Main features of the internal control and risk management in relation to the financial reporting process
Correct financial reporting in Vaisala Group means that its financial statements give a true and fair view of the operations and the financial position of the Company, and that these statements do not include intentional or unintentional misstatements or omissions both in respect of the figures and level of disclosure.
All Vaisala Group financial reporting is based on IFRS reporting standards approved by the EU. The financial statements of the Group parent Company are prepared in accordance with the Finnish Accounting Act and the guidelines and statements of the Accounting Board. The Vaisala Accounting Principles are reviewed and maintained by Vaisala Group Accounting and it provides the legal companies with detailed guidelines on the application of these policies. Other internal policies related to financial reporting include Vaisala Group Approval Policy and Vaisala Group Credit Policy. Vaisala financial control framework is built and based on unified global transactional and reporting processes as well as defined control points as described below.
Vaisala Group’s financial statements are based on the monthly reporting and forecasting process. This process includes in-depth analyses of deviations between actual performance, previous performance and business forecasts. Analyses cover both the financial information as well as key performance indicators measuring operational performance. The defined control points deal with the analysis, elimination and reconciliation of figures reported by legal companies as well as information included in financial statements bulletins and other stock exchange releases.
Vaisala has a global enterprise resource planning (ERP) system which is built in accordance with Vaisala Accounting Principles. Financial transactional processing is partially centralized in dedicated Group level teams. Vaisala uses Hyperion Financial Management as financial consolidation and reporting system. This system is built in accordance with IFRS. All major legal Company financials are prepared in the global ERP and transferred to consolidation and reporting system with standard interface. The defined control points in the legal Company transactional processing and reporting include reconciliation, balancing, in-depth analysis, system controls and segregation of duties. Vaisala applies the percentage-of-completion method in long-term projects. The critical control points of such projects include updating and analyzing revenue and cost forecasts of projects as well as project reviews.
Audit Committee reviews interim reports and financial statements. The Vaisala Board approves interim reports and financial statements.
Internal control roles and responsibilities
The Vaisala Board of Directors has the ultimate responsibility for the administration and the proper organization of the operations of the Company. The Board also ensures that the Company duly endorses the corporate values applied to its operations, approves the internal control, risk management and corporate governance policies. The Board can assign internal audit assignments to Vaisala’s external auditors or other external service providers as needed.
The President and CEO is in charge of the day-to-day management of the Company in accordance with the instructions and orders given by the Board. The President and CEO establishes the basis for internal control by providing leadership and direction to Management Group members and supervising the way they control the business they are in charge of and by ensuring that the accounting practices of the Company comply with the law and that financial matters are handled in a reliable manner.
The Management Group is responsible for creating detailed internal control policies and procedures in each unit. Finance and control function is of particular significance because its control activities cover all operating and other units of the Company. The head of risk management steers the enterprise risk management process and reports on it both to the Management Group and to the Audit committee as well as follows up the adequacy and effectiveness of control activities on the operative level.
The General Counsel and business area and corporate function directors are responsible for making sure that all units and employees under their responsibility comply with applicable laws, regulations and internal policies.
Vaisala does not have a separate internal audit function. The Audit Committee may engage external specialists to carry out separate evaluations of the control environment or operations. The audit plan of Vaisala's external auditor takes into account the fact that the Company has no internal audit.