Main features of internal control and risk management systems relating to financial reporting process

The objective of Incap Corporation’s internal control and risk management is to ensure that the company operates efficiently and profitably, that the information is reliable and that the regulations and operating principles are observed. The objective is further to identify, evaluate and follow-up the risks related to the company’s business.

The Board of Directors at Incap Corporation is responsible for determining operating principles for internal control, as well as for monitoring the efficiency of instructions and control. Internal control at Incap is implemented at different levels of the company by the Board of Directors, the management and Incap’s personnel.

The objective of internal control is to ensure that
• Operations are effective, functional and in line with the strategy.
• Financial reporting and information given to the management are reliable, complete and up-to-date.
• Financial reports issued by the company give substantial and correct information on the company’s
financial position.
• The company operates according to specified internal operating instructions.
• The Group follows laws and regulations, as applicable.

Internal control relating to the financial reporting process is a part of the Group’s internal control system. The consolidated financial statement of Incap is prepared in accordance with the international financial reporting standards approved by the European Union. The financial statement includes also the additional information required by the Finnish Accounting Standards and Companies Act. The financial statement of the parent company is prepared in accordance with the Finnish Accounting Standards.

Financial reporting process at Incap

The Group’s subsidiaries report to the Group’s shared reporting system on monthly basis. Reported figures are reviewed by finance departments both in the Group and in the subsidiaries. The outsourced finance and administration of the Group acts as the Group’s finance department and prepares the consolidated financial statement. The outsourced finance and administration further takes care of the book-keeping and reporting of the Finnish parent company. External and internal accounting and reporting of the subsidiaries in Estonia and in India is taken care by the local finance departments. The Group’s finance department is preparing reports on Actual and Estimated to be included in the monthly meeting material for the Board of Directors. The Group’s finance and administration monitor the observance of reporting and control processes. All finance functions also monitor the validity of external and internal financial reporting.

Interpretation and application of financial statement standards has been concentrated to the outsourced finance and administration. Based on the standards, common accounting principles for the Group have been determined. The Group’s outsourced finance and administration gives instructions to the organisation on the main principles of monthly reporting and is in charge of special instructions for reporting relating to budgeting and estimates. The Group’s finance and administration shares internal information on processes and practices connected with the financial reporting. The finance and administration also organises targeted training to other organisation on practices and related changes in financial reporting when necessary.

Roles and responsibilities

The Board of Directors has the final responsibility for the appropriate organisation of internal control relating to the financial reporting. The Board of Directors reviews and approves the financial statements, interim reports and other regulated financial reports. President and CEO, and the directors of subsidiaries are responsible for implementation of internal control relating to financial statement reports. In this task they are supported by the Group’s finance and administration.

The Group’s President and CEO is responsible for maintaining an efficient control environment. He is arranging internal control and risk management in practice. President and CEO is responsible for the legality of book-keeping practices and that the company’s finance and administration is run reliably and with competence. The Group’s directors and personnel promote the efficient internal control of the financial reporting process with their own actions.

Control

The control environment of the Group is based on the corporate principles and values. In operative units the Group-level instructions are observed, including among others guidelines for book-keeping and reporting as well as principles for risk management and internal control relating to financial reporting. President and CEO and the directors of different functions are responsible for arranging adequate control actions, as well as training related to the observance of instructions in their units. Moreover, they shall are responsible for ensuring that book-keeping and administration in their own areas of responsibility comply with the laws, Group’s operating principles and the instructions and orders given by the Board of Directors at Incap Corporation. The related control actions are operational instructions and practices, which ensure the implementation of the management’s orders. These actions include, for instance, approvals, authorisations, inspections, balancing, performance monitoring, protection of property and division of tasks.

Own operations in the company are monitored continuously also by means of separate evaluations, such as internal audits and audits of the accounts, supplier audits made by customers, as well as external and internal quality audits.

Control of financial reporting is performed by the Board of Directors, the auditors, President and CEO, Group’s management team and the Group’s finance departments. The monitoring is done continuously, as a part of daily duties or on specific assignment.

The Group aims at integrating control in all daily operations. Efficient internal control presupposes that the duties at job are divided in an appropriate manner and that eventual risky combinations of duties are eliminated. Tools for control are among others the Group-level instructions, checkpoints of financial reporting, instructions for book-keeping and reporting as well as the Group’s regular business reviews.
The Group has no specific organisation for internal auditing due to the scope of its business. The internal audit is organised so that the needed audit service is acquired from an external auditing service provider selected by the Group’s Board of Directors. The service provider, usually an authorised public accountant, shall be independent, competent and fitted with adequate resources.

Evaluation of risks and control actions

Evaluation of risks related to the financial reporting is part of the Group’s comprehensive system for internal control and risk management: For identifying the risks related to the financial reporting Incap has determined targets for financial reporting. The purpose of the risk evaluation process is to identify and analyse the risks in the financial reporting process as well as to determine the means for managing the risks.

To manage the risks, control actions are set to all levels of the organisation. Especially the personnel in finance and administration have a remarkable role, as the control actions in their responsibility are focusing in a multi-dimensional way to business units and functions of the Group.

In the financial period 2016, special focus continued to be on the development and improvement of the estimates for business and cash flow with a new tool for the Group’s budgeting and estimating. No internal audits were organised during 2012-2016 neither with own resources nor with external service.