Internal control and financial reporting
The Board’s responsibility for internal governance and control is regulated in the Swedish Companies Act, the Annual Accounts Act and the Swedish Corporate Governance Code. The Annual Accounts Act requires that the company, each year, describe its system for internal control and risk management with respect to financial reporting. The Board bears the overall responsibility for financial reporting and its working procedures regulates the internal division of work between the Board and its committees.
The Audit Committee has the important task of preparing the Board’s work to assure the quality of financial reporting. This preparation work includes issues relating to internal control and regulation compliance, control of recognized values, estimations, assessments and other activities that may impact the quality of the financial statements. The Committee has charged the company’s auditors with the task of specifically examining the degree of compliance in the company with the rules for internal control, both general and detailed.
Financial reporting to the Board
The Board’s working procedures stipulates which reports and information of a financial nature shall be submitted to the Board at each scheduled meeting. The President ensures that the Board receives the reports required to enable the Board to continuously assess the company’s and Group’s financial position. Detailed instructions specifically outline the types of reports that the Board is to receive at each meeting.
External financial reporting
The quality of external financial reporting is guaranteed via a number of actions and procedures. The President is responsible for ensuring that all information issued, such as press releases with financial content, presentation material for meetings with the media, owners and financial institutions, is correct and of a high quality. The responsibilities of the company’s auditors include reviewing accounting issues that are critical for the financial reporting and reporting their observations to the Audit Committee and the Board of Directors. Besides the year-end report, the auditor also conducts a review of the six-month report.
With regard to financial reporting, the risk that material errors may be made when reporting the company’s financial position and results is considered the primary risk. To minimize this risk, control documents have been established pertaining to accounting, procedures for annual accounts and follow-up of reported annual accounts. There is also a joint system for reporting annual accounts. SCA’s Board of Directors and management assess the financial reporting from a risk perspective on an ongoing basis. To provide support for this assessment, the company’s income statement and balance sheet items are compared with earlier reports, budgets and other planned figures. Control activities that are significant to financial reporting are carried out using the company’s IT system. For further information, see Risk and risk management.
Control activities and follow-up
Significant instructions and guidelines related to financial reporting are prepared and updated regularly by the Group Function Finance and are easily accessible on the Group’s intranet. The Group Function Finance is responsible for ensuring compliance with instructions and guidelines. Process managers at various levels within SCA are responsible for carrying out the necessary control measures with respect to financial reporting. An important role is played by the business unit’s controller organizations, which are responsible for ensuring that financial reporting from each unit is correct, complete and delivered in a timely manner. In addition, each business unit has a Finance Manager with responsibility for the individual business unit’s financial statements. The company’s control activities are supported by the budgets prepared by each business unit and updated during the year through continuous forecasts.
SCA has introduced a standardized system of control measures involving processes that are significant to the company’s financial reporting. The controls are adapted to the operational process and system structure of each unit. Accordingly, each unit prepares a record of the actual controls to be carried out in the unit in question. Control of these processes is assessed through self-evaluation followed up by the internal audit unit. In some cases, SCA has enlisted external help to validate these control measures.
Financial results are reported and examined regularly within the management teams of the operating units and communicated to SCA’s management at monthly and quarterly meetings. Before reports are issued, results are analyzed to identify and eliminate any mistakes in the process until the year-end closing. For additional information, see Internal audit in chapter Activities during the year.
The Board follows up to ensure that the internal control and reporting to the Board functions through continuous reporting from the CEO and CFO and through reporting from the internal audit unit in the scope of the audit plan set annually. Internal audit also continuously reports its observations in this respect to the Audit Committee. Internal Audit’s tasks include following up compliance with the company’s policies, and the results of this follow-up are reported to the Board through the Audit Committee.
Activities in 2015
For a number of years now, the entire SCA Group has used a shared reporting system for financial statements. An increasing number of units within SCA are also introducing the same accounting system based on a common IT platform.
Another development involved the co-location of accounting and reporting of several units in shared service centers, which made reporting more efficient and uniform. Work continued during the year to reduce the number of legal entities in SCA and thereby simplify the reporting and system structures. SCA Global Business Services (GBS), which is responsible for providing professional and transactional services in finance, HR administrative support, organization of master data, and office-related support and services to all units within SCA, continued its efforts to improve the efficiency of the processes during the year.
All of the SCA Group’s policies and, where relevant, instructions and guidelines were reviewed in 2015. The purpose of the review was to ensure that SCA has a portfolio of policies that promotes effective and responsible operation of the business.