8. TRANSPARENCY, INDEPENDENCE AND GOOD GOVERNANCE

FINANCIAL INFORMATION

The individual and consolidated annual accounts of the Company that are presented in order to be stated by the Board of Directors are previously certified by the Executive Chairman and by the Chief Financial Officer.

The Audit and Control Committee, mostly made up of independent, non-executive directors, meets with the auditors of the individual and consolidated annual accounts in order to review the Company’s annual accounts and certain periodic financial information that the Board of Directors must provide to the markets and their supervisory boards, overseeing compliance with the legal requirements and correct application of generally accepted accounting principles in the drawing up thereof. In such meetings, any disagreement or difference of opinion existing between the management of the Company and the external auditors is put forward, so that the Board of Directors can take the necessary steps in order for the auditors’ reports to be issued without qualifications. In line with best practices in the area of corporate governance, members of the Board of Directors meet with the financial auditors without any officer of the Company being present.

Furthermore, prior to the drafting of the annual, half-yearly or quarterly financial statements, the management of the Company also holds a meeting with the Audit and Control Committee and is subjected by the latter to suitable questions as to, inter alia, the application of accounting principles or the estimates made in the preparations of financial statements. Such topics are subject to discussion with the external auditors.

The auditors’ report on Financial Statements for financial year 2016 has been issued without qualifications.

AUDITORS’ INDEPENDENCE

Mechanisms set to preserve the independence of the external auditor are:

• The relations of the Board of Directors with the financial auditors of the Company shall be channeled through the Audit and Control Committee.
• The Audit and Control Committee shall abstain from submitting to the Board of Directors, and the latter shall abstain from putting forward to the General Meeting of Shareholders, the appointment as auditor of the Company of an auditing firm given rise to any incompatibility in accordance with the legislation on auditing as well as an auditors firm where the fees that it expects to pay them, for all services in all areas is in excess of the limits provided in the laws on auditing.
• The Audit and Control Committee, mostly made up of independent directors proposes to the Board of Directors the appointment of the financial auditors, so that it would be submitted to the Annual General Meeting of Shareholders, as well as the terms of their contracts, the scope of their professional mandate and, where appropriate, the termination or non—renewal of their appointment.
• The Audit and Control Committee shall regularly receive from the financial auditor information on the audit plan and the results of its implementation; it shall follow up on the recommendations proposed by the auditor and it may request its collaboration should it deem it appropriate.
• Among the functions of the aforementioned Committee is that of liaising with financial auditors in order to receive information on those matters that could jeopardise their independence and on any other matter related to the carrying out of the accounts auditing process, as well as on those other communications envisaged by auditing legislation and auditing standards.
• The Committee shall ask the auditor for a statement on the independence of the audit firm as a whole and of the members of the team charged with auditing the financial statements of the Group, as well as for information on any additional services of any type provided by auditors or any related-party thereto, pursuant to the provisions of the law on auditing. Likewise, the Audit and Control Committee shall oversee the application of the internal procedures to ensure quality and protect independence, implemented by the auditor. The Committee shall oversee the hiring of the auditor for services other than financial auditing, where the amount of the fees to be invoiced is significant.
• The Audit and Control Committee shall issue a report every year, prior to the issue of the auditors’ report, expressing an opinion on the independence of external auditors of the Company, and addressing at the rendering by the external auditors of any manner of additional services other than those covered in the audit agreement.
• The Audit and Control Committee oversees the terms and the enforcement of the contracts entered into with the external auditors of the Company to carry out assignments or tasks other than those covered in the audit agreement.
• The external auditors consult periodically with the Audit and Control Committee, in order to review the annual accounts of the Company that the Board of Directors must provide to the markets and their supervisory boards.
• The Company reports in its consolidated annual report on the fees paid to its external auditors for each item other than the auditing of the financial statements.

As regards the mechanisms established to guarantee the independence of the financial analysts, the Company releases information to the market following the principles included in the Internal Regulations of Conduct regarding Transactions in Securities, especially relating to the obligation that the information must be accurate, clear, quantified and complete, avoiding subjective assessments that lead or could lead to confusion or deceit.

The Company has not contracted services from Investment Banks or Credit Rating Agencies during financial year 2016.

EXTERNAL AUDIT FEES