Report on corporate governance and ownership 2011 - Indesit


<strong>Report</strong> on corporate governance and ownership at 21 March 2012 on 2011 – Annex
The perimeter of relevance was identified taking the following into account:
• significant accounts, in terms of materiality 10 ;
• processes that generate the significant accounts;
• the relevance of the aforementioned processes, identified at the level of each legal entity 11 .
Subsequently, an overall analysis of risks/controls at company/group level (“entity level controls”) was
carried out and risks/controls at process level (“process level controls”) were identified.
For the entity level risks/controls — in line with the reference model — an assessment (using specific
checklists) was made of certain key components of the ICS coming under the following five main areas:
• company control culture (sensibility on the part of top management in formalizing control roles
and responsibilities and a system of internal communication ensuring overall coherence with
business strategies and objectives);
• risk assessment process (continual process of identification and analysis of endogenous and
exogenous risks capable of compromising the achievement of business objectives);
• controls structure (rigorous methodologies in the design and implementation of control activities
to guarantee, for the top management, proper application of instructions given);
• reliable information systems and communication flows (integrity and completeness of data and
information);
• monitoring (on a continual basis to ensure maintenance and improvement of the internal control
system).
The process level risks, on the other hand, were fed into a set of matrixes with processes/subprocesses/activities
(Risk and Control Matrix or RCM) and assessed in terms of potential impact on
the precision of financial statements data and the probability of occurrence assuming no controls
(“inherent level” evaluation), to make a distinction between “primary” controls (indispensable for
ensuring coverage of the main risks) and “secondary” controls.
Where likely to impact significantly on financial reporting, the risks identified, including unintentional
error 12 and fraud 13 , were subjected to gap analysis with respect to the relevant best practice. A
remediation plan was then defined for corrective measures to remedy shortcomings and inadequacies
in specific aspects of the existing control model.
10. The selection of significant accounts serves to obtain a minimum coverage of 90% of the four classes of item in the
consolidated financial statements: Revenues, Costs, Assets, Liabilities; the remaining 10% was further analyzed to make
sure it was made up of items which, if considered singly, would count for less than 1% of their respective classes and the
processes associated with such items would already be included in those generating the 90% of balances selected.
11. The contribution (%) of each Material Control Unit (legal entity) to the significant accounts identified was analyzed with the
objective of a minimum coverage of 75% of the single balances, as required by the PCAOB, Public Company Accounting
Oversight Board.
12. Error: in the ICS, this means any unintentional act or failure to act resulting in a deceptive statement in reporting.
13. Fraud: in the ICS, this means any intentional act or failure to act resulting in a deceptive statement in reporting.
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