Internal control over financial reporting is based on the overall control environment. This involves clear definitions of organizational structure, decision-making paths and authority, which are communicated in the form of internal control documents such as policies, instructions and guidelines.
During 2016, further focus has been put to strengthen the Entity Level Controls (ELC). The control environment also includes laws and other external regulations.
The Board of Directors is ultimately responsible for ensuring robust internal controls, including that the Company has formalized procedures to ensure that (i) approved principles for financial reporting and internal controls are applied, (ii) the Company’s financial reports are produced in accordance with applicable legislation, accounting standards and other requirements for listed companies, and (iii) there is an appropriate system for follow-up and control of the Company’s operations and the risks to the Company that are associated with its operations. The Board has established Rules of Procedure and clear instructions for its work, which also cover the activities of the Audit and Remuneration Committees.
The overall duty of the Audit Committee is to support the Board’s supervision of the audit and reporting processes, and to ensure the quality of such processes. The activities of the Audit Committee during the year are described in detail on page 59 in the Annual Report 2016.
Responsibility for maintaining an effective control environment as well as the ongoing work on risk management and internal control over financial reporting is delegated to the CEO. This responsibility is in turn delegated to managers within their specific areas at various levels in the Company.
Responsibility and authority are defined in instructions to the CEO, regarding the right to sign for the Company, as well as within various internal manuals, policies, routines and codes. The Board approves the Code of Conduct and, on an annual basis, certain Group policies. Group Management approves other policies and instructions, and divisions and Group staff functions issue guidelines and monitor the implementation of all policies and instructions.
Group rules for accounting and reporting are stipulated in the accounting manual, which is available to all employees within finance and accounting. Policies and instructions are reviewed and updated regularly with reference to, for example, changes in legislation, accounting standards, procedures and listing requirements.