Annual report and accounts 2016

201
F.4.2
Mechanisms in standard format for the capture and preparation of financial information, which are applied and
used in all units within the entity or group, and support its main financial statements and accompanying notes as
well as disclosures concerning ICFR.
The Group Financial Reporting Department issues reporting instructions at each quarter end.
These instructions establish a timetable for key closing activities such as agreeing intragroup balances, submitting the main
accounting results and detailed disclosures. Assumptions to be used for accounting tests such as Weighted Average Cost of
Capital and percentage sensitivities on derivative transactions are determined centrally and included in the instructions. The
format of information to be submitted and the entities expected to submit the information is determined within the
consolidation system which includes validation tests for completeness and internal consistency.
Disclosures relating to ICFR are validated by senior accounting professionals identified by the Chief Financial Officers of IAG,
Aer Lingus, Avios, British Airways, Iberia, and Vueling.
F.5 Monitoring of the system operation
Indicate the existence of at least the following components, describing their main characteristics:
F.5.1 The ICFR monitoring activities undertaken by the Audit Committee and an internal audit function whose
competencies include supporting the Audit Committee in its role of monitoring the internal control system,
including ICFR. Describe the scope of the ICFR assessment conducted in the year and the procedure for the
person in charge to communicate its findings. State also whether the company has an action plan specifying
corrective measures for any flaws detected, and whether it has taken stock of their potential impact on its
financial information
The IAG Audit and Compliance Committee reviews all disclosures relating to ICFR and validates the Group’s approach
to complying with the CNMV’s ICFR recommendations. In this respect the Audit and Compliance Committee has been
careful to achieve an appropriate balance between the CNMV’s ICFR recommendations and the UK Corporate Governance
Code approach.
The Group’s ICFR includes the Company, Aer Lingus, Avios, British Airways, Iberia, and Vueling and covers processes performed
by IAG GBS and IAG Cargo on behalf of the operating companies. The Audit and Compliance Committee is supported by the
Internal Audit department.
The Internal Audit Department adopts a risk based approach to planning which incorporates financial risk factors.
The results of audits are discussed at the Aer Lingus, Avios, British Airways, Iberia and Vueling Boards of Directors or
Management Committees, and the IAG Audit and Compliance Committee. The implementation of actions to address
weaknesses identified by Internal Audit are tracked and follow up audits carried out whenever the overall rating of the original
audit was judged to be “deficient” or “seriously deficient” or a “material weakness” in an internal control over financial reporting.
ICFR 2016 Scope
Entity Level Controls, ITGC’s, and 19 business processes have been identified as having a major impact on financial reporting for
2016. There are nine processes in scope for Aer Lingus, one process in scope for Avios, 18 processes in scope for British
Airways, 15 processes in scope for Iberia, five processes in scope for Vueling.
Across the entities and business processes identified, the 587 key controls are broken down into 482 business process key
controls and 105 key IT general controls.
All in scope processes and key ITGCs have been tested. No material weaknesses were detected. A total of 12 substantial
weaknesses and 133 weaknesses were detected. Action plans were put in place with process owners to address each of these
internal control weaknesses and will be tracked by Internal Audit.
Strategic Report Corporate Governance Financial Statements Additional Information
F.5.2 A discussion procedure whereby the auditor (pursuant to TAS), the internal audit function and other experts can
report any significant internal control weaknesses encountered during their review of the financial statements or
other assignments, to the company’s senior management and its Audit Committee or Board of Directors. State
also whether the entity has an action plan to correct or mitigate the weaknesses found.
The Company’s external auditors attend the Audit and Compliance Committee meetings and report on significant control
weaknesses identified during their work. No significant control weaknesses were identified by the external auditors in 2016.
The Head of Group Audit attends the Audit and Compliance Committee meetings and submits his report directly to the
Committee. The Head of Group Audit reports functionally to the Chairman of the Audit and Compliance Committee. The
implementation of Internal Audit recommendations is tracked by the Audit and Compliance Committee.
www.iairgroup.com