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Last Update: 03/12/2009
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Part of the audited Consolidated Financial Statements and Management´s Analysis

The internal control system as regards financial reporting

Significant features: In the Finance division, the corporate unit Financial Reporting Compliance provides methods for the structured, Group-wide and uniform evaluation of the internal control system for financial reporting.

A risk catalog covers the significant risks to the BASF Group regarding an intact control environment as well as proper financial reporting. The risk catalog is revised and updated annually.

In a central selection process, companies and units are identified that are exposed to particular risks or that have a material impact on the Consolidated Financial Statements of the BASF Group or that provide related service processes. All significant BASF sites, regions and divisions are covered. The composition is decided on each year. In the companies and units, a responsible person is named who coordinates and monitors the execution of the following steps:

Yearly evaluation process: This consists of the following steps:

  • Evaluation of the control environment
    The adherence to internal and external guidelines that are relevant to the financial reporting process is checked through a standard questionnaire. Each responsible manager performs an appraisal based on sampling.
  • Identification of control activities
    In order to counter the risks to the financial reporting process listed in our central risk catalog, corresponding control activities are conducted. The control activities of the largest companies and those with special risks are documented in a global IT system.
  • Appraisal of the control activities
    After the documentation, a test is performed to verify if the described control is capable of adequately countering the risk. In the following test phase, samples are taken to test the effectiveness of the controls.
  • Monitoring of control weaknesses
    Management receives reports on any control weaknesses and their elimination, and an interdisciplinary committee investigates their relevance to the BASF Group. The Board of Executive Directors is informed once control weaknesses are identified that have a considerable impact on financial reporting.
  • Internal confirmation of the internal control system
    The responsible managing director and chief financial officer for each consolidated Group company confirm to the Board of Executive Directors of the BASF Group at the end of the annual cycle the effectiveness of the internal control system over accounting as well as the adequacy of financial reporting.

INTERNAL CONTROL SYSTEM OVER FINANCIAL REPORTING


  • Corporate unit Financial Reporting Compliance
  • Evaluation of the internal control system for financial reporting, based on a central risk catalog
  • Selection of companies/units based on risks, significance for the Consolidated Financial Statements or services processes provided
  • Execution and monitoring of the individual steps through the companies/units

CONTROL ACTIVITIES IN THE FINANCIAL REPORTING PROCESS


  • Evaluation of the control environment
  • Identification of control activities
  • Appraisal of control activities
  • Monitoring of control weaknesses
  • Internal confirmation of the effectiveness of the internal control system

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