Internal Control and Audit

Annual report 2010

# Internal Control and Audit

## Internal Control System

The Bank’s internal control system oversees financial and business activities to protect the rights and legal interests of all shareholders and investors. The system includes bodies and services that work to discover, prevent and restrict financial and operational risks, detect violations, and develop recommendations for ensuring compliance with the requirements by all levels of Bank staff.

The internal control system is governed by the Bank’s Regulations “On Organization of Internal Control” and by a various internal documents that regulate cooperation between internal divisions. The Audit Committee coordinates all elements of the system of control of the Bank’s financial and economic activities. Monitoring of the internal control system is the responsibility of the Board of Directors and the executive bodies.

The main issues under control are:

- Control over compliance with the Law On Joint-Stock Companies and the Bank’s Articles of Association by the executive bodies
- Control over the system of managing and assessing banking risks
- Control over distribution of authorities in the course of banking activities
- Control over management of information flows and ensuring information security
- Control over the system for combating legalization of criminally obtained revenues and financing of terrorism
- Control to ensure that the Bank’s activities as a professional securities market participant comply with Russian laws and the regulations of the Federal Financial Markets Service
- Ongoing monitoring of the internal control system

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## Internal Control and Audit Service

The Internal Control and Audit Service (ICAS) is the main regulatory body of Bank Vozrozhdenie’s internal control system. It carries out internal control and helps the Bank’s management bodies to ensure efficient functioning of the Bank. The ICAS carries out its activity according to the Regulation on the Internal Control and Audit Service and in compliance with the Bank’s Articles of Association and internal regulations, as well as Central Bank regulations.

The ICAS’s scope of authority includes:

- Audit reviews of all aspects of the Bank’s business
- Control over the efficiency of measures adopted by internal divisions and/or management bodies of the Bank due to the results of reviews aimed at reducing the level of risks detected
- Control over measures aimed at eliminating violations and shortcomings detected by specialists of the Central Bank and ICAS
- Cooperation with the Bank’s auditor and the Central Bank on issues regarding organization of internal control, as well as prevention and suppression of violations by Bank staff of legal acts, internal documents and professional standards
- Review of internal document drafts

The ICAS operates according to the principles of consistency, independence and impartiality.

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## Audit Commission

The Audit Commission comprises at least three members elected by the General Meeting of Shareholders for the period until the next meeting. Members of the Audit Commission cannot simultaneously be members of the Bank’s Board of Directors or Management Board.

The Commission has the authority to carry out reviews of the Bank’s financial and business activities to verify their compliance with financial and business plans, assess the Bank’s financial standing, and verify compliance with the established standards and the functioning of the systems of internal oversight and risk management.

In 2010, the Audit Commission carried out an audit of the Bank’s financial and business activity in the previous financial year. It also analyzed the Bank’s financial position, compliance with established standards and limits, and the functioning of internal control and risk management systems. It confirmed the accuracy of the data in the annual report, annual financial statements and other financial documents. The Commission did not carry out any extraordinary audit based on any decision by the General Meeting of Shareholders or Board of Directors or following any request by shareholders.

#### Membership of the Audit Commission

Name, year and country of birth | Positions held at the Bank or other organizations | Share of the Bank’s authorized and issued capital | Education
--- | --- | --- | ---
Viktor A. Afonin, 1956, Russia | Chairman of the Audit Commission; Deputy General Director of Almazyuvelirexport (federal unitary enterprise) | — | Higher, Moscow Finance Institute
Tamara N. Lapinskaya, 1954, Russia | Member of the Audit Commission; Head of Business Planning and Analysis Division of the Finance Department | 0.004% | Higher, Moscow Finance Institute
Svetlana A. Markina, 1952, Russia | Member of the Audit Commission; Head of the Internal Operations Accounting Division of the Accounting and Financial Reporting Department | 0.0004% | Specialized secondary, All-Union School of Accounting and Credit
Elena V. Abramova, 1970, Russia | Member of the Audit Commission; Head of the Corporate Relations Section of the Corporate Department | — | Higher, State Finance Academy

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## Auditor

In compliance with the Federal Law On Joint-Stock Companies, Bank Vozrozhdenie retains an independent auditor of the bank and its officers to audit and confirm the annual financial statements to both Russian Accounting Standards and International Financial Reporting Standards. ZAO PricewaterhouseCoopers Audit (before 1999, ZAO Coopers & Lybrand) has been Bank Vozrozhdenie’s auditor since the Bank was founded.

Member of the Chamber of Russian Auditors (non-profit partnership)

State registration number: 1027700148431.

Address: Butyrsky Val 10, Moscow, 125047

PricewaterhouseCoopers has a high reputation both in Russia and internationally. It carries out audits and provides business consulting, taxation and legal services to companies in various sectors.

ZAO PricewaterhouseCoopers Audit (and its official representatives) has no interests related to the Bank (or its official representatives).

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© 2011 Bank «Vozrozhdenie»