MICHELIN - 2008 ANNUAL REPORT

DESCRIPTION OF INTERNAL CONTROL PROCEDURES REGARDING
ACCOUNTING AND FINANCIAL INFORMATION PRODUCTION AND
PROCESSING
Description
The Managing Partners are responsible for publication of
reliable financial and accounting information. The accounting,
consolidation, management control and financial communication
departments: all play a part in the process of producing such
financial information. This report was discussed with the
Managing Partners and at a Supervisory Board meeting.
Within the Group’s organization, the accounting teams mainly
report to the Geographic Zones, while management controllers
are typically attached to the different Product Lines.
Corporate and consolidated financial statements are produced on
a monthly basis, in conditions similar to the year-end closing.
Necessary internal control procedures governing production of
reliable accounting information are in place at local level. These
include in particular physical inventory (for both fixed assets
and inventory), segregation of duties and reconciliation with
independent information sources.
A dedicated team is in charge of standardizing Group accounting
policies and of monitoring the development of new standards,
updating applicable accounting reference documentation for all
Group subsidiaries and following up all of the issues raised by
the latter.
General accounting and management accounting data are
submitted simultaneously by the subsidiaries. The systems verify
the consistency of the main aggregate figures (sales, operating
income…).
General accounting data received from the subsidiaries is
controlled for consistency and consolidated into Group financial
statements.
Monthly changes in consolidated financial statements are carefully
analyzed. The gap between plan and actual data, drawn from
management information, forms the subject of monthly detailed
review by the Group’s Executive Council and Product Lines.
At each interim and annual closing, Geographic Zone Heads
certify in writing that, to the best of their knowledge, the
accounts submitted by the companies in their respective Zones
are a fair reflection of their operations. The statement covers all
the compliance issues which, if not respected, could significantly
impact financial statements (applicable law and agreements) as
well as relevant particular events (litigation, fraud).
The Internal Audit Group Service proposes to the Managing
Partners and carries out yearly a number of specific missions to
control the Group’s financial and accounting information.
The Group’s Statutory Auditors, as part of the organization of
annual and consolidated financial statements auditing, direct the
local auditors to apply the international auditing standards.
The review of consolidated financial statements is carried out
jointly by Group Statutory Auditors and local auditors. Their
collaboration takes the form of audit instructions, drawing up
and analysis of audit questionnaires, emission by local auditors of
a review certificate for the period to June 30, and an audit report
to December 31, complemented by ad-hoc control reports and
regular communication throughout the year on specific points or
topical issues.
Group Statutory Auditors’ operations are complemented by
yearly visits to a number of sites worldwide. On these occasions,
the Statutory Auditors meet their local counterparts and gain a
clear understanding of some of the issues at hand.
The Investor Relations Department, which forms an integral
part of the Group’s Finance Department, is responsible for the
preparation and distribution throughout the financial community
of the Group’s financial communication. Financial communication
takes three main forms:
● The Annual Report and the Reference Document;
● The financial press releases;
● Support documentation produced for meetings with analysts
and investors.
The Investor Relations Department in consultation with the
Group’s Legal Department, and after validation by the Managing
Partners, coordinates publication of the Annual Report and the
Reference Document. Both Reports include contributions from
different experts in the Group’s main fields of operation, thus
ensuring they are information-rich and quality documents. The
Annual Report and the Reference Document are reviewed and
validated by the Managing Partners before publication.
Financial communications and press releases are systematically
reviewed by the Head of Investor Relations; those in connection
with the Group’s results are also submitted to the Supervisory
Board for review.
Documents produced for analyst and investor meetings are
drawn up by the Investor Relations Department and approved by
the Managing Partners.
Evaluation of the Processes Impacting the Reliability
of Financial Information
The financial and accounting information carried in Group
consolidated financial statements is analyzed for materiality and
level of risk based on different criteria (underlying operation
complexity, level of decentralization…).
A sample of companies representing around 80% of Group
accounting balances was first selected. The sample covers
all Geographic zones and operations (industrial, trading and
distribution networks).
15 key processes were initially identified for Michelin Group as a
whole. They are gradually integrated into the approach due to be
completed in 2010.
The approach adopted for the 2004-2007 phase
A group of 6 processes was selected for the first phase evaluation.
These include the following cycles: Purchasing (from purchase to
pay), Sales (from order to cash) and Inventory Management, as
well as Group Financing, Financial Risk Management, Intra-Group
Transactions and Commitments Identification. The Group’s
Internal Control operations to cover the IT management and
administration issues underlying the above processes are also
part of the scope.
Other Information
Additional Information Consolidated Financial Statements The Managing Partners’ Report Michelin at a Glance
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