abrdn Equity Income Trust plc 53
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Activities During the Year
The Audit Committee met twice during the year when,
amongst other things, it considered the Annual Report and
the Half-Yearly Financial Report in detail. Representatives
of the Manager’s internal audit, risk and compliance
departments reported to the Committee at these
meetings on matters such as internal control systems, risk
management and the conduct of the business in the
context of its regulatory environment. No significant
weaknesses in the control environment were identified
and it was also noted that there had not been any adverse
comment from the independent Auditor and that the
independent Auditor had not identified any significant
issues in its audit report. The Committee, therefore,
concluded that there were no significant issues which
required to be reported to the Board.
Internal Controls and Risk Management
The Board confirms that there is an ongoing process for
identifying, evaluating and managing the Company’s
significant business and operational risks, that has been in
place for the year ended 30 September 2022 and up to
the date of approval of the Annual Report, is regularly
reviewed by the Board and accords with the FRC’s
guidance on internal controls.
The Board has overall responsibility for ensuring that there
is a system of internal controls and risk management in
place and a process for reviewing its effectiveness. Day-
to-day measures have been delegated to the Manager
with an effective process of reporting to the Board for
supervision and control. The system of internal controls
and risk management is designed to meet the Company’s
particular needs and the risks to which it is exposed.
Accordingly, the system of internal control and risk
management is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives
and, by its nature, can only provide reasonable and not
absolute assurance against material misstatement or loss.
The design, implementation and maintenance of controls
and procedures to safeguard the assets of the Company
and to manage its affairs properly extends to operational
and compliance controls and risk management. The
Board, through the Audit Committee, has prepared its
own risk register which lists potential risks as set out in the
Strategic Report on pages 12 to 14. The Board considers
the potential cause and possible effect of these risks as
well as reviewing the controls in place to mitigate them.
Clear lines of accountability have been established
between the Board and the Manager. The Board receives
regular reports covering key performance and risk
indicators and considers control and compliance issues
brought to its attention. In carrying out its review, the
Board has had regard to the activities of the abrdn,
including its internal audit and compliance functions, and
the Auditor.
The Board has reviewed the Manager’s process for
identifying and evaluating the significant risks faced by the
Company and the policies and procedures by which these
risks are managed. The Board has also reviewed the
effectiveness of the Manager’s system of internal control
including its annual internal controls report prepared in
accordance with the International Auditing and Assurance
Standards Board’s International Standard on Assurances
Engagements (“ISAE”) 3402, “Assurance Reports on
Controls at a Service Organisation”. Any weaknesses
identified are reported to the Audit Committee and
timetables are agreed for implementing improvements to
systems. The implementation of any remedial action
required is monitored and feedback provided to the Audit
Committee.
The key components designed to provide effective
internal control are outlined below:
· written agreements are in place which specifically
define the roles and responsibilities of the Manager and
other third party service providers. These agreements
are reviewed periodically by the Board;
· the Board and Manager have agreed clearly defined
investment criteria, specified levels of authority and
exposure limits. Reports on these issues, including
performance statistics and investment valuations, are
regularly submitted to the Board;
· the Manager prepares forecasts and management
accounts which allow the Board to assess the
Company’s activities and review its performance;
· as a matter of course the Manager’s internal audit and
compliance departments continually review its
operations;
· bi-annually, the Audit Committee carries out an
assessment of internal controls by considering
documentation from the Manager, including the internal
audit and compliance functions and reports to the
Board on its conclusions; and
· the Audit Committee reviews internal control reports
from its third party service providers including the
Depositary, BNP Paribas Trust Corporation UK Limited
and the Registrar, Computershare.