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Internal Audit and Control

Internal Audit

The internal audit is responsible for the independent evaluation and assurance function required of a listed company, which systematically examines and verifies the effectiveness of risk management, control, management and governance. On the proposal of the Audit Committee, the Board of Directors approves the operating instructions and annual plan for the internal audit.

L&T’s internal audit has been outsourced to the audit firm KPMG Oy Ab. L&T has designated the CFO to be in charge of coordinating the practical activities. The internal audit function reports to the Audit Committee of L&T’s Board of Directors. In addition, the President and CEO, the CFO, the General Counsel and the management of each audited division are informed of the audit results. The implementation of the measures resulting from the internal audit recommendations is monitored and the monitoring results are reported to the Audit Committee.

Internal Control

Internal control is a material part of the Group’s administration and management. The purpose of internal control is to ensure the reliability of the Group’s financial reporting, efficiency and profitability of operations and compliance with legislation and other regulations. Tools of internal control include policies and principles, guidelines, manual and IT system-based automatic controls, follow-up reports and inspections or audits.

The company’s Board of Directors has ratified L&T’s internal control policy. The Board of Directors and the CEO are responsible for the organisation of internal control. The Audit Committee of the Board of Directors monitors the efficiency and performance of internal control and correctness of financial reporting.

The financial development of the company is monitored monthly by an operational reporting system covering the whole Group. In addition to actual data, the system provides budgets, forecasts and investment reports. L&T’s operations and financial reports are monitored and compared against budgets and forecasts at different organisational levels.

Group management, divisional management and area management as well as business unit management analyse the results and any nonconformities. Those responsible for finances at the divisions also analyse the financial reports and prepare reports for management use. Their duties also include supervision of the accuracy of financial reports and analysis of results.