Ubisoft 2007 Annual Report Download - page 153

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS
149
6
Internal control procedures
Internal control
definition and goals
To prepare the current report, Ubisoft chose to use the
internal control reference framework published on
January 22, 2007, and drafted by the Working Group set up
by the AMF (French Securities and Exchange Commission).
Under this framework, internal control is defined as a sys-
tem designed to ensure:
compliance with laws and regulations;
application of the instructions and policies fixed by
Senior Management;
the Company’s internal processes are functioning cor-
rectly, in particular, those implicating the security of its
assets;
the reliability of the financial information published.
This system must also contribute to the control over its
activities, the efficiency of its operations and efficient use
of its resources, as well as enabling the Company to ade-
quately take into account significant operational, financial
or compliance significant risks. Therefore, the internal
control system plays a key role in conducting and monito-
ring its activities.
In order to continuously assess the adequacy and effective-
ness of its internal control system, Ubisoft introduced a
proactive approach. Consequently, the internal control
system will continue to adapt to the constraints and speci-
ficities of the Group and its subsidiaries, and to changes to
its external environment.
It is applicable to all Group subsidiaries, now comprised of 27
French companies and 35 foreign companies, broken down as
follows: 20 distribution companies, 32 production companies,
10 support companies and 1 digital animation company.
However, the Group is aware that the internal control sys-
tem cannot provide an absolute guarantee that the com-
pany’s objectives will be met and that all the potential risks
it may face will be controlled.
The components of the
internal control system
6.2.2.1 Organization and operating procedures
The internal control system relies on a solid foundation of
autonomy and collaboration within the Group’s teams,
encouraging the alignment of goals, resources and the
mechanisms deployed. It is based on the clear identification
of goals and responsibilities, a human resources policy
ensuring that resources and skill levels are sufficient, and
information systems and tools that are adapted to each
team and/or subsidiary.
Each subsidiary is responsible to implement the relevant
strategies to achieve these objectives, although the moni-
toring of the internal control system and risk management
is highly centralized by the functional departments.
Organization
The various players involved in the internal control system
are as follows:
The Chairman and Chief Executive Officer of Ubisoft
Entertainment SA: he defines and drives the Group’s
strategy. He is responsible for establishing the procedures
and mechanisms employed to ensure both the functioning
and monitoring of the internal control system.
The Board of Directors: it defines the policies governing
the Company’s business activities and ensures their appli-
cation. In particular, it controls management activities, by
approving the annual financial statements and examining
the interim financial statements. To this end, it has access
to all documents and reports required to perform this task.
In addition, each Director may independently require addi-
tional information, from the Chief Executive Officer who is
at all times available to provide relevant information and
explanations the Board of Directors .
The Group’s managers and staff: the major policies and
goals are decided upon by Senior Management and passed
on to the subsidiaries. Each subsidiary has its own senior
management and management team and is responsible for
implementing the strategies designed to ensure that these
goals are achieved and for applying the Group internal
control guidelines.
The functional departments: in collaboration with Senior
Management, they are involved in setting the key accoun-
ting, finance, legal, tax, IT, operations and human
resources policies, and supporting the subsidiaries with
their implementation.
The finance and accounting teams: present in all sub-
sidiaries, they are responsible for performing analysis and
control functions, including budgeting, financial state-
ments preparation and compliance with internal control
over financial reporting.
The Internal Audit Department: reporting to Senior
Management and working with the head office financial
controllers, it carries out regular audits in the subsidiaries
and verifies the controls quality in order to formalize the
6.2
6.2.1
6.2.2
The preparation of this report is based on the information and control methods reported by the various internal control
players within Ubisoft and its subsidiaries, as well as the internal audit work performed at the request of Management.