IC System
Status: 2007 Registration Document
The IC system is based on a variety of IC policies and procedures within EADS. It is designed to provide reasonable assurance to the Board of Directors, the Chief Executive Officer and the Chief Financial Officer regarding the achievement of the following objectives:
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The quality of financial reporting, including design and implementation of processes to generate a flow of timely, relevant and reliable financial information;
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Compliance with laws and regulations applicable to the Group, as well as with internal Group policies; and
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Identification and response to significant operational, financial and compliance risks throughout EADS.
The management of the Divisions, BUs and HQ departments is responsible for the operating and monitoring of the IC system within their area of duty. They seek to ensure that the appropriate controls to achieve the control objectives defined by EADS HQ and listed in IC templates are in place and operate effectively on an ongoing basis.
EADS has established formal internal control self-assessment mechanisms, to be applied by each identified process/control owner on a regular basis, who must assess the operating and design effectiveness of the internal controls in place for his process. Identified control deficiencies are evaluated and prioritised into “deficiencies”, “significant deficiencies” and “material weaknesses”. For each deficiency, a remediation action is defined and implemented. The progress is monitored by the respective Division, BU and HQ department management and reported to EADS HQ. To verify the successful implementation of the remediation actions, the remedied controls are periodically re-assessed. Each year, corporate audit provides an independent review of the status of the IC systems and the performance of self-assessments in selected Divisions, BUs and HQ departments. Generally, relevant personnel (e.g., IC coordinators, process owners) receive training in order to be informed of new/changed laws and regulations regarding IC and to be updated on relevant process steps and activities regarding the IC system.
Based on the self-assessments, management of each Division, BU and HQ department prepares formal statements as to the adequacy and effectiveness of the IC systems within their scope of responsibility. Joint ventures, such as MBDA, operate separate IC systems. Alignment with the EADS IC system is facilitated, inter alia, through EADS’ presence on such affiliates’ supervisory and management bodies (e.g., MBDA Board of Directors, audit committees).
Monitoring of Internal Controls - Management discussions
In addition to regular monitoring activities at the Divisional, BU and HQ levels, assessments about the adequacy and effectiveness of the IC and RM systems are discussed between the Chief Executive Officer and Chief Financial Officer and the respective Division/BU Chief Executive Officers and Chief Financial Officers or the HQ-department heads. These discussions serve to prioritise potential issues at the EADS level, define and implement appropriate actions, if needed, and derive conclusions for the overall EADS IC and RM report.
Management Sign-Off - Sub-Representation
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The IC system is adequate to provide reasonable assurance regarding the reliability of financial reporting as well as compliance with applicable laws and regulations;
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The control objectives are being achieved by controls that are documented, adequately designed for their business and are operating effectively, in all material respects;
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The owner of each control activity is clearly identified; and
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The RM system is designed and operated to identify, assess, respond to, design controls and monitor/report on risks on a timely basis.
Once every year, identified significant deficiencies and material weaknesses are reported in sub-representation letters. Since the 2007 reporting cycle, an enhanced sign-off process requires Chief Executive Officer and Chief Financial Officer confirm to the Board of Directors, to the best of their knowledge, whether:
The Chief Executive Officer and Chief Financial Officer’s IC and RM statement is mainly based on the self-assessments, reviews and management discussions described above, and is substantiated by sub-representation letters provided to the Chief Executive Officer and Chief Financial Officer by all Divisional and BU management.
Further Information: |
