Control

Internal Control System (ICS)

Our Internal Control System (ICS) is an integral component of our risk management system. It is made up of systematically designed control measures, regulations and work instructions. In every key business process, we install control measures based on the principles of separation of duties, dual control, and (in specific areas) regular job rotation. Control measures serve to ensure:

Internal Control System (ICS): an Integral Component of Risk Management

Internal Control System for Accounting

The purpose of our internal control system for accounting is to guarantee proper and reliable accounting practices and to ensure that our consolidated and annual financial statements comply with regulations.

In addition to the ICS principles already mentioned, we perform assessments and analyses to help identify and minimize any risks with a direct influence on financial reporting. Moreover, we continuously monitor changes to accounting standards. The employees responsible for financial reporting regularly receive extensive training. We enlist external experts to reduce the risk of accounting misstatements in complex and challenging issues, such as pensions.

Our internal accounting control system is designed to ensure that our accountants process every business transaction correctly and promptly and that reliable data on the company’s profitability, assets and financial position are constantly available. As WACKER’s key accounting regulation, our accounting manual has groupwide validity and is available on the intranet. Organizational workflows are also defined by accounting and organizational regulations, and book-entry instructions. We continuously adapt workflows to changes in accounting principles and interpretations. By separating financial functions between accounting, statement analysis and strategy, we ensure that potential errors (prior to preparation of the statements) are identified and accounting standards complied with. To ensure the completeness and accuracy of processes, we have implemented access rules for IT systems and dual-control policies for accounting at individual entities and for consolidating figures within the Group.

Decentrally, it is our subsidiaries’ responsibility to implement existing stipulations in their regions. We check the effectiveness of controls not only through feedback talks with the employees responsible, but also by continually monitoring key financial indicators in our monthly management reports and in system-supported test runs. Additionally, regular external audits and reviews are carried out at year-end and for each quarter.

Internal Controls

Corporate Auditing, on behalf of the Executive Board, regularly inspects each corporate entity to ensure that the risk management and internal control systems there are functioning properly. It also checks on compliance with control mechanisms, such as dual control and the separation of duties. Our auditing manual serves as the basis for these checks. The Executive Board adopts a risk-driven approach when defining audit topics, which, if necessary, are flexibly adjusted during the year to take account of changes in underlying conditions. In 2009, these internal audits focused on both ordering and invoice-settlement processes for technical services – in response to our intense investment and maintenance activities. In China, 2009 saw WACKER installing a local auditing unit, which reports to Corporate Auditing and supplements the latter’s scheduled Chinese audits. Additionally, we increased our Compliance staff. Overall, Corporate Auditing conducted 36 audits in 2009 (2008: 30 audits). It completed most of 2009’s auditing schedule although a few issues and/or points for review await finalization in 2010. Based on our audits, there were no major regulatory infractions.

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External Controls

An external auditor examines our early risk-detection system when auditing our annual financial statements.