News; Jan 8, 2003 CET

Each word is significant

The Auditors’ Report may not look much, with its brief, standard formulations, but each precise word weighs extremely heavily,« says Bernt Magnusson, Chairman of the Board.

»It is backed by an enormous investment in man hours, corresponding to 16 MSEK each year, and by many years of experience and expertise both on our part and that of the auditors.

Auditors put their honor and their firm’s entire credibility capital at stake in affirming its correctness. There is no greater pledge. For auditors, credibility is everything. The result is security for shareholders.«

The annual audit is the process reviewing Senior Management’s performance in the task of managing shareholders’ assets. It is also the shareholders who, via the Annual General Meeting, assign the auditors their task. Is it therefore not a problem that the President and the Board foot the bill and, in practice, formulate the assignment and act as the customer? »No,« replies īe Danielsson. »There is no conflict between what Senior Management wants us to do and what we are obliged to do. We provide support for management while also acting as independent review body, with the duty of ensuring that Group companies follow management’s orders.«

»For the auditors, credibility is everything. The result is security for the shareholders.«
Bernt Magnusson

BERNT MAGNUSSON AND the Group’s auditors are agreed that bookkeeping is not an exact science. »And therefore, a precise and objective view of a company’s condition does not exist. The important thing is to try to achieve as much openness and transparency as possible.

Shareholders and others must be able to see what conclusions we have reached and, preferably, why. Then one must accept that other conclusions are also possible.«

According to Bernt Magnusson, this manifesto underlies the conservative »audit culture« at Swedish Match. »Long-term credibility is as important to us as it is to the auditors.«

ONCE EVERY FOUR YEARS, the Board conducts a procurement process for auditor services by setting a list of requirements and requesting bids. What are the criteria for the auditing assignment at Swedish Match? »With our broad, international operations, only the major, international auditing firms are suitable. Other requirements include independence, a strong combination of general expertise and specialist knowhow, particularly at the auditing firm’s headquarters in Stockholm. And, again, an untarnished reputation and credibility,« says Bernt Magnusson. Auditors have been highly criticized during the past six months in the wake of the US corporate scandals at Enron and WorldCom. Could events like these hit Swedish Match?

»There is no conflict between what Senior Management wants us to do and what we are obliged to do.« ċE DANIELSSON

ċE DANIELSSON ANSWERS, »Society often has unreasonable expectations. Our role is clearly defined in the Companies Act. We are to take those measures that may reasonably be demanded and which indicate any problems. However, the primary emphasis of the audit is not on uncovering fraud, and we have no way of exerting power. The power within the company lies with the Annual General Meeting, the Board and the President.«

Bernt Magnusson says, »We have reviewed our audit process to check whether or not we have any of the loopholes and pitfalls of the type discovered in the US. However, this did not necessitate any action. A business is built on mutual trust between a large number of individuals. Protecting oneself against crooks and dishonest individuals would be difficult without a degree of control that would turn us all into policemen, thus creating an untenable working environment. «

Swedish Match’s Board has decided to establish an Audit Committee, consisting of three members, whose specific tasks, responsibilities and authorization will be determined during the next few months.