|Oversight over the application of uniform accounting principles by the Parent Entity and KGHM Polska Miedź S.A. Group companies during the process of preparing reporting packages for the preparation of the consolidated financial statements of the KGHM Polska Miedź S.A. Group
||In order to ensure correctness and accuracy of keeping of accounting ledgers by the Parent Entity as well as conformity of the accounting policies used to prepare financial statements in the Group’s subsidiaries, the Management Board of the Parent Entity has introduced for continuous application the Group’s Accounting Policy consistent with the International Financial Reporting Standards approved by the European Union, which is updated on an ongoing basis based on new regulations.
Oversight over the applied accounting principles in the process of preparation of financial statements in KGHM Polska Miedź S.A. and in the Group’s subsidiaries relies on the control mechanisms built into the functionality of reporting systems.
The reporting packages of the subsidiaries are also reviewed by the pertinent functions within the Parent Entity.
|Centralised finance and accounting function
||KGHM Polska Miedź S.A. keeps accounting ledgers in a centralised finance and accounting function. The accounting records of the Parent Entity are kept in the Accounting Services Centre separated in the Head Office structures of KGHM Polska Miedź S.A. Centralised accounting carried out using a process model minimizes the risk of errors in accounting error and ensures high quality of financial statements, through a transparent allocation of powers and responsibilities. Measures optimizing the operation of the accounting function’s structures and increasing the safety of records are undertaken on an ongoing basis.
|Finance and accounting systems
||KGHM Polska Miedź S.A. keeps accounting ledgers in a centralised finance and accounting function. The system’s modular structure ensures a transparent division of processes and powers, coherent records of operation in the ledgers and verification of the reporting, main and auxiliary ledgers. Access to data in different cross-sections and layouts is available through an extensive reporting system. Parent Entity adapts its IT system to the changing accounting rules and other legal standards. The solutions applied by the Parent Entity are implemented in the IT systems of Group companies.
In order to ensure the proper operation and protection of systems, data, secure access to data and computer hardware, appropriate organisational and systemic solutions have been implemented. Access to resources of the finance and accounting records system and the financial reporting system is restricted by a system of rights, which are awarded to authorised employees only to the extent of duties performed by them. The rights are subject to regular reviews and audits. Control of access is exercised at every stage of preparation of the financial statements, starting from entry of source data to data processing to generating output information.
The actions undertaken to increase the use of IT tools to automate the control and settlement of purchasing processes in the Company are an important element in mitigating the risk of errors and irregularities in the registration of economic operations. These actions include, among others:
- Workflow – the electronic circulation system supporting settlements and document approval,
- the system supporting data transmission between the Parent Entity’s system and IT systems of Group companies,
- counterparty settlements based on purchase e-invoices and sales e-invoices.
|Corporate risk management
||Under the existing Corporate Risk Management Policy and Procedure and the Rules of the Corporate Risk and Compliance Committee, the process of corporate risk management in the Group is consistently performed. We identify, assess and analyse on a continuous basis the risks in different areas of the Group’s operations in the context of the possibility to mitigate them.
The Corporate Risk and Compliance Management Department, which monitors and escalates risks and reports incidents, is responsible for coordinating the whole corporate risk management process and for developing methods and tools to be used by managers in the Parent Entity, in all subsidiaries and projects.
The measures also include the management of risk pertaining to the process of preparation of the Group’s consolidated financial statements.
The corporate risk management process is subject to an annual effectiveness assessment as required in the “Best Practice for WSE Listed Companies 2016”.
A detailed information on the risk management system in the KGHM Polska Miedź S.A. Group is presented in Chapter 12 of the Management Board Report on the Activity of KGHM Polska Miedź S.A. and the KGHM Polska Miedź S.A. Group in 2020.
||The main risk management element in the process of preparing financial statements relating to the functioning of control mechanisms and the occurrence of risks in the operations of KGHM Polska Miedź S.A. is the work performed by the Internal Audit Department. Its work indirectly strengthens the process of preparation of financial statements and the accuracy of the statements.
The Internal Audit Department performs its tasks in accordance with the Audit Plan for the calendar year, which is approved by the Management Board of KGHM Polska Miedź S.A. and opined by the Audit Committee.
The purpose of audit is to provide the KGHM Polska Miedź S.A. Management Board and its Supervisory Board Audit Committee with independent and objective information about the internal control system and risk management systems and analysis of business processes within KGHM Polska Miedź S.A. and in Group companies. Irrespective of the internal audit and institutional control tasks, KGHM Polska Miedź S.A. has in maintained the obligation of full self-control of employees and functional control exercised by all levels of management as part of its coordination and supervisory duties.
||As required by law, the consolidated financial statements of the KGHM Polska Miedź S.A. Group are subject to half-year reviews and annual audits conducted by statutory auditors. The statutory auditor is selected by the Supervisory Board through a tender procedure, based on a recommendation of the Supervisory Board’s Audit Committee and a report on the tender procedure conducted by the Committee.
The financial statements of KGHM Polska Miedź S.A. for 2019-2021 are audited by PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp.k. Within the framework of its audit work, the statutory auditor makes an independent assessment, based on the applicable audit methodology, of the accounting policies applied by the Parent Entity in the preparation of the financial statements and of the fairness and accuracy of the standalone and consolidated financial statements.
The effectiveness of the internal control and risk management system in the process of preparation of financial statements is confirmed by the auditor’s reports on the standalone and consolidated financial statements of KGHM Polska Miedź S.A., which are issued by the statutory auditor without qualifications.
|Supervision over the process of financial reporting
||The body exercising supervision over the financial reporting process in KGHM Polska Miedź S.A. and cooperating with the statutory auditor is the Supervisory Board Audit Committee appointed by the power of the Parent Entity’s Supervisory Board. Pursuant to the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Oversight (Journal of Laws of 2017 item 1089, as amended), responsibilities of the Audit Committee include, in particular:
- monitoring the financial reporting process in terms of its conformity with the Accounting Policy adopted in the in KGHM Polska Miedź S.A. Group and the law,
- monitoring the effectiveness of internal control, internal audit and risk management systems
- monitoring the independence of the statutory auditor and the entity authorised to audit financial statements
- carrying out the process of selecting an entity authorised to audit the Parent Entity’s financial statements in order to submit a recommendation to the Supervisory Board.
The final stage of review and control effected by the body is the monitoring of the financial reporting process and assessment of the financial statements by the Supervisory Board. It ensures correctness and accuracy of the information presented in the standalone and consolidated financial statements of the KGHM Polska Miedź S.A. Group.
The correct management of the accounting process and the financial statements preparation process ensures security and high quality of information.