Aer Lingus 2010 Annual Report Download - page 35

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Directors’ Report Aer Lingus Group Plc – Annual Report 2010
• Details regarding financial risk management are set out at Note 3
to the consolidated financial statements on page 61;
• The description of how the Audit Committee discharged its
obligations throughout the year on page 30; and
• The description of the Risk Committee on page 32.
Internal control
The Board acknowledges that it is responsible for the Group’s system
of internal control and for reviewing its effectiveness. Such a system is
designed to manage rather than eliminate the risk of failure to achieve
business objectives and can provide reasonable, but not absolute,
assurance against material misstatement or loss.
As recommended by the revised guidance for Directors on internal
controls (The Turnbull Guidance, October 2005) there is an ongoing
Corporate Risk Assessment Process for identifying, evaluating and
managing the signifi cant risks faced by the Group, under fi nancial,
operational and compliance controls and risk management systems. The
process has been in place throughout the accounting period and up to
the date of approval of the Annual Report and fi nancial statements and
its outputs are relied upon for the purpose of preparing the Group’s
consolidated accounts. The process involves the Board considering:
• The nature and extent of the key risks facing the Group;
• The likelihood of these risks occurring;
• The impact on the Group should these risks occur;
• The actions being taken to manage these risks at the desired level;
and
• The procedures in place to monitor these risks.
The risks facing the Group are regularly reviewed by management and
the Risk Committee (as delegated to it by the Audit Committee, whose
terms of reference require it to keep under review the effectiveness of
the Company’s internal controls and risk management systems).
In accordance with the process outlined above, the Board confi rms that
it has conducted an annual review of the effectiveness of the internal
control systems in operation and that it has approved the reporting
lines to ensure the ongoing effectiveness of the internal controls and
reporting structures. This review included a review of all material
controls, including fi nancial, operational and compliance controls
and risk management systems.
In addition to the matters described above, the other elements of the
Group’s internal control and risk management systems in relation to the
process for preparing the Company’s consolidated accounts are as
follows:
• Clearly defined organisation structures and lines of authority;
• Employment of competent persons;
• A strong and independent Board that meets regularly during the
year, with separate Chairman and Chief Executive roles;
• Corporate policies for financial reporting, treasury and financial risk
management, information technology and security, project appraisal
and corporate governance;
• Board of Directors approval of all major strategic decisions;
• Clearly defined process and information system for controlling
capital expenditure including use of appropriate authorisation
levels;
• Long term business plan;
• Detailed annual budget process, with budget reviewed and approved
by Board;
• Monthly monitoring of historic and forecast performance against
budget which is reported to the Board;
• Comprehensive system of internal financial reporting which includes
preparation of detailed financial statements and key performance
indicators on a monthly basis and the preparation of the year end
consolidated financial statements;
• An internal audit function which reviews and reports on key
business processes and controls;
• Corporate compliance monitoring; and
• An audit committee which approves audit plans and deals with
significant control issues raised by internal or external audit; and
• Regular communication with external auditors.
Any system of internal control can provide only reasonable and not
absolute assurance that material fi nancial irregularities will be detected
or that the risk of failure to achieve business objectives is eliminated.
The Directors, having reviewed the effectiveness of the system of internal
fi nancial, operational and compliance controls and risk management,
consider that the system operated effectively throughout the fi nancial
year and up to the date that the fi nancial statements were signed.
Going concern
After making enquiries the Directors consider that the Company has
adequate resources to continue operating for the foreseeable future.
For this reason they have continued to adopt the going concern basis
in preparing the fi nancial statements.
Accountability and audit
A statement relating to the Directors’ responsibilities in respect of the
preparation of the fi nancial statements is set out on page 25 with the
responsibilities of the Company’s Independent Auditors outlined on
page 42.
Directors’ Report (continued)