Sustainability r e p o r t - Sabesp

Relationship with independent auditorsThe Company abides by the principles that maintain the independenceof the external auditor: an auditor should not audit his or her own work,perform management functions; and act as an advocate for an audit client.PricewaterhouseCoopers was our independent auditor for the annual periodended December 31, 2009 and they did not provide non-audit services duringthis period.Risk ManagementIn 2009, the implementation of companywide risk management was alsoconsolidated, by identifying and assessing strategic risks and the main businessprocesses of Sabesp. The project also includes the assessment of Fundação deSeguridade Social - Sabesprev’s strategic risks (Sabesprev).We are aware that good risk management is important to ensure the continuityof our activities and accomplish our mission: provide water and waste services,contributing for a better quality of life and environmental quality.Previously, we used to perform various nonstandard risk management actions.In 2009, the process was made official and the management of strategic risks isnow under the responsibility of two bodies: (i) - Risk Committee, consisting ofPresident of SABESP, as coordinator, and a representative from each department;and (ii) - the Risk Management Center, which reports to Internal Audit. TheCommittee formally started its activities in January 2010.Internal ControlIn 2009, we continued testing internal controls to maintain the certification thatmeets the US Sarbanes-Oxley Act (SOx), since 2006. These controls cover theprocedures that ensure the accuracy of accounting records; the preparationof statutory financial statements; and the proper authorization of transactionsrelated to the purchase, use and disposal of Company assets.Based on the assessment made, internal controls were considered effectiveand, therefore, we concluded that the main risks that might impact the financialstatements were duly mitigated.To improve organizational instruments and operational processes, in 2009 weensured the continuity of performance-indicator monitoring, focusing on theidentification of critical points that require action to maintain and expand revenue,reduce expenses, and optimize the management of administrative, operational,and construction processes. The Company’s managers proposed Action Plans toimprove internal control, which were reported to the Audit Committee and theTop Management.Arbitration ClausePursuant to the Novo Mercado Listing Rules, we are bound by the ArbitrationClause, under which BM&FBOVESPA, the Company, and our shareholders, officers,and members of the Supervisory Board agree to solve through arbitration anydispute or controversy among them, whether related to or, in particular, arisingfrom the enforcement, validity, effectiveness, interpretation, violation and effecttherefrom of the provisions set forth in Law 6404/76, our Bylaws, the rules issuedby the National Monetary Council, the Central Bank of Brazil, and the BrazilianSecurities and Exchange Commission, as well as the other rules applicable tothe operation of capital markets in general, in addition to those contained inNovo Mercado Listing Rules, the Novo Mercado Participation Agreement, and theMarket Arbitration Chamber Regulation. Any dispute shall be brought before theMarket Arbitration Chamber established by BM&FBovespa, in compliance with saidRegulation, considering the exception applicable to the unavailable rights.82 Relatório de Sustentabilidade 2009 83