2014 ANNUAL REPORT

Consolidated Financial Report |

DIRECTORS’ REPORT

2014 Annual Report

Prysmian Group

(2) ”COSO Framework - Committee of Sponsoring Organizations of the Treadway Commission”.

consistency of financial data communicated externally

through the financial statements. The Board of Directors has

also appointed the Head of Internal Audit as responsible for

verifying that the system of internal control over financial

reporting is always operating adequately and effectively. To

this end, the Internal Audit Department draws up an annual

audit plan using a structured approach to risk assessment, in

line with the Group's ERM model. This plan is first approved

by the Control and Risks Committee and then by the Board

of Directors. The audit planning activity is not only based on

the findings of the ERM process but also takes account of

specific risks identified through interviews with Senior Man-

agement, and also includes any areas for which remediation

actions have been previously recommended. In conducting

Internal Audit activities, internal auditors are given complete

access to all relevant data and information to enable them to

perform each audit. The Head of Internal Audit attends every

meeting of the Control and Risks Committee. The results of

internal auditing activities are reported to the committee

along with key findings and remediation actions. The status

of the audit plan is reported during each meeting and any

significant deviations or anticipated deviations are discussed

and confirmed. The implementation status of previous audit

recommendations or remediation actions is also reported to

this committee.

For the purposes of ensuring a reliable system of internal

control over the financial reporting process, Prysmian

Group has adopted a set of administrative and accounting

procedures, as well as a series of operating policies, proce-

dures and instructions such as to guarantee an effective

flow of information with its operating companies. The

administrative and accounting procedures include the Group

Accounting Manual (rules for the use and application of ac-

counting policies), the Administrative Processes Manual, the

procedures for creating and publishing financial information

and other procedures for the preparation of the consolidated

financial statements and interim financial reports (including

the chart of accounts, the consolidation procedures and

procedures for related party transactions). Prysmian Group

Head Office functions are responsible for distributing this

documentation to operating companies, which can be

accessed through the Group's intranet site. The operating

companies also issue local policies, procedures and rules that

comply with the Group's guidelines.

The Group has adopted a centrally coordinated evaluation

system and attestation process for the purposes of assessing

the adequacy and effectiveness of the internal control

system, which includes controls over the financial reporting

process. This system has been developed using the "COSO

Framework

" to identify key risks and thus the required key

controls to adopt to mitigate the risks identified and to

ensure the internal control system operates effectively.

A scoping exercise is carried out annually to identify the

companies, processes and sub-processes to be audited. In

fact, the Internal Audit Department, serving in an indepen-

dent capacity, tests the operation of the controls previously

identified for each of the Group's "in-scope" operating

companies and processes. The Chief Executive Officer and

Chief Financial Officer of every Group operating company,

and the Heads of the relevant Head Office Functions and

Departments, are responsible for maintaining an adequate

system of internal control; this includes periodically testing

the key controls, identified and tested by the Internal Audit