Loreal 2011 Annual Report Download - page 65

63REGISTRATION DOCUMENT − L’ORÉAL 2011
Corporate governance
2
Internal Control procedures (Report of the Chairman of the Board of Directors onInternal Control)
actions undertaken in the area of Internal Control and it reports
thereon to the Board of Directors. Its remits are defined in the
Internal Rules of the Board of Directors in paragraph2.2.2.3.
on page46 .
Each year, the committee performs a review of the Internal Audit
plan, its objectives and the general conclusions of Internal Audit
assignments. Major Internal Control projects and initiatives are
also presented to it. The committee then prepares a report with
its own remarks for the Board of Directors.
The Audit Committee’s work with regard to accounting and
financial information is described in paragraph2.5.4.2. on
page64 .
The Functional Divisions
The Functional Divisions each define guidance and procedures
for their own areas, which they communicate to the different
countries and entities.
The Administration and Finance Division
This Division’s main role is to assist and control the operational
employees in their administrative, financial and legal activities.
In order to do so, it sets the operating rules that apply to all
entities in these areas and is responsible for the definition and
deployment of tools, procedures and best practices, particularly
in the following areas: financial control, accounting and
consolidation, financing and treasury, tax, legal affairs, financial
communication, information systems, and insurance. An Internal
Control Committee was created in2008 with the aim of taking
all measures to promote the proper understanding and the
proper application of the Group’s Internal Control rules and
also to monitor progress on important Internal Control projects.
The Internal Control Department
This department, which is separate from Internal Audit and
placed under the responsibility of the Administration and
Finance Division, ensures the distribution and updating of the
“Fundamentals of Internal Control” guide. Frequent actions at
seminars and during training cycles help to increase knowledge
of this tool and to improve its application and use by operational
employees.
The task of this department is to coordinate the implementation
of the projects and work decided by the Internal Control
Committee with the experts in each area. The updating of the
standards mentioned in paragraphs2.5.2.3.
on page61 and
2.5.4.2. on page64 is one example of this work.
In addition, the Internal Control Department also monitors
compliance with regulatory Internal Control obligations on an
ongoing basis.
The Internal Audit Department
In addition to its role of supervision of application of the Internal
Control system (see paragraph2.5.2.5 on page62 ), the Internal
Audit Department carries out cross-functional analyses with
regard to possible Internal Control weaknesses based on
findings noted during their assignments. These analyses make it
possible to orient the work of the Internal Control Committee and
to identify the priority areas for improvement and strengthening
of procedures.
The Operations Division
This Division comprises the Quality, EHS (Environment, Health and
Safety), Purchasing, Information Systems (production), Human
Resources (production), Supply Chain, Production Organisation,
Industrial Management and Real Estate Departments. It defines
standards and methods applicable in the areas of production
quality, safety and the environment. It assists operational
employees in the definition and implementation of their
manufacturing and logistics policies.
The other Functional Divisions
Divisions also involved in Internal Control are the Human Resources
Department, the Research and Innovation Department which
is responsible in particular for cosmetovigilance and the
quality of the formulae used in product composition, and
the Communications and External Relations Department,
which co-ordinates communications initiatives, prepares crisis
management principles and ensures that they are applied.
This department is also responsible for the co-ordination of
Sustainable Development initiatives.
2.5.4. Internal Control system
relating tothepreparation
and processing of
financial and accounting
information
For the preparation of this report, L’Oréal based itself on the
“Application Guide for Internal Control of accounting and
financial information published by issuers”, which is part of the
Reference Framework published by the AMF on July22nd, 2010.
This approach is part of an overall process aimed at making
continual progress and improving the Internal Control system
that has already been set up.
2.5.4.1. Definition, scope and objectives
Internal Control of accounting and financial fields covers the
processes that contribute to accounting data: i.e . the process
of production of financial information, the process of accounts
closings and actions of financial communication.
The Internal Control system with regard to accounting and
financial aspects aims to ensure:
♦compliance with accounting regulations and the correct
application of the principles on which the financial
statements are based;
♦application of the guidelines set by the General Management
with regard to financial information;