Internal control over financial reporting

Interview with Leila Benabderrazik, Internal control Manager

A key process to guarantee the integrity of our financial

Internal control is key to showing our investors that we have responsible control processes. Therefore, we have an internal control system in place, covering all business processes that can have a financial impact. Our objective is to guarantee the integrity of our financial reporting, disclosures and footnotes to ensure they are valid, accurate and complete.

We have identified 15 critical cycles. For each of these, we have selected a champion who is responsible for outlining the process, describing the activities, and defining the measures we have in place to prevent financial misstatement or fraud.

For the last three years, we have been checking the effectiveness of those measures, by performing around 2,500 tests a year on our major locations. We do this by taking random samples, to check that each measure is well designed and working properly.

In 2005, we identified several aspects to improve, primarily relating to documentation and standardization across ST locations. In 2006, we made a number of enhancements to our controls, thanks to the sharing of best practices among our locations and further maturity in the definition of our processes.

In our filings with the U.S. Securities and Exchange Commission and as required by SECT404 of Sarbanes Oxley act, we have not reported any material weaknesses in our internal controls over financial reporting which allows us to get the SOX certification for 2006.

We also have a corporate policy for the appropriate handling of any complaints concerning accounting, internal accounting controls or auditing matters. This includes our appointment of a special ombudsman to collect any such complaints, whatever their source, and protect the identity of those who wish to remain anonymous. Contact details for our special ombudsman are made available to employees on our intranet site. | 4.4 | 4.6 |

In addition to the non-compliance channel managed by a special ombudsman described above, an e-mail channel has also been put in place to give employees the option of communicating suspected instances of non-compliance with ST’s Principles for Sustainable Excellence to ST’s top management. These two high-level reporting channels are in addition to existing local channels, starting with an employee’s manager, Human Resources manager and site director. A new corporate level procedure now defines how local and regional organizations should manage non-compliance reporting at their level, to ensure this is happening in a consistent way worldwide (See more in the social section with the New Social Policy).

Business Conduct and Ethics policy | S03 | STSO1 |
This year we have decided not to publish information on this indicator because we are currently changing to a new prodedure for tracking the signature of Business Conduct and Ethics policy which will be performed through a new compliance e-learning course ‘Compliance with ST’s Principles for Sustainable Excellence’.

 

 

For more details on anti-competitive behavior and compliance, read our
20-F report (pages 116, 145, 146). | S07 | S08 |