APC 2004 Annual Report Download - page 35

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c) Internal Audit
The Vice-President in charge of the 18-member
Internal Audit Department reports to the Chairman
and CEO and to the Audit Committee.
The internal auditors are responsible for ensuring at
the level of each unit that:
Risks are appropriately identified and managed.
Significant financial, management and operating
information is accurate, reliable and timely.
Employees' actions are in compliance with the
Group's policies, standards, procedures and the
applicable laws and regulations.
Resources are acquired economically, used effi-
ciently and adequately protected.
Internal audit plans are drawn up based on risk and
control concerns identified by management, taking
into account the work performed by the external
Auditors. In light of Schneider Electric's core busi-
nesses, internal audit procedures focus mainly on
revenue recognition, cash and asset management
processes, wages and benefits, financial reporting,
information systems, manufacturing operations, pur-
chasing and operating expenses.
After each internal audit, a report is issued setting out
the auditors' findings and recommendations. Copies
of the report are given to the head of the audited enti-
ty, Group senior management and the Audit
Committee.
Internal benchmarks
a) Principles of Responsibility
The Principles of Responsibility are a set of guide-
lines for decisions and actions that have an impact on
stakeholders-employees, customers, suppliers, share-
holders, the community-or the environment. A copy of
the Principles is given to all new employees along
with their employment contract.
b) Insider Code
This code sets out the rules to be followed by man-
agement and employees to prevent insider trading. It
imposes an obligation of confidentiality on all employ-
ees who have access to price-sensitive information
and sets permanent restrictions on purchases and
sales of Schneider Electric shares by persons who
have access to price-sensitive information in the
course of their work.
c) International Internal Auditing Standards
The Schneider Electric internal auditors are commit-
ted to complying with the international standards pub-
lished by the Institute of Internal Auditors (I.I.A.) and
other bodies.
d) Group accounting polices (see below)
Procedures
a) General Procedures
Commitment limits
Commitment limits have been set for executives from
Group level down to the individual units, whereby con-
tracts for the purchase or sale of products or services
may be signed or authorized only by line manage-
ment when they exceed a certain amount which
varies according to the type of contract, up to a max-
imum of 10 million. In addition all transactions that
may affect the Group's fundamental interests, due to
their size or nature, must be authorized in advance by
Group senior management or, in some cases, the
Board of Directors. This rule applies in particular to all
purchases and sales of shares in subsidiaries and
affiliates whatever the amounts involved, as well as to
subscriptions to share issues by these entities, pur-
chases and sales of strategic assets, product devel-
opment, trademarks and patents, and off-balance
sheet commitments.
Acquisitions Committee, New Products Committee
Proposed business acquisitions and development
programs must be submitted to the Acquisitions
Committee or the New Products Committee for
review, prior to being presented for approval at the
appropriate management level as described above.
The two committees are made up of representatives
of the main departments involved in the projects.
Quarterly management reviews
Group senior management (comprising the Chief
Operating Officer, the Executive Vice-President,
Finance & Control - Legal Affairs and the Executive
Vice-President, Human Resources & Communication)
performs a comprehensive review of the activities and
results of the Operating and Corporate Divisions four
times a year. The review covers the status of the main
action plans in the areas of business growth, opera-
tional efficiency and human capital management, as
well as year-to-date results and forecasts for the
remaining quarters.
Monthly management reporting
Group senior management holds monthly meetings to
review the monthly management accounts of the
Group and the individual entities.
Financial review meetings
The financial position of all Group companies is
reviewed once a year by Group Finance & Control -
Legal Affairs.
The process includes, for each unit:
Analytical review of the balance sheet and of capi-
tal employed.
Analytical review of working capital and customer
credit.
Analysis of financial risks (liquidity, currency, coun-
terparty and credit risks).
Corporate Governance