and evaluation of the adequacy and effectiveness of the organization’s system of internal control and the quality of performance in carrying out assigned responsibilities.  The scope of KPHI’s internal audit includes:

  • Review of the reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information.
  • Review of the systems established to ensure compliance with those policies, plans, procedures, laws, and regulations that could have significant impact on operations.
  • Review of the means of safeguarding assets and as appropriate, verification of the existence of such assets.
  • Review of the established systems of internal control to ascertain whether they are employed.
  • Review of specific programs or initiatives to ascertain whether results are consistent with established objectives and goals and whether the programs or initiatives are carried out as planned.
  • Review of priority risks that are appropriately identified and monitor compliance with established mitigating measures.
     

CODE OF ETHICS

IAD have the responsibility to conduct themselves so that their integrity, objectivity, confidentiality, and competency are not open to question.  Standards of professional behaviour are based upon the Code of Ethics issued by the Institute of Internal Auditors (IIA).  Internal auditors will:

  • Exercise honesty, objectivity, and diligence in the performance of their duties and responsibilities.
  • Exhibit loyalty in all matters pertaining to the affairs of the Company and not knowingly be a party to any illegal or improper activity.
  • Refrain from entering into any activity which may be in conflict with the interest of the Company or which would prejudice their ability to objectively carry out duties.
  • Decline to accept anything that may impair or be presumed to impair their professional judgement.
  • Be prudent in the use of information acquired in the course of their duties and not use confidential information for any personal gain or in a manner that knowingly would be detrimental to the welfare of the Company.
  • Use reasonable care to obtain sufficient, factual evidence to support the conclusions drawn and in reporting, reveal such material facts known to them which if not revealed, could distort the report of the results of operations under review or conceal an unlawful practice.
  • Engage only in those projects which they have the necessary knowledge, skill, and experience.
  • Continue to strive for improvement in the proficiency and effectiveness of their service.