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Report on internal control
The Board of Directors’ report on internal control of fi nancial
reporting for the fi scal year 2005
This report has been prepared in accordance with section 3.7.2 of the Swedish
Code of Corporate Governance (“the Code”) and is thereby limited to internal
control of fi nancial reporting. This report does not constitute part of the formal
annual report.
The Board of Directors is ultimately responsible for the Company’s organization
and management of its affairs. Each year in connection with its statutory meeting,
the Board establishes rules of procedure for the Board and an instruction for the
President. These documents cover, among other things, the delegation of duties
between the Board and the President and CEO, as well as how decisions are
made on various issues. The President handles the day-to-day management
according to the Board’s guidelines and instructions.
The basis of internal control of fi nancial reporting is comprised of the control
environment with the organization, decision-making channels, authorization and
responsibilities documented and communicated in governing documents such
as internal policies, guidelines, manuals and codes.
Information and communication of internal policies, guidelines, manuals
and codes for fi nancial reporting are covered in, among other places, the Group’s
Handbook, which is updated regularly. The Handbook is available in electronic
form to all subsidiaries of the Group. The Chief Financial Offi cer, CFO, of the
Intrum Justitia Group has chief responsibility for the contents of the Handbook.
Consolidated accounts are prepared each month for internal use. Financial
reporting is submitted in the form of both fi gures in a Group-wide reporting
system and written comments according to a special template. Instructions and
rules on written reports and fi gures can be found in Intrum Justitia’s Handbook.
The results compiled in the monthly accounts are compared with the previous
year, budgeted fi gures and the latest forecast, which is updated quarterly.
Conferences are held once or twice a year for the subsidiaries’ accounting
and fi nancial managers for the purpose of maintaining a high level of quality
in fi nancial reporting by discussing issues concerning the Group’s accounting
principles and examining the requirements on internal control. The conferences
are the responsibility of the Group’s CFO.
Intrum Justitia applies risk evaluation and risk management to ensure
that the risks the Company is exposed to are managed within established frameworks.
The signifi cant risks monitored include operating and fi nancial risks. To
limit and control risks in subsidiaries’ operations as well as the risk of signifi cant
errors in their fi nancial reporting, the Parent Company performs controls and
follow-ups, for example, through representation on the subsidiaries’ boards,
through visits and follow-ups by business controllers and fi nancial controllers,
and through internal audits.
Stockholm, March 16, 2006
The Board of Intrum Justitia AB (publ)
Management of fi nancial risks such as interest rate risk, fi nancing risk, liquidity
risk and credit risk is handled by Group Treasury. Intrum Justitia’s fi nance
policy contains rules on how fi nancial activities are managed, how responsibilities
are delegated, how fi nancial risks are measured and identifi ed, and when
and how they are limited.
Intrum Justitia’s fi nancial reporting and risk management are also based on a
number of control activities at various levels in companies and business areas.
They are conducted through both IT systems that support various operating
processes and more conventionally designed manual controls to prevent, detect
and correct errors and deviations. Examples of manual controls include authorization
routines and requirements for approval from superiors for verifi cations, as
well as logbooks of transactions and changes in basic data. Emphasis is placed
on the inclusion of only approved business transactions in the fi nancial reporting.
Follow-ups to ensure the quality of internal control are done in various ways
within Intrum Justitia. Recurring reviews of internal control are made by, among
others, the Internal Audit Function on behalf of and in accordance with the
approach decided on by the Board’s Audit Committee. Since 2003 the internal
audit function is outsourced to an external accounting fi rm.
Internal control is also monitored through board work in subsidiaries; where
action is considered necessary, the controller organization is utilized.
As an element in its audit, the auditor elected by the Annual General Meeting,
KPMG Bohlins AB, also reviews a sample of controls. KPMG Bohlins reports on
its fi ndings and suggests actions to the Board of Directors of Intrum Justitia AB
twice a year. Prior to these meetings, observations from audits of subsidiaries
have been presented to each local management group. These observations are
acted upon and followed up in a systematic manner within each unit.
In 2003 Intrum Justitia initiated a special internal control project. Within the
framework of this project, each subsidiary in the Group responded to a questionnaire
on the status of internal control within their company. A similar internal
survey is conducted again in 2006 with a special focus on the companies’
accounting organization. With the survey as a basis, defi ciencies will be identifi ed
and alleviated. At the same time it will identify companies with the highest level of
internal control within each area to facilitate knowledge transfers.
In accordance with the recommendation issued by the Swedish Corporate
Governance Board, the Board refrains from issuing statements on how the
internal control has worked during the year. The report has not been reviewed
by the Company’s auditors.