Annual report 2010 - Dexia.com

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsInternal AuditOrganisation and governanceInternal audit taskInternal Audit is an independent and objective activity whichhas the task of giving the Dexia Group an assurance on thedegree of risk control.To that end, internal audit grasps all the objectives of theorganisation, analyses the risks associated with thoseobjectives and periodically assesses the robustness of thecontrols put in place to manage those risks. Internal audit thensubmits an assessment of the residual risks to managementso that the latter can validate their adequacy to the globalrisk profile desired by the Dexia Group and for Dexia SA, andif necessary puts forward actions to management to increasethe effectiveness of controls.Moreover, via audit committees, internal audit supports theGroup Boards of Directors in their surveillance role.In accordance with international standards, a joint auditcharter sets out the fundamental principles governing theinternal audit function in the Dexia Group, describing itsobjectives, its role, its responsibilities and its modes ofoperation. Following the transformation of the Dexia Group,the audit charter was adapted so as to reflect the changesarising within the internal audit support line. The new charterwas presented to and approved by the Management Boardon 27 July 2010 and by the Audit Committee of Dexia SAon 4 August 2010. So that each member of staff of theDexia Group can grasp the importance of the function in theinternal control mechanisms and aids to the management ofthe Dexia Group, the audit charter will be published on theDexia internet site (wwww.dexia.com) as well as on the DexiaSA intranet site during the first half-year 2011.Guiding principlesThe strategy, the level of requirement and the rules ofoperation of internal audit in the Dexia Group are fixed bythe Management Board of Dexia SA, within the frameworkapproved by the Board of Directors of Dexia SA, via itsAudit Committee. That framework takes account of therequirements, legislation and local regulations and instructionsfrom the prudential control authorities.In line with professional and ethical standards, the followinggeneral principles underlie the performance of the tasks ofthe internal audit support line and are compulsory for allauditors:• Objectivity: the objectivity of audits is guaranteed by severalelements: the allocation of auditors, the objectification ofaudit conclusions via a documented methodical approach,the supervision of tasks and taking account of the point ofview of the party audited through a process in which bothsides take part.• Independence: independence is ensured by aligning eachaudit department to the highest hierarchical level of the entityfor which it is responsible.• Impartiality: internal audit is not involved in the operationalorganisation of Group entities. Group Management Boardsmay however call on them for an opinion, advice orassistance. This type of intervention by internal audit mustremain exceptional, particularly with regard to the elaborationand introduction of internal control procedures.• Access to information: in performing its task, internal audithas access to all information, documents, premises, systemsor persons of the entity for which it is responsible, includinginformation regarding management, minutes and files fromconsultative and decision-making bodies. Within that context,audit management has access to all information in all Groupentities.• Confidentiality: each auditor is bound by a strict dutyof reservation and discretion. In particular it must ensurefulfilment of the obligations of professional secrecy arisingfrom the regulations.• Competence: each auditor must demonstrate the greatestprofessionalism and have constant training to ensure masteryof the rapid developments of audit techniques, banking,financial and IT techniques and fraud techniques. Trainingrequirements are assessed at annual appraisals.• Common methodology: auditors use the same methodologyand document their work in an identical manner in order toensure consistent quality of interventions and the traceabilityof investigations by internal audit in the Group and to fostera consolidated perception of risks and their control.Internal audit receives the means necessary to perform itstasks from the Management Boards of the Dexia Group sothat it can respond constantly to the evolution of structuresand the environment of the Group.Scope of interventionAll activities, processes, systems and entities of the DexiaGroup are within the scope of action of internal audit, withoutreservation or exception. The scope of intervention includesall processes, whether operational, support, management,corporate governance and risk management and controlprocesses.In principle it does not cover the activities of companies inwhich the Dexia Group only has a minority holding, apartfrom exceptions associated in particular with requests fromthe supervisory authorities.Organisation of the functionThe first half-year 2010 was marked by the continuation ofthe transformation plan and by the effective introductionof the changes provided by the audit transformation plan,particularly in terms of organisation of the support line andthe evolution of methodology.1. PrinciplesThe Dexia Group internal audit support line operates inaccordance with a directive model by which all the GeneralAuditors of the entities run directly by Dexia SA report directlyto the General Auditor of Dexia SA, and this has an impactprincipally on the fixing of objectives and the assessment ofthe General Auditors of the entities reporting to the Dexia SAGeneral Auditor. Within this context, the heads of internalaudit in the branches report hierarchically to the GeneralAuditor of their parent company and the heads of internalaudit in the support lines of the parent companies report tothem operationally.52 Dexia Annual report 2010