Internal control
Swedish Match applies the Swedish Code of Corporate Governance. The Company is not reporting any deviations from the Code for 2007, except with regard to the Code’s rule that the Company’s half-year or nine-month report be reviewed by the Company’s auditors.
The reason for this deviation is that the Board of Directors, with reference to the Company’s stable operations, was of the opinion that the extra cost that would be incurred by such a review was not warranted.
Report on internal control
The Board of Directors is responsible for internal control pursuant to the Swedish Companies Act and the Swedish Code of Corporate Governance. This report has been prepared in accordance with the Swedish Code of Corporate Governance and is thereby limited to internal control regarding financial reporting.
The basis for internal control with regard to financial reporting comprises a control environment with organization, decision making channels, powers and responsibilities that have been documented and communicated in governing documents such as internal policies, guidelines, manuals and codes (for example, the division of duties between the Board of Directors on the one hand and the President and the other entities that the Board establishes on the other), instructions with regard to attestation rights and auditing and reporting instructions.
The Company applies a risk-evaluation and risk-management method in order to ensure that the risks to which the Company is exposed are managed within the frameworks that have been established. Risks that have been identified in connection with financial reporting are managed via the Company’s control structure.
The Company has defined a standardized system of controls to ensure that essential risks pertaining to financial reporting are handled properly.
The Company monitors compliance with governing documents in the form of internal policies, guidelines, manuals and codes, and evaluates the effectiveness of the control structures. The evaluation of the effectiveness of internal controls is conducted through tests performed by internal control resources, the central department for internal control, external consultants or, in certain instances, through self evaluation. The central department for internal control reports the results from the evaluation and other internal control issues to the Audit Committee and Company Management.
Monitoring of the Company’s information and communication channels is also performed with the aim of ensuring that these are appropriate with regard to financial reporting. The Disclosure Committee follows up the sufficiency of the financial reports with regard to disclosure requirements.
The Board receives monthly reports and the financial status of the Company and the Group is discussed at every scheduled Board meeting. In addition, the Board’s various committees fulfill important functions as part of the Board’s follow-up activities.
The Board has evaluated the need for a special internal auditing function based on the Group’s operations. As a result of the existence of a department for internal control within the Company, the task of which is to ensure internal control, the Board of Directors is satisfied that a need for a separate internal auditing function within the Company does not presently exist.
Stockholm, February 19, 2008
The Board of Directors of
Swedish Match AB
Source: Swedish Match Annual Report 2007