Carrefour - 2017 Registration Document

MANAGEMENT’S DISCUSSION AND ANALYSIS AS OF DECEMBER 31, 2017 Internal control system 2017 REGISTRATION DOCUMENT | CARREFOUR 4. 210 Tools and operating methods The Group continues to standardise the accounting systems used in the various countries. Specifically, this has led to the implementation of an organisational model that includes the establishment of shared national service centres (for the processing and payment of invoices involving merchandise, fixed assets, general expenses and payroll), thus standardising and documenting procedures in the various countries and ensuring the appropriate separation of duties. Operating methods are made available to all users. Each country implements tools to address its specific consolidation needs. The Group uses a consolidation and reporting tool to detail, make reliable and facilitate the transmission of data, controls and consolidation operations. Accounting and financial information systems are subject to the same security requirements as all other systems. Consolidation/reporting process and principal controls To assist the Group consolidation process, each country is responsible for reporting its own financial data by legal entity and for consolidating the financial statements at its own level. The Group Reporting and Consolidation Department’s nine-person team leads this process and is responsible for producing the Group’s Consolidated Financial Statements. Responsibilities have been defined by country, as have cross-functional analysis responsibilities within the team. Consolidation has occurred on a monthly basis since 2015 (quarterly previously). Only the half-yearly and annual Consolidated Financial Statements are subject to a third-party review or audit and are published. The Group uses identical tools, data and regional breakdowns for its management reports and Consolidated Financial Statements. Subsidiaries prepare their own statutory financial statements as well as the Consolidated Financial Statements converted into euros for their region. The Finance department in each country makes use of controls in place in the consolidation tool. Countries also have access to a Group benchmark for expected controls during the production of accounting and financial information and the consolidation process. The Reporting and Consolidation Department checks for consistency and performs a reconciliation and analysis at the end of each month. The main options and accounting estimates are subject to review by the Group Reporting and Consolidation Department and the country-level Finance Directors, including during meetings for financial statement reporting options, organised before the financial statements are reported at Group and country level in cooperation with external auditors. Between reporting dates, country visits by the Reporting and Consolidation Department teams provide opportunities to improve processes at country level by promoting understanding and dissemination of the Group’s accounting principles and addressing specific issues within the various countries. If necessary, inspections can lead to recommendations aimed at improving the country’s consolidation procedures. A hard-close procedure was introduced by the Reporting and Consolidation Department in late May to anticipate, as far in advance as possible, any potentially sensitive subjects relating to the six-month reporting period. Also, a review is carried out in late September by the Statutory Auditors to assess the quality of the Group’s internal control system and of the processes associated with measuring income and expenses that, due to their nature and amount, have a material impact on Group performance, so that any weaknesses can be rectified before the financial year-end. The countries are asked to carry out specific work, which is reviewed by the Statutory Auditors. This work focuses mainly on internal control of the supplier and inventory cycles, a review of the main disputes and risks, and impairment testing of stores. In order to provide an opinion to the Board of Directors on the draft financial statements, the Accounts Committee reviews the annual and half-yearly financial statements and the findings of the Statutory Auditors’ team concerning their work. Accordingly, the Accounts Committee meets regularly and as necessary so that it can monitor the process of preparing the accounting and financial information and ensure that the principal accounting options applied are pertinent. Oversight of the internal control system Oversight of the internal control system is mainly based on: a self-assessment process for the application and oversight of the ● main regulations defined by the Group concerning internal accounting and financial control. Action plans are defined at country level where necessary and are subject to monitoring; in-country actions by the Group Internal Audit Department. The ● internal audit plan incorporates tasks to review internal accounting and financial control. Oversight also involves assessing the information provided by the Statutory Auditors as part of their in-country operations. The country-level Finance Directors systematically provide the Group Reporting and Consolidation Department with summaries of actions and letters of recommendation from the Statutory Auditors. It oversees the implementation of these recommendations. The entire process is regularly presented to the Accounts Committee. When significant shortcomings are detected in a country’s internal control system, the Accounts Committee is given a quarterly presentation of changes to action plans. At each reporting date, the Group Internal Audit Department receives letters of affirmation, signed by the Country Executive Director and country-level Finance Director, certifying that the consolidation reporting packages are fair and were prepared in accordance with the IFRS accounting principles applied by Carrefour.