Siemens 2014 Annual Report Download - page 240

108 A. To our Shareholders 131 B. Corporate Governance 171 C. Combined Management Report
172 C. Business and economic environment
187 C. Financial performance system
193 C. Results of operations
205 C. Financial position
210 C. Net assets position

As of October , , we have also eliminated the Sector level
and consolidated our business activities into nine Divisions and
one separately managed unit, Healthcare (for details see
C... ORGANIZATION AND BASIS OF PRESENTATION ). This change is
expected to increase our customer proximity and accelerate our
decision-making. In addition, we have made governance even
more stringent across all levels of our organization. Our Man-
aging Board leads the Company and maintains the balance be-
tween our businesses and Regions. It is supported by strong,
efficient corporate governance functions, our Corporate Core,
which is expected to ensure fast, nonbureaucratic deci-
sion-making across key company functions (for details, see
C.. STRATEGY).
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 finan-
cial reporting is conducted in a proper manner such that the
Consolidated Financial Statements and the Combined Man-
agement 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 (control
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 procedure
under which necessary controls are defined, documented in
accordance with uniform standards, and tested regularly on
their effectiveness. Nevertheless, there are inherent limitations
in the effectiveness of any control system, and no system, in-
cluding one determined to be effective, may prevent or detect
all misstatements.
Our Consolidated Financial Statements are prepared on the ba-
sis of a conceptual framework which primarily consists of com-
pany-wide uniform Financial Reporting Guidelines and a chart
of accounts, both issued centrally and to be applied consistently
throughout Siemens. New laws, accounting standards, and
other official announcements are analyzed on an ongoing basis
with regard to their relevance and impact on the Consolidated
Financial Statements and the Combined Management Report
and where necessary, our Financial Reporting Guidelines and
the chart of accounts are adjusted accordingly. In quarterly clos-
ing letters, accounting departments of Siemens AG and its sub-
sidiaries 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 an
internal shared services organization. Furthermore, other ac-
counting activities, such as governance and monitoring related
activities, are bundled on regional level. In addition, for some
areas requiring specialized know-how such as valuations relat-
ing 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 Con-
solidated Financial Statements are subject to both manual and
automated controls at all levels.