ANNUAL REPORT 2011 - DONG Energy

InteRnal contRol AND RISK MANAGEMENT
54
Internal control and risk management
in connection with the financial reporting
DONG Energy’s internal control and risk management in
connection with its financial reporting are planned with a
view to presenting financial statements that are in accordance
with International Financial Reporting Standards
(IFRS) as adopted by the EU and additional Danish disclosure
requirements for listed and State-owned public limited
companies.
The internal control and risk management system is designed
to ensure that material errors or irregularities in the
financial reporting are prevented or detected and corrected
to ensure that interim financial reports and the annual report
give a true and fair view without material misstatement.
DONG Energy has used the internationally recognised
COSO framework as a basis for its work on risk management
and determination of internal control in connection
with the financial reporting.
Control environment
The Board of Directors and the Executive Board have the
overall responsibility for the Group’s risk management and
internal control in connection with the financial reporting.
The Board of Directors’ and Executive Board’s approach to
good risk management and internal control in connection
with the financial reporting is continuously being promoted
in DONG Energy.
The Audit and Risk Committee supports the Board of
Directors in its work. The Audit and Risk Committee monitors
the financial reporting process and reviews material
key risks in it. The Audit and Risk Committee also monitors
the development in the internal control and risk management
systems as well as the ongoing reporting on assessed
risks and internal controls from the business areas. Reference
is made to the Audit and Risk Committee section for
further details on the Committee’s tasks.
The Executive Board is responsible for ensuring that internal
control and risk management systems are effective
and that controls have been implemented to address risks
relating to the financial reporting. For jointly controlled operations
and entities, such requirements are determined
and approved in collaboration with the partners in the operations
and entities in question. Managers at different levels
are responsible for the internal control and risk management
in their respective areas.
The Board of Directors and the Executive Board approve
DONG Energy’s overall policies and guidelines in key ar-
manaGEmEnt’s rEviEw – DONG ENERGY ANNUAL REPORT 2011
eas. Determination of overall policies and guidelines is
based on a clearly defined organisational structure, clear
reporting lines, authorisation and approval procedures and
segregation of duties. The overall policies and other management-approved
guidelines include finance policy, IT security
policy, policy for responsible business practices,
whistleblower policy, etc.
Based on these policies, the business areas issue more
detailed guidelines and monitor the application of policies
and procedures.
risk assessment
An overall risk assessment, during which management
identifies and reviews the items and processes that involve
a risk of material errors in the financial statements, is performed
at least once a year. Input for this risk assessment
is provided partly through dialogue with the business areas
on the business procedures and processes that form the
basis of the financial reporting and on the risks inherent in
this, and partly through discussions with the external auditor.
As part of the risk assessment, the risk of fraud and the
measures put in place to mitigate this risk are evaluated.
Furthermore, any opportunities for the day-to-day management
to override controls and manipulate the financial
statements are assessed. Based on an assessment of materiality
and risk, the items and companies that need to be
comprised by reporting on internal control are identified.
Material risks in connection with DONG Energy’s financial
reporting are described in note 2 to the consolidated
financial statements on critical accounting estimates and
judgements, to which reference is made.
Control activities
The control activities in place are designed to prevent or
detect and correct material errors in the financial statements.
The control activities are based on the risk assessment
and comprise approvals, segregation of duties, analyses,
reconciliation and controls relating to IT applications
and general IT controls, etc.
DONG Energy has established a reporting process for
identification of material risks and has performed internal
control in relation to the risks assessed. Material risks and
internal controls mapping these risks are compiled in control
catalogues for the Group’s business areas. Material
risks and controls included in the business areas’ control
catalogues are reassessed at least once a year.