| A | A | A |
The Board of Directors' report on internal control of financial reporting for the fiscal year 2007*.
In accordance with the provisions of the Companies Act and the Code, the Board is ultimately responsible for the internal control of financial reporting. The basis of internal control of financial reporting is comprised of the control environment with organization, decision-making channels, authorization and responsibilities documented and communicated in governing documents such as internal policies, guidelines, manuals and codes.
The main purpose of the internal control is to ensure that the Company's objectives and strategies are followed and executed and that the interests of the shareholders and other stakeholders are protected. Internal control is also a means to ensure that the financial reporting is reliable and prepared in accordance with generally accepted accounting principles and to verify compliance with applicable laws and regulations. Intrum Justitia follows the international framework Internal Control - Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). The internal control is based on COSO and comprises risk assessment, control activities, information and communication and monitoring. All of these steps help to verify the accuracy, thoroughness and reliability of the financial reporting and ensure compliance with implemented guidelines for financial reporting. Control of the quality of the financial reporting is based on the below principal delegation of responsibilities, control routines and governing documents:
CONTROL OF REPORTING BY GROUP COMPANIES
The Intrum Justitia Group is organized in matrix form, where financial follow-up is made primarily by geographic region, and secondarily by service line. In the geographic regions, each country manager has a significant responsibility. The Parent Company exercises control, both through representation on the local company's board and through the Parent Company's business controllers and financial controllers, who monitor the operations of subsidiaries from various perspectives. Each controller is responsible for monitoring a number of countries. Each subsidiary files monthly accounts with an income statement divided along service lines, a balance sheet, volume data. The accounts are consolidated at the Group level and included in a monthly report to the senior management and the Board. Consolidated accounts are prepared each month for internal use. Financial reporting is submitted in the form of figures in a Group-wide reporting system and written comments according to a special template. Instructions and rules on written reports and figures can be found in Intrum Justitia's handbook (see below). The results in the monthly accounts are compared with the previous year and budgeted figures. Along with revenue and earnings, the indicators include the volume of new collection cases, the value of the existing caseload and collected amounts.
GROUP TREASURY
Management of financial risks such as interest rate risk, financing risk, liquidity risk and credit risk is handled by Group Treasury. Intrum Justitia's finance policy contains rules on how financial activities are managed, how responsibilities are delegated, how financial risks are measured and identified, and when and how they can be mitigated or eliminated.
INTERNAL CONTROL
Intrum Justitia has been building up an internal control function since 2006. This function has initially focused on the companies' accounting organizations. Each subsidiary reports the status of its controls twice a year in a number of processes that are important to the Group. In 2007 the form was expanded to include legal issues, including their internal legal structures and processes. After submitting their report, each subsidiary was visited by an internal auditor to verify their replies. Based on these evaluations, work has begun to alleviate the de-ficiencies. After semiannual reporting, each company receives an action list from the internal auditors that follows up on current measures, agreed completion dates and responsible employees. The results are reported to the Group's Audit Committee. In late 2007 the Group established a function with the primary responsibility for the Group's internal audits, including coordination of all internal control functions (Finance, HR, IT, Legal, Operational Excellence and Risk) and audits within Intrum Justitia. This function will be operational in 2008. In some countries such as Norway, internal control has been upgraded through the appointment of a so-called conciliation officer responsible for the company's compliance with the Norwegian debt collection laws. An effort has also been made at a regional level, beginning in Scandinavia, to plan for hiring regional compliance managers in 2008. Internal control issues will be discussed in 2008 at all subsidiary board meetings. Report on internal control
________________________________________________________
* This report does not constitute part of the formal annual report and has not been reviewed by the Company's auditors.
In accordance with the provisions of the Companies Act and the Code, the Board is ultimately responsible for the internal control of financial reporting. The basis of internal control of financial reporting is comprised of the control environment with organization, decision-making channels, authorization and responsibilities documented and communicated in governing documents such as internal policies, guidelines, manuals and codes.
The main purpose of the internal control is to ensure that the Company's objectives and strategies are followed and executed and that the interests of the shareholders and other stakeholders are protected. Internal control is also a means to ensure that the financial reporting is reliable and prepared in accordance with generally accepted accounting principles and to verify compliance with applicable laws and regulations. Intrum Justitia follows the international framework Internal Control - Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). The internal control is based on COSO and comprises risk assessment, control activities, information and communication and monitoring. All of these steps help to verify the accuracy, thoroughness and reliability of the financial reporting and ensure compliance with implemented guidelines for financial reporting. Control of the quality of the financial reporting is based on the below principal delegation of responsibilities, control routines and governing documents:
CONTROL OF REPORTING BY GROUP COMPANIES
The Intrum Justitia Group is organized in matrix form, where financial follow-up is made primarily by geographic region, and secondarily by service line. In the geographic regions, each country manager has a significant responsibility. The Parent Company exercises control, both through representation on the local company's board and through the Parent Company's business controllers and financial controllers, who monitor the operations of subsidiaries from various perspectives. Each controller is responsible for monitoring a number of countries. Each subsidiary files monthly accounts with an income statement divided along service lines, a balance sheet, volume data. The accounts are consolidated at the Group level and included in a monthly report to the senior management and the Board. Consolidated accounts are prepared each month for internal use. Financial reporting is submitted in the form of figures in a Group-wide reporting system and written comments according to a special template. Instructions and rules on written reports and figures can be found in Intrum Justitia's handbook (see below). The results in the monthly accounts are compared with the previous year and budgeted figures. Along with revenue and earnings, the indicators include the volume of new collection cases, the value of the existing caseload and collected amounts.
GROUP TREASURY
Management of financial risks such as interest rate risk, financing risk, liquidity risk and credit risk is handled by Group Treasury. Intrum Justitia's finance policy contains rules on how financial activities are managed, how responsibilities are delegated, how financial risks are measured and identified, and when and how they can be mitigated or eliminated.
INTERNAL CONTROL
Intrum Justitia has been building up an internal control function since 2006. This function has initially focused on the companies' accounting organizations. Each subsidiary reports the status of its controls twice a year in a number of processes that are important to the Group. In 2007 the form was expanded to include legal issues, including their internal legal structures and processes. After submitting their report, each subsidiary was visited by an internal auditor to verify their replies. Based on these evaluations, work has begun to alleviate the de-ficiencies. After semiannual reporting, each company receives an action list from the internal auditors that follows up on current measures, agreed completion dates and responsible employees. The results are reported to the Group's Audit Committee. In late 2007 the Group established a function with the primary responsibility for the Group's internal audits, including coordination of all internal control functions (Finance, HR, IT, Legal, Operational Excellence and Risk) and audits within Intrum Justitia. This function will be operational in 2008. In some countries such as Norway, internal control has been upgraded through the appointment of a so-called conciliation officer responsible for the company's compliance with the Norwegian debt collection laws. An effort has also been made at a regional level, beginning in Scandinavia, to plan for hiring regional compliance managers in 2008. Internal control issues will be discussed in 2008 at all subsidiary board meetings. Report on internal control
________________________________________________________
* This report does not constitute part of the formal annual report and has not been reviewed by the Company's auditors.