Internal control – financial reporting ASSA ABLOY’s internal control process for financial reporting is designed to provide reasonable assurance of reliable financial reporting, which is in compliance with generally accepted accounting principles, applicable laws and regulations, and other requirements for listed companies. Control environment The Board of Directors is responsible for effective internal control and has therefore established fundamental documents of significance for financial reporting. These documents include the Board of Directors’ rules of procedure and instructions to the CEO, the Code of Conduct, financial policy, an annual financial evaluation plan. Regular meetings are held with the Audit Committee. The Group has an internal audit function whose primary objective is ensuring reliable financial reporting and good internal control. All units in the Group apply uniform accounting and reporting instructions. Internal control guidelines have been established and are reviewed annually for all operating companies. These Group-wide guidelines have a relatively broad scope and concern various processes such as ordering, sourcing, financial statements, plant management, compliance with various policies, legal matters, and HR matters. The Code of Conduct has been regularly reviewed and updated, and compliance is monitored systematically in operations. Risk assessment Risk assessment includes identifying and evaluating the risk of material errors in accounting and financial reporting at Group, division and local levels. A number of previously established documents govern the procedures to be used for accounting, finalizing accounts, financial reporting and review. A major focus has been on auditing the reconciliation between local accounts and consolidated reporting in recent years. The entire Group uses a financial reporting system with pre-defined report templates. Control activities The Group’s controller and accounting organization at both central and division levels plays a significant role in ensuring reliable financial information. It is responsible for complete, accurate and timely financial reporting. A global financial internal audit function has been established and carries out annual financial evaluations in accordance with the plan annually adopted by the Audit Committee. The results of the financial evaluations are submitted to the Audit Committee and the auditors. Further, in 2019, compliance with the Group’s anti-corruption policy was reviewed in Asia, South America and Europe. In 2019 ASSA ABLOY further strengthened the internal audit and internal control functions in terms of staffing and expanded the number of audits at the local level. Each division has employed full-time internal auditors who audit the companies and monitor internal control. Information and communication Reporting and accounting manuals as well as other financial reporting guidelines are available to all employees concerned on the Group’s intranet. A regular review and analysis of financial outcomes is carried out at both business unit and division levels and as part of the Board of Directors’ established operating structure. The Group also has established procedures for external communication of financial information, in accordance with the rules and regulations for listed companies. Review process The Board of Directors and the Audit Committee evaluate and review the Annual Report and Interim Reports prior to publication. The Audit Committee monitors the financial reporting and other related issues, and regularly discusses these issues with the external auditors. All business units report their financial results monthly in accordance with the Group’s accounting principles. This reporting serves as the basis for quarterly reports and a monthly legal and operating review. Operating reviews conform to a structure in which sales, earnings, cash flow, capital employed and other important key figures and trends for the Group are compiled, and form the basis for analysis and actions by management and controllers at different levels. Financial reviews take place quarterly at divisional board meetings, monthly in the form of performance reviews and through more informal analysis. Other important Group-wide components of internal control are the annual business planning process and regular forecasts. The Group-wide internal control guidelines are reviewed during the year in all operating companies through self-assessment. An action plan focused on concrete measures was implemented several years ago to further improve basic processes with an impact on the company’s financial position.