20,000 hours of meticulous effort each year

The 40-line Auditors’ Report, never more, never less, is the culmination of an estimated 20,000 hours of auditing annually. This is on top of the process that involves almost everyone in the Group, from the Board to the smallest stockrooms around the world. The ultimate purpose is to ensure that the most reliable picture of »shareholders’ Swedish Match« is obtained.

Year-round audit process
The audit process at Swedish Match involves some 100 auditors during its most hectic phase between September and February. More or less continual review of calculations, control and reporting systems is conducted by 24 audit teams in 15 countries.

Bertil Raihle from Swedish Match and Claes Janzon from ըrlingsPricewaterhouseCoopers are key figures in the process - Bertil Raihle because he works with the Group’s financial reporting as Group Controller at the Head Office, and Claes Janzon because he is responsible for coordinating all 24 audit teams. Both then report to their superiors - Sven Hindrikes, the Group’s CFO, and the two regular auditors, īe Danielsson and G� Tidstr�lt;br>
They barely have time to catch their breath after the Annual General Meeting before work begins again in May with planning meetings. »At that time, we discuss whether we are going to focus the review on any particular areas, perhaps in light of any major structural changes in the Group, changes in legislation or regulations or if the previous year’s audit highlighted the need for any special efforts,« says Bertil Raihle.

Such »themes« in the audit may involve reviews of IT systems’ suitability and security, a special review of stock values or the invoicing system’s quality. »In a large Group like Swedish Match, the work largely involves system reviews, rather than detailed inspection of orders and invoices,« explains Claes Janzon, who also has specialist expertise in US accountancy practices, which is of special use to Swedish Match.

»In a large company like Swedish Match, work largely involves system reviews, rather than detailed inspection of orders and invoices.«

ACTIONS OF THIS KIND are also taken, although more in the form of random checks. Auditors may, for example, visit warehouses to check flows and the valuation of goods. However, system quality is emphasized - who is authorized to enter data into the system, how is accuracy checked, how are warehouse flows linked to order data, accounts receivable and the sales ledger, and how are quality and the value of the stock checked?

Also important are the review of financial transactions and the evaluation of the risk these involve, as well as the standard of the accountancy principles employed and the degree to which they are followed.

»As auditors, we are to ensure that the company maintain control and works ambitiously to limit risks in their operations,« Claes Janzon continues.

AFTER THE VACATION PERIOD, work gets underway as the 24 audit teams receive their instructions, five in Sweden, two in the US, and the remainder concentrated to Swedish Match countries such as the Netherlands and India. In London, a special team conducts a review based on the US rules. That review results in a »20F« document, an Annual Report, which must be submitted to the US Securities and Exchange Commission.

In total, some 100 auditors are involved with the review of all of Swedish Match’s companies around the world. In November, the various audit teams submit their reports. A total of 400-500 pages, following a strict template, pour into the Stockholm office by e-mail. Claes Janzon then compiles reports for Bertil Raihle and Sven Hindrikes. Meetings are held to discuss unresolved issues and instructions for additional work are then sent to auditors in the field. The review of the annual financial statements begins early in January. All audit teams work intensively and within a few weeks reports on the review are submitted from all local companies. A Groupwide accountancy team works in parallel to compile the financial statements for the entire Group. On about February 5, a report meeting is held to finalize the financial statements for the full year. »We hold a number of meetings in January and early February.

Many late nights are spent resolving questions and fine-tuning the figures in preparation for the Board’s meeting to discuss the financial statements on about February 10, in which the auditors participate.

At that point, the review of the Annual Report has already begun. That process progresses during January and February. In addition, as a company listed in the US, Swedish Match is required to compile a thorough 20F document, in accordance with US GAAP accountancy standards within six months of the close of the financial year. In this context, the special team in London plays the primary auditing role.

Bertil Raihle grabs the Swedish Financial Accounting Standards Council’s 350-page recommendations from the shelf and indicates a row of files, »We have to follow this too, about 4,000 pages of US standards! It is extremely thoroughly thought out and detailed. It forces a demanding intellectual processing of the Report.«

OCCASIONALLY, THE US RULES conflict with the Swedish ones. In Sweden, the principle of caution is worshipped while the basic US stance involves market evaluation. Swedish Match must therefore report in accordance with both systems and explain any divergences. These are reported in a special note in the Annual Report.

Obviously the auditing organization obtains a very broad and deep knowledge of the Group and its operations.

»It is therefore natural that we use them for a number of consultancy type assignments. We need their assistance on such matters as accountancy details in connection with acquisitions, advice on tax issues, and the management of complicated bookkeeping transactions in international business. In addition, the auditors have extensive knowledge of the reporting and control systems, which we are able to use in the ongoing development of our own administrative systems,« concludes Bertil Raihle.