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72
Rothschild & Co | Annual Report 2017
Internal control, risk management and accounting procedures
Once data has been input into SAP FC, “blocking” controls defined by the
Group are applied in order to validate the consistency of the accounting
data, the correctness of the flows and the completeness of the analyses.
In addition to these controls, the procedure for preparing the consolidated
accounts includes:
• the reconciliation of intercompany transactions and the distribution of
shareholdings in the Group’s companies;
• checks on the application of consolidation adjustments;
• analysis and justification of shareholders’ equity;
• analysis of changes in balances and ratios on a quarterly and year-to-
date basis; and
• review at consolidated level of the provisioning policy.
5.3 Accounting control process
The accounting control process at Group level complements the control
systems implemented at each level of the Group’s organisation.
5.4 Accounting control mechanisms in
the Group
Group Finance relies on a decentralised system where the primary control
functions are assigned to the persons responsible locally for producing the
financial statements.
Local accounting data is collected using SAP FC, the Group’s consolidation
tool. The local finance departments are responsible for validating the
accounting data entered in SAP FC through three levels of control:
• a first level – of the self-control type – which is embedded in the local
accounting processes. These controls are operated daily;
• a second level, which is operated by accounting managers, for example
involving controls on securities positions and consistency controls
designed to ensure the reliability and completeness of the accounting
and financial information; and
• a third level, which involves the Statutory Auditors who certify the
accounts, carried out on an annual and half-yearly basis. Note that
not all entities are audited (but most are) and that only the large entities
and the significant balances are reviewed for the half-year accounts.
The Internal Audit department is also involved in the control process
as a third level control.
As described above, local entities’ accounting information is input on an
IFRS basis into SAP FC templates. Once data has been input, “blocking”
system controls are applied.
5.5 Accounting control mechanisms at
consolidation level
In addition to the control procedures described above, the consolidation
process is accompanied by additional checks on the integrity of the
consolidated accounting information. These checks are carried out by:
• Group Finance, which in addition to its controls on the integrity of
the accounting information, checks the consistency of the data
reported with:
–– its knowledge of the major transactions;
–– the Group management accounts and the reconciliation of
differences with the Group financial accounts;
–– a category-by-category analysis of key balances; and
–– papers produced by other relevant Committees (for example,
the Remuneration and Nomination Committee, the Group ALCO,
the Group Executive Committee, etc.).
• Rothschild & Co Gestion, as Managing Partner of Rothschild & Co,
which approves the consolidated accounts before they are sent to the
Audit Committee.
• The statutory auditors, in the context of the certification of the accounts.
Their work is carried out in accordance with professional standards.
• A final level of control takes place through the work of the Audit
Committee, which is responsible for examining the Rothschild & Co
consolidated accounts.
5.6 Control framework for regulatory reports
The Group Regulatory Reporting Division draws up the relevant Group
procedures and ensures the quality and reliability of calculations of the
solvency ratio, credit risk, market risk, operational risk and regulatory capital.
At Group level, the regulatory reports prepared for the
Autorité de contrôle
prudentiel et de résolution
are those related to:
• solvency ratio (including Capital Adequacy and Risks reports) Leveraged
Ratio and Large Exposures;
• liquidity Coverage Ratio, Additional Liquidity Monitoring Metrics and Net
Stable Funding Ratio; and
• IFRS/FINREP reports on a regulatory scope.
There are currently four main procedures related to regulatory
reporting process:
• solvency ratio procedure was first written and communicated in
May 2010;
• large exposures procedure;
• procedures have been defined for FINREP and the list of subsidiaries;
and
• counterparty master data procedure.
Furthermore, each quarter the Group regulatory reporting division circulates
quarterly regulatory reporting instructions and a quarterly Group regulatory
finance newsletter to all relevant finance staff in the Group.