Siemens 2013 Annual Report Download - page 244

92 A. To our Shareholders
117 B. Corporate Governance 155 C. Combined Management Report
156 C. Business and economic environment
173 C. Financial performance system
179 C. Results of operations
192 C. Financial position
204 C. Net assets position
207 C. Overall assessment of the economic position
209 C. Subsequent events
210 C. Sustainability
227 C. Report on expected developments and
associated material opportunities and risks

C.. Significant characteristics
of the accounting-related internal
control and risk management system
The following discussion describes information required pursu-
ant to Section  () and Section  () no.  of the German
Commercial Code (Handelsgesetzbuch) and explanatory report.
The overarching objective of our accounting-related internal
control and risk management system is to ensure that financial
reporting is conducted in a proper manner such that the Con-
solidated Financial Statements and the Combined Management
Report are prepared in accordance with all relevant regulations.
As described in C.. RISK MANAGEMENT, our ERM approach is
based on the worldwide accepted “Enterprise Risk
Manage-
ment – Integrated Framework” developed by the COSO.
As one
of the objectives of this framework is reliability of a company ’s
financial reporting, it also includes an accounting-related per-
spective. The accounting-related internal control system (con-
trol system) implemented by us is based on Internal Control –
Integrated Framework (), an internationally recognized
framework also developed by the COSO. The two systems are
complementary.
Our management is responsible for establishing and maintain-
ing adequate internal control over financial reporting. At the
end of each fiscal year, our management performs an evalua-
tion of the effectiveness of its control system, both in design
and operating effectiveness. We have a standardized proce-
dure under which necessary controls are defined, documented
in accordance with uniform standards, and tested regularly on
their effectiveness. Our management has concluded that the
Company ’s internal control over financial reporting was effec-
tive as of September , . Nevertheless, there are inherent
limitations in the effectiveness of any control system, and no
system, including one determined to be effective, may prevent
or detect all misstatements.
Our Consolidated Financial Statements are prepared on the
basis of a conceptual framework which primarily consists of
company-wide uniform Financial Reporting Guidelines and a
chart of accounts, both issued by the Corporate Finance de-
partment and to be applied consistently throughout Siemens.
New laws, accounting standards, and other official announce-
ments are analyzed on an ongoing basis with regard to their
relevance and impact on the Consolidated Financial State-
ments and the Combined Management Report and where
necessary, our Financial Reporting Guidelines and the chart of
accounts are adjusted accordingly. In quarterly closing letters,
accounting departments of Siemens AG and its subsidiaries
are informed about current topics from an accounting and
closing process perspective and any deadlines that must be
met for the respective closing processes.
The base data used in preparing the Consolidated Financial
Statements consists of the closing data reported by the opera-
tions of Siemens AG and its subsidiaries, which are derived
from the various accounting records. The preparation of the
closing data of most of our subsidiaries is supported by our
internal Global Shared Services organization. Furthermore,
other accounting activities, such as governance and monitor-
ing related activities, are bundled on regional level. In addi-
tion, for some areas requiring specialized know-how such as
valuations relating to post-employment benefits support from
external service providers is obtained and used. The reported
closing data is used to prepare the Consolidated Financial
Statements in the consolidation system. The steps necessary
to prepare the Consolidated Financial Statements are subject
to both manual and automated controls at all levels.
The specialist skills required of employees involved in the ac-
counting process are assessed when the employees are initial-
ly selected; thereafter, the employees receive regular training.
As a fundamental principle, at the different levels, items must
be verified by at least one other person (four eyes principle)
and specific procedures must be adhered to for the authoriza-
tion of the data. Additional control mechanisms include target-
performance comparisons and analyses of the composition of,
and changes in, individual line items, both in the closing data
reported by units and in the Consolidated Financial Statements.
Accounting-related IT systems provide for defined access rules
in order to ensure that accounting related data is protected
from unauthorized access, use or modification. Every unit
included in our Consolidated Financial Statements is subject
to the rules and regulations of the Corporate Information
Security Guide.
On a quarterly basis, management of Sectors, Divisions, SFS,
Cross-Sector Services, regions and certain Corporate Units, are
supported by confirmations of management of entities under
their responsibility, which confirm the accuracy of the finan-
cial data they have reported to Siemens’ corporate headquar-
ters and the effectiveness of the related control systems.