Description of the accounting-related internal control and risk management system in accordance with Section 289 Paragraph 4 and Section 315 Paragraph 4 HGB
The ICS covers all the principles, procedures and steps intended to ensure effective, economical and accurate accounting and compliance with the relevant legal regulations. It is based on the COSO framework (Committee of the Sponsoring Organizations of the Treadway Commission).
Overall responsibility for the Internal Control System required to manage risk lies with the Executive Board of Deutsche Lufthansa AG, which defines the scope and the format of the systems in place based on the specific requirements of the Lufthansa Group.
The central Corporate Audit department of Deutsche Lufthansa AG as well as the decentralised internal audit departments at Delvag Versicherungs-AG and Lufthansa AirPlus Servicekarten GmbH are embedded in the internal monitoring system for the Lufthansa Group and act independently of business processes. In addition, the effectiveness of those areas of the internal control system relevant to financial reporting are reviewed by the auditors as part of a risk-oriented approach to their audit. The Audit Committee of the Deutsche Lufthansa AG Supervisory Board monitors the effectiveness of the internal control system and risk management system on the basis of Section 107 Paragraph 3 of the German Stock Corporation Act (AktG).
The objective of the internal control system for accounting processes is, by implementing checks, to provide a reasonable degree of certainty that the annual financial statements and the consolidated financial statements of Deutsche Lufthansa AG comply with the rules, despite the risks identified.
The following preventative and investigative checks are embedded in the accounting process:
- IT-supported and manual cross-checks,
- functional separation,
- dual signatures and
- monitoring checks.
Operational accounting processes are carried out locally at the Group companies and also using the Group’s own and external shared service centres. Expert opinions for determining the amount of pension provisions are prepared by external consultants.
Corporate Accounting is functionally responsible for preparing the consolidated financial statements and draws up binding regulations for the Group companies that pertain to form, content and deadlines. The Lufthansa Group’s accounting guidelines are updated regularly and define uniform accounting policies for the domestic and foreign companies included in the consolidated financial statements of the Lufthansa Group in accordance with the International Financial Reporting Standards (IFRS) applicable in the European Union. For Deutsche Lufthansa AG and other German companies in the Group, a guideline defines rules for drawing up individual financial statements in line with the German Commercial Code (HGB). This ensures that standardised Group accounting practices are applied to the recognition, measurement and presentation of balance sheet items, with as little room for discretion as possible. The formal requirements relate to the mandatory use of a standardised and complete set of reporting forms and a uniform chart of accounts for the Group. When they submit the reporting package, the responsible managers at the Group companies must confirm to the Executive Board of Deutsche Lufthansa AG that they comply with these policies.
Individual financial statements that contain errors are selected and restated as necessary at company or Group level on the basis of control mechanisms already defined in the SAP SEM-BCS consolidation software and/or by systematic plausibility checks. The consolidation system dictates the different deadlines for various elements of the reporting package and verifies centrally that they are adhered to during the preparation process.
The IT systems used for accounting are protected against unauthorised access by special security precautions.
By means of the organisational, control and monitoring structures defined for the Lufthansa Group, the internal control system and risk management system as it relates to accounting ensures that all matters affecting the Company are captured, processed and evaluated, and are presented adequately in the Group’s financial reporting. In particular, the use of individual discretion, faulty checks, criminal acts by those involved and other circumstances may compromise the effectiveness and reliability of the internal control system and risk management system in place. This means that even the Group-wide application of these systems cannot guarantee with complete certainty that facts are presented correctly, fully and promptly in the consolidated financial statements. These statements only relate to Deutsche Lufthansa AG and the major subsidiaries included in the consolidated financial statements of Deutsche Lufthansa AG.