Annual Corporate Governance Report 2017

21 C.1.32 Describe any mechanisms put in place by the board so that the separate and consolidated financial statements authorised for issue by the board and laid before the general meeting do not attract a qualified opinion in the audit report. The Board Regulations (article 23(1)(f)) entrusts the Audit and Control Committee with the duty of ensuring that the Board submits the financial statements to the General Meeting without reservations or a qualified opinion in the audit report. In exceptional cases in which reservations or qualifications arise, both the Chairman of the Audit and Control Committee and the auditors have to provide shareholders with a clear explanation of the content and scope of the qualifications. The Audit and Control Committee is regularly attended by the Chief Finance Officer and the Chief Audit Executive who can thus directly address all queries from directors regarding matters dealt with by the Committee. Moreover, the Committee regularly requires the presence of external auditors at some of the meetings scheduled in the year - with the adequate level of responsibility and representativeness of the audit firm - and in any case, with respect to the half-yearly review and the conclusions of the preliminary and final audit work. At these meetings, the conclusions reached by the external auditors as a consequence of their engagement are announced in advance and analysed, to take the required measures and to avoid the need to include any potential reservation, mention or qualification in the auditors’ report. Members of the Audit and Control Committee receive relevant information on the auditor’s findings and are able to raise questions and engage in such discussion as they think fit with the external auditor. The Chair of the Audit and Control Committee immediately informs the Board of the content of its meetings. After the meetings, all directors receive a copy of the Committee minutes. In addition, in 2017 the external auditor attended a Board meeting to expand upon the information provided to directors on the review work and audit they had conducted and their main findings. Directors were then able to pose questions to the external auditor and enter into discussion as they thought fit. C.1.33 Does the Secretary to the Board have the status of director? Yes  No X Name / company name of secretary Manuel de la Viuda Fernández de Heredia C.1.34 (Repealed.) C.1.35 Describe any mechanisms put in place by the company to preserve the independence of external auditors, financial analysts, investment banks and credit rating agencies. In 2016, the Board of Directors resolved to amend its Regulations, specifically article 23, to adapt it to the amendment of article 529 quaterdecies of the Spanish Companies Act, which came into force in June 2016, and which was introduced by Ley 22/2015 (Spain’s statute on auditing). The Audit and Control Committee is tasked with establishing appropriate relations with the external auditor in order to receive information and examine the audit plan and address all those matters that may threaten its independence, as well as any other issues related with the audit process. This Committee is also charged with granting the required authorisation, when necessary, to provide services other than prohibited services, in line with applicable independence laws and regulations, and with performing or supervising the other notifications envisaged in auditing legislation and standards, verifying that the Company’s senior management takes into account its recommendations. At all events: a) The Audit and Control Committee establishes relations with the external auditor to receive all the information that may potentially represent a threat to its independence. b) Each year, the Audit and Control Committee receives a declaration from the external auditors regarding their independence vis-à-vis the Company or entities directly or indirectly related to it, together with detailed, itemised information on additional services of any kind and the related fees