LEGRAND_REGISTRATION_DOCUMENT_2017

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INTERNAL CONTROL AND RISK MANAGEMENT

Internal audit system

3.4 – INTERNAL AUDIT SYSTEM

3.4.1 – Definition and objectives of the internal audit

The purpose of the internal audit is to provide objective assurance of the degree of control over operations, of the processes for managing, controlling and governing risk, and to make recommendations on how to increase their efficiency.

3.4.2 – Audit planning, implementation and follow-up

An audit plan is drawn up each year, taking into account the rules for its preparation: W the rotation of audits across all the Group’s reporting entities and functional departments; W the audit of the Group’s new acquisitions within a year of them being taken over or invested in; W follow-up audits on the action plans put in place by operational entities, if the situation requires it; W the audit of the systems for controlling the risks identified in connection with risk management; W specific and cross-functional audits aimed at covering major or emerging risks.

After approval by the General Management, the audit plan is presented annually to the Audit Committee. Every audit assignment always results in a report. These reports are distributed to General Management and a summary of them is presented quarterly to the Audit Committee. The recommendations expressed in the audit reports address directly the inherent risks in the identified weaknesses in internal control, thereby strengthening the previously mentioned bottom-up approach. Correct implementation of action plans is monitored systematically by the Internal Control Department.

3.5 – PROCEDURES FOR PREPARING AND PROCESSING ACCOUNTING AND FINANCIAL INFORMATION

Objectives

The internal controls applied to accounts and finance must meet the following objectives, namely to: W ensure that the published accounting and financial information complies with applicable regulations; W ensure that the instructions concerning this information, issued by the Group’s General Management, are applied;

W safeguard the Group’s assets; W detect and prevent fraud and accounting irregularities, wherever possible; W ensure the reliability of internal financial and accounting information, as well as the information disclosed to the markets.

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REGISTRATION DOCUMENT 2017 - LEGRAND