The Board’s responsibility for internal control is regulated by the Swedish Companies Act and the Annual Accounts Act, which require that information on the key elements of Transtema’s system of internal control and risk management in connection with financial reporting be included in the Corporate Governance Report each year, as well as the Code.
Internal control aims to create a clear accountability structure and an effective decision-making process. The Board has adopted a number of basic documents of importance for financial reporting to ensure an effective control environment. The Board’s Rules of Procedure and instructions for the Chief Executive Officer further ensure a clear allocation of roles and responsibilities, aiming to effectively manage the business’s risks. The Board has also established some basic guidelines and policies relevant to internal control.
The basic policy documents are subject to review on an ongoing basis. In addition, an effective control environment requires an adequate organisational structure and ongoing reviews of the same. Transtema’s Group Management regularly reports to the Board following defined routines. Furthermore, Group Management is responsible for the system of internal controls required to manage material risks in the ordinary course of business. Managers at various levels within the Group finally have defined authority and responsibility regarding internal control.
The Board ensures that established principles for the financial reporting and internal control are adhered to and that appropriate relations with Transtema’s auditor are maintained. The Board monitors the financial reporting on an ongoing basis to ensure good internal control and continuous improvements. At least one board meeting annually focuses on internal control, risks, and management reporting. The responsibility for maintaining an effective control environment and the ongoing work with internal control over financial reporting is delegated to the CEO, who in turn delegates this to the CFO following Transtema’s Financial Policy.
The internal control structure is based on Transtema’s organisation with clear roles, responsibilities, and delegation of power. Operational decisions are made at the company level, while decisions on strategy, overall financial matters, acquisitions, and larger investments are made by Transtema’s Board with the support of Group Management. The policy documents relating to accounting, Transtema’s accounting manual, and financial reporting, the Company’s financial policy, constitute the essential elements of the control environment concerning financial reporting. These documents are updated on an ongoing basis when changes are made to, for example, accounting standards and legislation.
Within Transtema, a risk assessment is carried out regularly to identify material risks relating to financial reporting. As regards financial reporting, the risk is primarily considered to lie in material misstatements in the accounts, for example, regarding the accounting and valuation of assets, liabilities, income, and expenses or other deviations. Fraud and loss through misappropriation are another risk. Risk management is built into each process, and different methods are used to assess and mitigate risks and to ensure that the risks to which Transtema is exposed are managed following established policies, instructions, and follow-up procedures, which aim to reduce potential risks and promote correct accounting, reporting, and information disclosure.
The risks identified regarding financial reporting are managed through Transtema’s control activities, such as access controls in IT systems, attestation controls, and the like. The control structure consists of clear roles in the organisation that enable an effective distribution of responsibilities for specific control activities and aim to detect or, in time, prevent the risk of reporting errors. The continuous analysis of the financial reporting and the analysis performed at Group level are crucial to ensure that the financial reporting does not contain any material misstatements. The Group’s financial organisation plays an important role in the internal control process, which is responsible for the accuracy, completeness and timeliness of the financial reporting from each unit.
The Group has information and communication channels intended to promote the completeness and accuracy of its financial reporting, as set out in its information policy. Policies, guidelines, and internal instructions relating to financial reporting are available in electronic and printed form. Regular updates and announcements of changes in accounting policies, reporting requirements, or other information disclosures are made available and known to relevant employees.
The CEO has delegated responsibility to the CFO, who is responsible for ensuring that internal control is organised and monitored according to the guidelines established by the Board. The CFO is also responsible for conducting independent objective reviews to systematically evaluate and propose improvements to the Group’s governance, internal control, and risk management processes. Financial management and control are carried out by the group finance function. Transtema’s management performs a monthly performance review with an analysis of deviations from the budget, forecast, and previous year, and all monthly accounts are discussed with the management of the respective subsidiary or operating segment. The Board receives monthly financial reports, and the financial reporting is followed up at each board meeting. Before the publication of the Annual Report and quarterly reports, the Board and Group Management review the financial reporting. An external audit of the financial statements is carried out in connection with the annual accounts.