Internal control over financial reporting
According to the Swedish Companies Act, the Board of Directors is responsible for internal control. This report has been prepared in accordance with the Annual Accounts Act and describes how the Company’s internal control over financial reporting is organized.
Good governance is the foundation for effective internal control. The formal work plan for the Board of Directors, and instructions for the CEO and the Board’s Committees, ensure a clear division of roles and responsibilities and promote effective management of the Company’s risks.
Guidelines for the control environment
The Board has adopted a number of basic guidelines and policies to create conditions for a sound control environment. These include, among other things, Indutrade's Code of Conduct, a policy for economic and financial reporting, a finance policy and an investment policy. These policies are monitored and revised as and when required.
The executive management continuously prepares instructions for the Group’s financial reporting, and together with the policies adopted by the Board, these are included in the Group’s Financial Manual.
The Group has a joint reporting system that serves as a base for the Group’s monthly reporting, consolidation and performance monitoring.
The Company has implemented a structured process for the assessment of risks that may affect the internal control over financial reporting. This process is repeated annually, and evaluated by the Audit Committee and the Board of Directors.
Companies of varying size, geography and sector have a positive effect on risk diversification
The risk assessment shows that the Group’s structure promotes risk diversification. The companies are of varying size, operate across a range of sectors and geographic markets, and are usually self-sufficient and independent of each other.
The risk assessment also included the Group’s income statement and balance sheet items to identify areas in which the combined risk of errors and their effects could be greatest. The areas identified are primarily revenue recognition, accounts receivable and inventories.
Ongoing risk assessments
Ongoing risk assessments are performed in the context of strategic planning, budgeting, forecasting and acquisition activities, which are partly, aimed at identifying events in the market or operations that could give rise to changes in, for example, revenue streams and measurements of assets or liabilities.
Six business areas with controllers
The Group’s companies are organised in six business areas. Each business area has a business area manager as well as a controller. The controller plays a central role in analyzing and monitoring the business area’s financial statements, and ensuring that the companies included in the business area comply with the Group’s policies for financial reporting.
Analysis, assessment and monitoring in the Parent Company
The Parent Company has additional functions for ongoing analysis and monitoring of the financial statements submitted by the Group, the business areas and the subsidiaries. The Parent Company’s finance department also initiates work with annual self-assessments of internal control over financial reporting.
The Group’s companies are divided into three groups for the assessment, depending on the nature and extent of each company’s operations. A questionnaire for assessing the internal control is designed for each group of companies, based on the risk analysis performed. An acceptable level of control is determined for each group and serves as the baseline for the assessment.
All companies owned by Indutrade must complete the assessment questionnaire. The responses are compiled and evaluated per group of companies, and in total for the Group. In addition, the auditors perform a validation of each company’s completed questionnaire.
The Company’s completed assessment and the results of the auditors’ validation are reported to, and discussed with, the Audit Committee. Feedback is provided to Group companies in which a need for improved procedures has been identified. The overall assessment of internal control over financial reporting provides a basis for the following year’s self-assessment and efforts to further strengthen internal control practices.
Information and communication
The Company’s key governing documents, such as policies, guidelines and manuals – to the extent they pertain to financial reporting – are continuously updated and communicated to the Group’s companies through various channels. Systems and procedures have been developed to provide management with reports on the earnings trend and financial position in relation to, for example, set objectives.
Every month, the Board of Directors evaluates the Group’s business development, earnings, financial position and cash flow based on a reporting package containing comments on outcomes and certain key ratios.
The Audit Committee plays a key role in supervising the Company’s financial reporting, risk management, governance and control. The Audit Committee also maintains regular contact with the Company’s auditors to monitor whether the Company’s internal and external reporting meets the requirements for a listed company, as well as findings from the audit.