Philips 2007 Annual Report Download - page 93

Philips Annual Report 2007 99
and related controls are designed to provide reasonable
assurance that assets are safeguarded, that the books and
records properly re ect transactions necessary to permit
preparation of  nancial statements, that policies and
procedures are carried out by quali ed personnel, and
that published US GAAP  nancial statements are properly
prepared and do not contain any material misstatements.
The Board of Management has assessed the design and
operating effectiveness of controls within the scope of
section 404 of the US Sarbanes-Oxley Act. The Board
of Management’s evaluation included controls at Group
and division level, and transactional controls at signi cant
locations across all of the Philips’ divisions. The scope also
included relevant IT controls. Any de ciencies noted in
design and operating effectiveness were not completely
remedied were formally evaluated at year-end. The Board
of Management’s report, including its conclusions, regarding
the effectiveness of its internal control over US GAAP
 nancial reporting, can be found in the chapter Group
 nancial statements of this Annual Report.
Philips General Business Principles
The Philips General Business Principles (GBP) govern
Philips’ business decisions and actions throughout the
world, applying equally to corporate actions and the
behavior of individual employees. They incorporate the
fundamental principles within Philips for doing business.
The intention of the GBP is to ensure compliance with laws
and
regulations, as well as with Philips’ norms and values.
The GBP are available in most of the local languages
and are an integral part of the labor contracts in virtually
all countries where Philips has business activities.
Responsibility for compliance with the principles rests
principally with the management of each business. Every
country organization and each main production site has
a compliance of cer. Con rmation of compliance with
the GBP is an integral part of the annual Statement on
Business Controls that has to be issued by the management
controls. Thereafter, Philips introduced a program to
systematically certify the critical IT systems against an
internal control standard which is based on the generally
accepted standards: control objectives for information and
related technology (COBIT) and COSO. Furthermore,
as part of BCF, Philips implemented a global standard
for internal control over  nancial reporting (ICS). ICS
supports management in a quarterly cycle of assessment
and monitoring, enhancing transparency of its control
environment. ICS has been deployed in all main reporting
units, where business process owners perform an
extensive number of controls, document the results each
quarter, and take corrective action where necessary.
With respect to  nancial reporting, a structured
company-wide assessment and monitoring process
is in place to enable the Company’s President/Chief
Executive Of cer and Chief Financial Of cer to review
and report on the effectiveness of risk management and
business controls. Each quarter, division management and
functional management at Group level involved in the
external reporting process issue a formal certi cation
statement to con rm the adequacy of the design and
effectiveness of disclosure controls and internal controls
over  nancial reporting, which is subject to review by the
Board of Management. Annually, as part of the Annual
Report process, management’s accountability for business
controls is enforced through the formal issuance of
a Statement on Business Controls and a Letter of
Representation by each business unit, resulting, via a cascade
process, in a statement by each division. The Statements
on Business Controls and Letters of Representation are
subject to review by the Board of Management.
Section 404 Sarbanes-Oxley Act
Under section 404 of the US Sarbanes-Oxley Act, the
Board of Management is, amongst other things, responsible
for establishing and maintaining a system of internal control
over US GAAP  nancial reporting for Philips. This internal
control framework and its established accounting procedures
98 Risk management 112 Our leadership 116 Report of the Supervisory Board 126 Financial Statements
Strategic risks Market risks Operational risks Financial risks Compliance risks
Corporate Governance
Philips Business Control Framework
Philips General Business Principles