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Governance Structure

Internal Audit

Internal Audit represents the third line of defense of the Schaeffler Group’s governance structure. Internal Audit provides independent and objective audit and consulting services focused on adding value and improving business processes. The internal audit function contributes to meeting the corporate objectives the Schaeffler Group has communicated by assessing and helping to improve the effectiveness of the compliance management system, risk management, controls, and management and supervisory processes using a systematic and goal-oriented approach. Responsibility for establishing the internal audit function and for its effectiveness rests with the Board of Managing Directors and cannot be delegated. Hence, Internal Audit reports to the entire Board of Managing Directors. Organizationally, Internal Audit is assigned to the Chief Executive Officer of Schaeffler AG.

The Schaeffler Group has made the following arrangements to ensure the independence and objectivity of Internal Audit:

  • direct organizational link to the Chief Executive Officer to ensure there are no gaps in audit coverage;
  • neither the head of Internal Audit nor audit staff have any operational responsibilities;
  • reports annually on potential impairment of independence to the CEO/Board of Managing Directors/audit committee;
  • audit planning and significant changes therein have to be approved by the Board of Managing Directors and documented appropriately.

Internal Audit consists of the functions “Methods, Reporting and Quality Assurance”, “Corporate Audits” and “IT and Special Audits”. It also has locations in each of the four regions.

The responsibilities of Internal Audit specifically include, but are not limited to, the following activities:

  • audit and assessment of the appropriateness, efficiency, and effectiveness of the internal control system;
  • audit and assessment of the appropriateness, efficiency, and effectiveness of the management and supervisory processes;
  • audit and assessment of the finance and accounting systems, the information system, and the reporting system;
  • audit and assessment of the effectiveness of risk and compliance management;
  • audit and assessment of the effectiveness of arrangements for preventing and detecting fraud;
  • audit of arrangements for safeguarding assets;
  • audit and assessment of the implementation of and compliance with legal requirements and the company’s internal rules (“orderliness“);
  • performance of special investigations with respect to fraud, conflicts of interest and other irregularities.

Internal Audit performs systems- and effectiveness audits. Systems audits involve auditing selected areas (e.g. Procurement) and documenting and analyzing the actual processes in place. Any findings documented during such systems audits are assigned to one of three assessment areas („orderliness“, “internal monitoring system”, “business processes”). Effectiveness audits involve testing the effectiveness of the risk management system or the internal control system within the Schaeffler Group. Compliance risks are covered in the “orderliness” assessment area.

In a risk analysis done in preparation for audit assignments, Internal Audit exchanges information with other departments (e.g. Compliance and Corporate Security, Controlling, Legal, Quality, Risk Management).

In order to obtain sufficient reliable, relevant, and constructive information to achieve its audit objectives, Internal Audit regularly performs its audit assignments on location.

In its audit reports, Internal Audit communicates its findings, its recommendations for mitigating risk, and the persons responsible for implementation, with whom they agree binding implementation dates. In a monitoring and follow-up process, Internal Audit monitors implementation of its recommendations for remediating identified deficiencies.

In accordance with the International Standards for the Professional Practice of Internal Auditing 2016 of the Institute of Internal Auditors (IIA), the head of Internal Audit has established a quality assurance and improvement program covering all of Internal Audit’s responsibilities.

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