Report of the Audit and Risk Committee to the Board of Directors For the Year Ended 31 December 2010
The Audit and Risk Committee’s roles and responsibilities are defined in the Audit and Risk Committee Charter approved by the Board of Directors. It provides assistance to the Board of Directors in fulfilling its oversight responsibility to the shareholders relating to: (a) the integrity of the Company’s financial statements, the financial reporting process and the systems of internal controls; (b) the quality and integrity of the risk management process; (c) the performance of the Company’s internal audit function and independent auditors; and (d) the compliance with legal and regulatory matters and other reporting standards.
In compliance with the Audit and Risk Committee Charter, we confirm that:
• An independent director chairs the Committee;
• We had four (4) regular meetings during the year;
• We have reviewed and discussed the quarterly unaudited consolidated financial statements and the annual audited consolidated financial statements of Ayala Corporation and Subsidiaries, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, with the management, internal auditors and SGV & Co., the independent auditor of Ayala Corporation. These activities were performed in the following context:
- That management has the primary responsibility for the financial statements and the financial reporting process; and
- That SGV & Co. is responsible for expressing an opinion on the conformity of the Ayala Corporation’s audited consolidated
financial statements with Philippine Financial Reporting Standards;
• We have discussed and approved the overall scope and the respective audit plans of the Company’s internal auditors and SGV & Co.
We have also discussed the results of their audits and their assessment of the Company’s internal controls and the overall quality ofthe financial reporting process including their management letter of comments;
• We have reviewed and approved all audit, audit-related and permitted non-audit services provided by SGV & Co. to AyalaCorporation and the related fees for such services. We have also assessed the compatibility of non-audit services with the auditors’independence to ensure that such services will not impair their independence;
• We have reviewed the reports of the internal auditors ensuring that management is taking appropriate corrective actions in a timely manner, including addressing internal control and compliance issues; All the activities performed by Internal Audit were conducted in accordance with the Standards for the Professional Practice of Internal Auditing;
• The Company’s enterprise risk management procedures and processes are currently under review for further enhancement and a follow up risk assessment is planned for next year. We will review the adequacy of the risk management process and the effectiveness of the control environment in succeeding periodic reviews.
Based on the reviews and discussions undertaken, and subject to the limitations on our roles and responsibilities referred to above, the Audit and Risk Committee recommends to the Board of Directors that the audited consolidated financial statements be included in the Annual Report for the year ended December 31, 2010 for filing with the Securities and Exchange Commission and the Philippine Stock Exchange. We are also recommending to the Board of Directors the re-appointment of SGV & Co. as Ayala Corporation’s independent auditor for 2011 based on the review of their performance and qualifications.
10 March 2011
XAVIER P. LOINAZ
RAMON R. DEL ROSARIO JR.