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Internal control

Report of the Board of Directors on internal control for financial year 2018/19

Under the Swedish Companies Act and the Swedish Code of Corporate Governance, the Board is responsible for internal control. This report has been drawn up in accordance with the Swedish Annual Accounts Act. It describes how the internal control of financial reporting is performed. The Board thus has an important role to play in quality assuring financial reporting, which includes issues of internal control and compliance, verification of reported values and estimates and other issues that could influence the quality of the financial disclosures. Internal control is based on the structure in the framework for internal control referred to as the COSO model, from the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Control environment

Effective work by the Board of Directors is the basis of effective internal control. The control environment in Systemair is characterised by short paths between Group management and the operational units. The Board of Directors has adopted several key documents to create and maintain a smoothly functioning control environment that is material to financial reporting. These include the Board of Directors’ rules of procedure, instructions for the CEO, a financial policy and accounting manuals. Instructions and guidelines for financial reporting are prepared and updated continuously by the Parent Company’s controller organisation. An audit committee has been established within the Board of Directors. Its task is to ensure that policies adopted on financial reporting and internal control are complied with and developed. The committee also maintains day-to-day relationships with the Company’s auditor. The audit committee and the Board include accounting and auditing issues as a recurring item on the agenda at the four Board meetings at which the quarterly reports are discussed.

Risk assessment 

Systemair’s Board of Directors is responsible for identifying and managing significant financial risks and risks of errors in financial reporting. Regarding financial reporting, the primary risk is deemed to be material errors arising in the disclosures of the Company’s results and position. The Board, audit committee and management continuously assess reporting from a risk viewpoint, in which comparisons of income statement and balance sheet items with previous disclosures and budgets form an essential element. In addition, regular risk assessments are conducted in connection with strategic planning, budgeting, forecasting and acquisition activities.

Control activities 

Important instructions and guidelines for financial reporting are prepared and updated continuously by the Group’s central controller organisation and are readily accessible on the Group’s intranet.

All companies in the Group report five working days after the end of the month in a common group consolidation and reporting system so that any deviations or errors can be captured quickly and corrected, for example.

At the end of the accounting period, the Group comprised around, 80 subsidiaries that mostly are owned directly by the Parent Company, Systemair AB. The subsidiaries are legal entities with their comprehensive income statements and balance sheets. Each subsidiary reports to the Parent Company every month, where consolidation is performed.

Central controllers are directly responsible for following up several companies that they continuously monitor and analyse. Outcomes are reviewed regularly against plans and targets in consultation with representatives of the subsidiaries, business boards and Group management.

For the majority of its subsidiaries, the Group has a common, 100%-integrated ERP system that provides a highly efficient tool for management, control and follow-up. For major decisions such as those in connection with acquisitions, investments and significant contracts, clearly-defined decision-making methods and processes are in place.

In addition, every unit is also visited regularly by representatives of business boards and Group Management for ongoing evaluation of internal control and financial reporting.

Information and communication

The President and the CFO are jointly responsible for the accuracy and good quality of all information published externally, including quarterly reports, press releases and company presentations in conjunction with analysts’ meetings. The tasks of the Company’s auditor include reviewing accounting issues that are material to financial reporting and reporting his or her observations to the Board.

Each month, the Board receives a reporting package that includes the complete financial accounts for each important subsidiary, as well as the consolidated accounts for the Group. Several key ratios and benchmarks are also included; these enable the results for the period to be compared with budget and the outcomes for preceding years.

The Board’s rules of procedure regulate which reports and information of a financial nature will be presented continuously and for each Board meeting.

In order to promote awareness of policies and manuals among the Group’s employees, information is available to all concerned on the Group’s intranet. To ensure that external information is accurate and comprehensive, the Board of Directors has therefore adopted a Communication Policy.

Follow-up

Systemair is characterised by the simplicity of its legal and operational structure, and by smoothly functioning and well-established systems for management and control. The Board, remuneration committee and Group Management monitor compliance with policies and guidelines adopted. At every Board meeting, the Company's financial situation is discussed, and prior to the publication of quarterly reports and annual reports, the Board reviews the financial information. Each month, Group Management and Business Board members review the results for each subsidiary and discuss deviations from the plan with the CEO of the subsidiary concerned.

The tasks of the external auditors include supervising internal control in the Group companies annually. The auditors maintain continuous contact with and report directly to the Board of Directors.

During the year, the controller organisation performed several internal audits of subsidiaries. This work adheres to a standardised model, in which various material issues associated with internal guidelines and policies are followed up.

Ways of working with internal audits are being developed continuously, and an annual plan for audit activities has been adopted and is addressed by the Board

Internal audit

Systemair has a simple operating structure with excellent facilities for internal control. Compliance with the systems of governance and internal control developed by the Company is regularly followed up by the Group’s controllers. In addition, ongoing follow-up is performed by the business boards and Group management. Further control and follow-up are exercised by the Board of Directors.

Day-to-day dialogue between the Company and its external auditors and the checks carried out by the above bodies are considered at present to be adequate to ensure that internal control remains effective. Every year, the Board evaluates the need for internal auditing. To date, it has concluded that a separate internal auditing function would not deliver any material benefit. This judgement is assessed continuously, and a review will take place in 2019/20.

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