Financial Reporting Systems
The Group has a comprehensive financial reporting systems, which are reviewed and modified as circumstances require. Procedures include: preparing operational budgets for the forthcoming year for review and approval by the Board; preparing budgets and forecasts using conservative and consistent assumptions, which are continually reviewed; monitoring performance against key performance indicators throughout the financial year and updating forecasts with reference to information on key risk areas.
In addition, monthly management reports are prepared both on a divisional and consolidated basis and are presented to the Executive Committee.
Internal Control and Risk Management
The Directors have overall responsibility for ensuring that the Group maintains a robust system of internal controls to provide them with reasonable assurance that all information used within the business and for external publication is adequate.
This includes financial, operational and compliance control and risk management to ensure that shareholders' interests and the Company's assets are safeguarded. In line with best practice, the Board regularly reviews the internal control system to ensure that it remains effective and fit for purpose. Where weaknesses are identified as a result of the reviews, new procedures are put in place to strengthen controls and these are in turn reviewed at regular intervals.
The Group's internal audit activity is managed through the Management Assurance Services ('MAS') function and is an important element of the overall process by which the Board obtains the assurance it requires to ensure that risks to the business are properly identified, evaluated and managed. MAS also provides assurance to the Board on the effectiveness of relevant internal controls.
The scope of work, authority and resources of MAS are regularly reviewed by the Audit Committee and its work is supported by the services of leading international accountancy firms (but specifically not including the Group's external auditors).
Each of the Group's principal subsidiaries has in place procedures to ensure that sufficient internal controls are maintained. These procedures include a monthly meeting of the relevant management committee and a quarterly meeting of the audit committee of that subsidiary. These committees are appointed by the board of directors of each relevant subsidiary and the Chairman of the Audit Committee of each principal subsidiary reports to the Group Audit Committee on whether there are any material adverse findings.
The responsibilities of MAS include recommending improvements in the control environment and ensuring compliance with the Group's procedures and policies.
The planning of internal audit is approached from a risk perspective. For internal audit purposes, the Group is divided into three auditable groupings, namely: manufacturing/operating entities, special projects and other entities. In preparing an internal audit plan, reference is made to the Group's risk matrix, inputs are sought from senior management and project managers and audit committee members and reference is made to past audit experience and financial analysis.
This process is designed to manage rather than eliminate the risk of failing to achieve the Group's business objectives. As such, the process can only provide reasonable rather than absolute assurance against material misstatement or loss.