CORPORATE GOVERNANCE REPORT - Alibaba

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Key principle/practice CP/RBP Note How did Alibaba.com apply them? ACCOUNTABILITY AND AUDIT Financial reporting • Announcement and RBP publication of quarterly C.1.4 financial results Audit Committee • Clear authority and duties CP C.3.3 • A majority of members are independent non-executive directors • Summary of work performed Directors’ Responsibility for the Consolidation of Financial Statements • Directors’ responsibility for preparing the accounts • Auditors’ reporting responsibility in the auditors’ report CP C.1.2 CP C.1.2 Note: CP denotes a code provision and RBP denotes a recommended best practice. Alibaba.com Limited Annual Report 2011 Our Company announces and publishes quarterly financial results after the end of the relevant quarter, which are prepared using the same accounting policies applied to our Company’s half-year and annual accounts. Role and Function: Our audit committee is primarily responsible for assisting our board in providing an independent view of the effectiveness of our financial reporting process, internal control and risk management system, and for overseeing the audit process and performing other duties and responsibilities as assigned by our board. It meets regularly to review financial reporting, internal control and risk management matters and to this end has unrestricted access to both our external and internal auditors. Our audit committee has a total of three members, namely KWAUK Teh Ming, Walter, TSAI Chung, Joseph and KWAN Ming Sang, Savio with a majority composition of independent non-executive directors including the committee chairman. Our audit committee held four meetings during the year. The attendance of its members is described on page 43 of this Annual Report. Our audit committee reviewed, considered and approved the following matters in its meetings held during the year: ✓ Our Company’s unaudited quarterly, interim consolidated financial statements and audited annual consolidated financial statements, with a recommendation to the board for approval; ✓ The terms of engagement and remuneration of our Company’s external auditors; ✓ All connected transactions/continuing connected transactions of our Company; ✓ The internal investigation of fraudulent Gold Suppliers on our international marketplace; ✓ The effectiveness and adequacy of our internal control system; ✓ The internal control and risk management plan and measures; ✓ The Internal audit plan and measures; and ✓ Other compliance and corporate governance measures and practices. Our directors acknowledge their responsibility for preparing our consolidated financial statements and of ensuring that the preparation of our consolidated financial statements is in accordance with the statutory requirements and applicable standards. We maintain a team of suitably qualified accounting professionals (including our prior qualified accountant) to oversee our financial reporting and other accounting related issues in accordance with relevant laws, rules and regulations. The statement of our auditors concerning their reporting responsibilities on our consolidated financial statements is set out in the Independent Auditor’s Report on page 81 of this Annual Report. 49
Alibaba.com Limited Annual Report 2011 CORPORATE GOVERNANCE REPORT 50 Key principle/practice CP/RBP Note How did Alibaba.com apply them? INTERNAL CONTROLS • Review of effectiveness of the system of internal control • Additional information to assist understanding of the risk management process and system of internal control • Processes applied for review of internal control system CP C.2 RBP C.2.4(c) RBP C.2.3(b) RBP C.2.4(b) RBP C.2.3(c) Note: CP denotes a code provision and RBP denotes a recommended best practice. Our internal control system is designed to provide reasonable assurance in safeguarding our assets, preventing and detecting frauds and irregularities, providing reliable financial information as well as ensuring compliance with applicable law and regulations. The system is designed to manage, rather than eliminate, the risk of failure to achieve our business objectives, and it aims to provide a reasonable, as opposed to an absolute, assurance in this respect. Our board acknowledges its overall responsibilities to establish, maintain, and review the effectiveness of our internal control system to ensure our shareholders’ investment and assets are safeguarded on the one hand, and to enhance operational efficiency and effectiveness, promote corporate governance and ensure proper implementation of risk assessment and risk management measures on the other hand. Our management is responsible for designing and implementing the internal control system of Alibaba.com to achieve the abovementioned objectives. Our management delegates to our internal control department responsibility of strengthening our internal control system in respect of financial reporting and regulatory compliance. Our internal control department also helps management to improve our existing business processes to achieve higher operational efficiency and effectiveness. In addition, our management monitors the effectiveness of our internal controls through control self assessment. We firmly believe that a sound control environment stems from having the right tone at the top together with concerted action from our senior management. Therefore, we adopted a code of business conduct that applies to all our directors, officers and employees. All directors, officers and employees, whether existing or newly joined, are required to read and sign off to confirm their commitment to abide by this code of conduct and behave in accordance with our policies, guidelines and procedures. We have also continued to improve our internal reporting system which encourages our staff to report situations where employees, including directors and senior management, may be in breach of our rules. Under its terms of reference, our audit committee performs review of our internal control system covering financial, operational and compliance controls and risk management procedures. Regular communications are maintained among our board, audit committee, management and internal control department to address various areas of our internal control system. Also, our internal audit team, which reports directly to the audit committee, provides independent assessment as to the existence and effectiveness of our internal control system, mainly through conducting the annual internal audit, validation of our control self assessment results and audit on various operational projects.
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CORPORATE GOVERNANCE REPORT - Alibaba

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