Volvo 2013 Annual Report Download - page 109

The foundation of the internal control pro-
cess relating to the fi nancial reporting is based
on the Group’s directives, policies and instruc-
tions, as well as the responsibility and authority
structure that have been adapted to the Group’s
organization to create and maintain a satisfac-
tory control environment. The principles for
internal controls and directives and policies for
the fi nancial reporting are contained in Volvo
Financial Policies & Procedures (FPP), an inter-
nal document comprising all important instruc-
tions, rules and principles.
Risk assessment
Risks relating to fi nancial reporting are evalu-
ated and monitored by the Board through the
Audit Committee inter alia through identifying
what types of risks that typically could be con-
sidered as material and where they would typi-
cally occur. The annual evaluation of internal
control activities conducted by the Internal Con-
trol and Corporate Audit functions, is based on a
risk-based model. The evaluation of the risk that
errors will appear in the fi nancial reporting is
based on a number of criteria. Complex account-
ing principles can, for example, mean the fi nan-
cial reporting risks being inaccurate for those
posts that are covered by such principles. Valua-
tion of a particular asset or liability according to
various evaluation criteria can also constitute a
risk. The same is true for complex and/or chang-
ing business circumstances.
Control activities
In addition to the Board of AB Volvo and its
Audit Committee, the management groups and
other decision-making bodies in the business
areas, Group Functions and Group companies
constitute overall supervisory bodies.
Several control activities are applied in the
ongoing business processes to ensure that
potential errors or deviations in the fi nancial
reporting are prevented, discovered and cor-
rected. Control activities range from review of
outcome results in management group meet-
ings to specifi c reconciliation of accounts and
analyses of the ongoing processes for fi nancial
reporting.
Responsibility for ensuring that control activ-
ities in the fi nancial processes are appropriate
and in accordance with the Group’s policies and
instructions are compiled in the Group’s fi nan-
cial reporting function. The Group’s shared ser-
vice center is responsible for the performance
of control activities including the responsibility
for ensuring that authority structures are
designed in accordance with good internal con-
trol so that one person cannot perform an activ-
ity and then perform the control of the same
activity. Control activities within IT security and
maintenance are a key part of Volvo’s internal
control over fi nancial reporting.
Information and communication
Policies and instructions relating to the fi nan-
cial reporting are updated and communicated
on a regular basis from management to all
affected employees. The Group’s fi nancial
reporting function has direct operating respon-
sibility for the daily fi nancial reporting and
works to ensure a uniform application of the
Group’s policies, principles and instructions for
the fi nancial reporting and to identify and com-
municate shortcomings and areas of improve-
ment in the processes for fi nancial reporting.
Follow-up
Ongoing responsibility for follow-up rests with
the Group’s fi nancial reporting function. In addi-
tion, the Corporate Audit and the Internal Con-
trol functions conduct review and follow-up
activities in accordance with what is described
in the introduction of this report. More specifi -
cally, the Internal Control function runs and
coordinates evaluation activities through the
“Volvo Group Internal Control Programme,” with
the purpose of systematically evaluating the
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Volvo Group Internal
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Volvo Group Internal Control Programme
Yearly evaluation of the effectiveness of
internal control over fi nancial reporting (ICFR)
within the Volvo Group.
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