Following is a brief description of how internal control and financial reporting works.
Control Environment
The control environment forms the basis of internal control of financial reporting. The Company’s internal control structure is based on a clear division of responsibilities and duties between the Board and CEO as well as within operational activities. In addition to guidance documents such as instructions for the Board and CEO, the disclosure policy and the financial reporting policy, there are also guidelines and policies for operating and administrative activities. All guidance documents and process descriptions are communicated within the organisation and are available and known to the staff concerned.
Risk Assessment
The Company identifies, analyses, and makes decisions on managing the risk of errors in the financial statements. Currently, the business is relatively small and involves a limited number of persons. The Company has identified the operational processes and earnings and balance sheet items for which there is a risk that errors, omissions, or irregularities could occur if the necessary control elements were not built into routines.The Company’s risk assessment analysed how and where errors may occur in the procedures. Issues that are important to risk assessment are things such as whether assets and liabilities exist on a given date, accurate valuation, whether a business transaction actually occurred, and whether items are recognised in accordance with laws and ordinances. Currently, the Company’s biggest risk are linked to raising capital (liquidity risk).
Control Activities
A number of control measures were established based on the Company’s risk assessments. These are both of a preventive nature, meaning that they are designed to avoid reporting losses or errors, and of an investigative nature. The controls will also ensure that errors are corrected.
Information and communication
Internal regulations, policies, and procedural descriptions are available on the Company’s internal network. Internal communication to and from the Board and management takes place through regular meetings, either physically or by telephone. To ensure that external communication with the stock market is accurate, there is a disclosure policy that regulates how investor relations are managed.
Follow-up
In 2020, follow-up of operations was mainly done in connection with regular board meetings. The Company’s auditors regularly reviewed the internal controls during 2020. The Company intends to update procedural descriptions, policies, and guidance documents as necessary, but at least annually. The Board shall receive quarterly financial results, including management’s comments on operations. The Company’s auditor participates in at least one board meeting to present their observations of the Company’s internal routines and control systems.
Internal auditing
The Company currently has a simple legal and operational structure along with established management and internal control systems. As a result, the Board determined in 2018 that a separate internal audit function was not necessary. The Board regularly monitors the Company’s assessment of internal control through contact with the Company’s auditors and by other means.