Annual report on corporate governance and the ownership ... - Indesit

• assurance mechanisms: these are required to ensure continual alignment of the ICS’s design with
the Company’s governance and control requirements. Application of this principle presupposes
independence of and separation between operating and control responsibilities, thus preventing
potential conflict of interest between organisational functions and individual positions which might
compromise integrated risk control.
The ICS’s main instruments, in addition to the system of assignment of powers, are the Code of Conduct 35 , the
Model 36 and various activities that verify the existence, adequacy and actual application of the administrative
and accounting procedures needed to draft financial statements which the “DP” has to issue in accordance with
the Investor Protection law (also definable as the “Internal control system for financial <strong>report</strong>ing”) 37 .
6.2 Internal audit function and internal audit manager
In line with the definition of the “Institute of Internal Auditors”, the function provides the Board, the executive
director overseeing the operation of the ICS, the ICC and the Statutory Auditors with professional advice
on maintenance and continual improvement of the ICS and assurance, based on checks and assessments,
regarding the functionality, completeness and adequacy of the ICS.
This is 3 rd level control and its operating phases may be summarized as follows:
• assessment of risks characterizing business processes and operating units ( risk assessment) and
identification of areas most at risk and thence definition of control priorities (annual audit plan);
• development of the audit plan, identification of critical issues and areas for improvement in 1 st and 2 nd
level control and discussion on corrective actions with operating management;
• monitoring of timings agreed for implementation of corrective actions and their efficacy ( follow-up);
• review of the results of the audit activities outlined above with the CEO and his direct <strong>report</strong>s.
The Board assigns the duties of internal control manager (as defined in the Code) to the head of the
Internal Audit function (Chief Audit Executive), who is a member of the Chairman’s staff (also given that the
Chairman is the executive director overseeing the working of the ICS) and does not therefore <strong>report</strong> to the
head of any operating department.
The internal control manager <strong>report</strong>s to the Statutory Audit Committee and the ICC (at least quarterly) and to
the Chairman in his capacity as executive director charged with supervising the ICS on, among other things,
activities carried out, and therefore on risk management, compliance with risk management plans and
assessment of the adequacy of the ICS itself.
Further, this manager:
• is charged with checking that the ICS is always adequate and fully operational;
• has direct access to all information needed to carry out the function properly;
• has the means (annual budget) and structures needed to carry out the function assigned to him/her (also
in terms of numbers and professional qualifications of employees).
The board of directors appoints and fixes the remuneration of the internal control manager on the
recommendation of the executive director charged with overseeing the operations of the ICS and having
consulted the ICC.
In 2010, the main activities carried out by the Internal Audit function were as follows: (i) completion of
activities to update the Model and review the Code of Conduct; (ii) supporting the AFC in testing activities
related to the project to adapt to the Investor Protection law and the issue of an independent opinion on the
validity of internal controls in financial <strong>report</strong>ing processes, (iii) carrying out of checks under the 2010 audit
plan, covering, among other things, operating audits in certain Italian plants, a number of financial audits in
Turkey, France and the UK, and “business ethics audits” on certain Subsidiaries, (iv) finalization of an interdepartmental
project to improve the disciplining of accesses to the SAP information system for the purposes
of segregation of tasks (assigned to Ernst&Young in December 2010), and (v) participation in a project to
review the processes of authorization/control and methods of booking discounts allowed to the network
(post-invoice discounts).
35. See section 13.
36. See section 13.
37. For a full description of the financial <strong>report</strong>ing control system, see Annex 1.
Report on corporate governance and ownership at 22 March 2011 on 2010 23