Annual Report 2010

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CORPORATE GOVERNANCE REPORT 2010 Significant internal policies that form the control environment: » The Code of Conduct was adopted by the Board in 2001. The Board has stated the Group’s vision and values and the standards of integrity, ethical value and competence at which the Group’s employees shall operate. » The anti-fraud policy was approved by the Board in 2005. The policy outlines the employees’ responsibilities with regard to fraud prevention, what to do if fraud is suspected and what action will be taken by management in the case of suspected or actual fraud. » The whistleblowing policy was adopted by the Board in 2008 to complement the anti-fraud policy and is intended to cover serious concerns that could have a significant impact on the Group. The internal audit function performs on a regular basis risk assessments and audits and coordinates the joint venture audits within the Group. The oil and gas industry is based upon companies sharing costs and risks through joint venture arrangements. Joint venture partners have audit rights over the operating partner. To ensure that accounting procedures are followed and costs are incurred in accordance with the joint operating agreement, for non-operated assets, Lundin Petroleum undertakes regularly audits of joint ventures. 4. Information and Communication Communicating relevant information throughout all levels of the Group and to external parties is an important part of internal control. The communications policy that has been approved by the Board of Directors deﬁnes how external information is to be issued, by whom and the way in which the information should be given. Financial information is published in the following forms: » Lundin Petroleum’s annual report. » Quarterly reports. » Press releases for news and events that may have an impact on the share price. » Presentations, webcasts and audiocasts for analysts, investors and media. » Lundin Petroleum’s website. Policies, guidelines and procedures, such as the Group Accounting Principles Manual, Authorisation Guidelines and Finance and Administration Manual are communicated on a regular basis to all employees and are accessible through the information system network. 5. Monitoring Monitoring of the ﬁnancial reporting of Lundin Petroleum is carried out by the Board of Directors, Group management, the internal audit function and by other employees holding various functions within the Group. Operational monitoring includes monthly and quarterly follow-up of results against budget and forecast and is carried out by the ﬁnance department at Group and at local level. Monitoring and reporting is also done by the internal audit function, which provides objective support to the Board on matters relating to the internal control by investigating major areas of risk and by doing reviews in deﬁned areas. An important role of the internal audit function is to follow up that the results from previous years’ reviews have been implemented. The Board reviews and evaluates comprehensive ﬁnancial information regarding the Group as a whole and the entities it comprises. The Board also reviews, primarily through the Audit Committee, the most important accounting principles applied by the Group in the ﬁnancial reporting, as well as changes to these principles. Minutes are taken at all meetings of the Audit Committee and are provided to all Board members and the external auditors. The Rules of Procedures of the Board include detailed instructions regarding the type of internal ﬁnancial reports that shall be submitted to the Board. 3. Control Activities The ﬁnance department is responsible for the consolidated accounts, consolidated reports and for ﬁnancial and administrative control systems. Various control activities are incorporated in the ﬁnancial reporting process to ensure that the ﬁnancial reporting gives a true and fair view at any reporting date and that business is conducted eﬃciently. Control activities range from review of results by management to speciﬁc reconciliation of accounts and analysis of the processes for ﬁnancial reporting. The ultimate responsibility for ensuring that control activities are appropriate and in accordance with the Group’s policies, lies with the General Managers/Managing Directors of the Group companies. The choice of control activities depends on the nature of the risk identiﬁed and the results of a cost-beneﬁt analysis. Developed control activities within Lundin Petroleum include processes for approval of business transactions, reconciliations, reviews of operating performance, security of assets, segregation of duties, policies, guidelines and procedures and information systems. As part of the control activities the following documents have been issued: » The Lundin Petroleum Group Accounting Principles Manual outlines the Group’s accounting principles and explains how transactions are to be accounted for and requirements for disclosure. The manual focuses upon the accounting policies to be applied in accordance with International Financial Reporting Standards (IFRS). » The Lundin Petroleum Authorisation Guidelines have been established to deﬁne the limits of authority that are applicable within the Group. » The Lundin Petroleum Finance and Administration Manual describes the day-to-day ﬁnancial procedures within the Group. Further, the Investment Committee was established by the Board to assist the Board in overseeing the Group’s investment decisions and to make recommendations to the Board as required. The Investment Committee meets at least twice per month. 49

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