Internal controls 2009
Part of Management Report 2009
Key elements of internal control and risk management systems in the financial reporting process (the Danish Financial Statements Act section 107b, subsection 1(6)) 1)
The Board of Directors and Executive Board bear the overall responsibility for the Group's risk management and internal control procedures in connection with the financial reporting process, including ensuring compliance with relevant legislation and other regulations relating to financial reporting.
The Group's risk management and internal control procedures are intended to effectively identify, manage and minimise the risk of error in the financial reporting process, and can provide only reasonable assurance that significant errors or discrepancies do not occur in the financial reporting.
The Audit Committee appointed by the Board of Directors performs an annual assessment of the Group's risk management and internal control procedures, together with the associated management guidelines.
Control environment
The Board of Directors approves the global risk management policies laid down by the Executive Board. These policies are incorporated into the internal control and risk management system, which encompasses a clearly-defined organisational structure specifying roles and responsibilities. On the basis of this structure, manuals have been compiled describing the key business processes, internal controls, segregation of duties, reconciliation, approval and certification, and applied accounting policies. Regular checks are made to ensure that the guidelines are respected.
A central controlling function has been established to monitor the financial reporting of all Group companies and ensure compliance with the applied accounting policies. Each business area has been assigned a business control function which validates its reported earnings and underlying activities.
Risk management
The Executive Board undertakes ongoing assessment of the risks to which the Group is subject, including risks relating to financial reporting. If changes occur, or are expected to occur, which may affect these risks, the Executive Board discusses this and the proposed actions with the Board of Directors. The Audit Committee undertakes at least one annual assessment of the effectiveness of the internal controls in the financial reporting process in relation to the identified risks.
The Audit Committee annually, and when it is deemed needed, reviews the applied accounting policies and changes in these, as well as significant estimates relating to the financial reporting (see notes 1 and 40 in the annual report). As part of this review, changes in accounting policies and the effect of significant estimates are discussed with the Executive Board.
Control activities
The control activities are intended to ensure that the guidelines on policies, manuals and procedures are adhered to, and to prevent, detect and correct material errors, etc. These control activities are partly manual, and partly system-based.
A reporting process has been established under which monthly reports are made to the Board of Directors, explaining deviations from the expected results and key figures for each business area and its underlying activities. Estimates for the year are updated on a quarterly basis. Detailed information is obtained for use in reports to the Board and external quarterly reports. The information obtained is intended to ensure compliance with both internal and external reporting requirements.
Information and communication
As a consequence of the ongoing work with business processes, internal controls and changes in accounting rules, regular updating is carried out on the contents of the manuals in relation to business processes, internal controls, requirements for segregation of duties, reconciliation, approval and certification, as well as applied accounting policies. The manuals are made available on the Group intranet, and in the case of major changes, the affected companies are informed directly and in reasonable time before the changes take effect, including the consequences of the changes.
Monitoring
The risk management procedures and internal controls are regularly reviewed in order to continuously secure and enhance their effectiveness. Significant weaknesses and violations of internal guidelines are reported to the Executive Board, which follows up on these.
The auditors appointed by the Annual General Meeting reports as a part of the audit of the consolidated financial statements and parent company financial statements any significant weaknesses in the Group's internal control and risk management system in the audit report, while less serious weaknesses are mentioned only in management letters to the Executive Board. Management letters for the subsidiaries are also forwarded to the Executive Board. The Board of Directors ensures that the Executive Board follows up on any matters referred to, while the Executive Board ensures that the subsidiaries follow up on any identified weaknesses.
The managing directors and accountants of the subsidiaries are required to declare once annually that their reports adhere to Group reporting guidelines.
1) This description is part of the management report and is covered by the auditors opinion hereof.
''Translated document - in case of discrepancies the Danish version shall prevail ''