to download Telecom Italia Annual Report 2011 - Company Reporting

For the purposes of an overall assessment of the internal control system, the Manager takes as a
methodological reference for his interventions the following components of the CoSo Report 1 :
“Control environment” and “Information and Communication”, which have a significant impact
on, inter alia, oversight of the compliance and auditing methodologies, dissemination of the
control culture and consolidation of the ethical values of the business;
“Risk assessment” and “Control activities”, which require a process of identifying and managing
audit projects, as well as oversight of the compliance of processes and business operations with
applicable laws and internal procedures of reference;
"Monitoring", which requires the continuous performance of activities to control the business
areas at the greatest risk, aimed at determining the effective overcoming of the weaknesses
reported.
The Board of Auditors closely supervised the internal control system adopted by the Company and
the Group, evaluating its adequacy, also through periodic meetings with the Manager responsible for
internal control and with the audit and compliance structures, the statutory auditor, interviews with
management and with the head of Enterprise Risk Management, joint meetings or attendance at
meetings of the Committee for Internal Control and Corporate Governance and by acquiring
documentation.
Up until 31 December 2011 the role of internal control manager was assigned to Telecom Italia
Audit & Compliance Services S.c.a r.l., represented by its Vice Chairman (ex Chairman) and General
Manager, Federico Maurizio d’Andrea.
In August the Boards of Directors of Telecom Italia and Telecom Italia Audit & Compliance Services
approved a plan for merger by incorporation of the latter into the former, in accordance with the
policy of reviewing the control governance structures of the Group, which concentrates activities and
expertise in the matter of internal controls in the Parent company. The process of incorporation of
Telecom Italia Audit & Compliance Services concluded with the drafting of the deed of merger in
December 2011 and the incorporation consequently took effect from 1 January 2012.
In its meeting on 1 December 2011, given this process of integration, and in substantial continuity
with the pre-existing situation, the Board of Directors of Telecom Italia assigned the role of internal
control manager to Mr. D’Andrea, as Manager of the Audit Division of the Company. Favourable
opinions were expressed on this choice by the Board of Auditors and the Committee for Internal
Control and Corporate Governance.
The Board of Auditors has monitored the activities of the internal control manager, noting a positive
evolution (in the various contexts) of the elements that make up the internal control system, and the
fact that most of the improvements identified have been implemented by the management within
the timescales specified. In general, audits have found that the principal improvement processes
have regarded projects on network quality, further strengthening the security of the systems and
network, commercial processes and oversight of subsidiary companies. In addition the audits have
triggered improvements in the Group procedures system. In this context the Board of Auditors has
also noted the overall assessment of the internal control system expressed by the internal control
manager, which is reported in full below: “With reference to the specific operational contexts
analysed, and considering the system weaknesses of various intensity identified by the audits on the
one hand, and the regular (and practically integral) implementation of the defined improvement
actions on the other, I believe that the current internal control system, as a whole, has reduced risk
profiles to a level that is physiologically acceptable for the correct functioning of the processes.
As part of the aforementioned activity to monitor the adequacy of the internal control system, the
Board of Auditors has also arranged a series of specific and in-depth meetings with the manager of
the audit department Brazilian subsidiary TIM Participações S.A.; moreover, again in the context of
monitoring the internal control system, the Board of Auditors has met with the Chairmen of the
Boards of Auditors of the principal Italian subsidiaries and the Chairman of the Board of Auditors has
1
Control model developed by the Committee of Sponsoring Organisations (CoSO) of the Treadway
Commission.
Other information Report of the Board of Statutory Auditors 446