TAURON Group’s due diligence procedures
Internal control and audit procedure
TAURON Capital Group’s internal audit and internal control process is organized in such a way as to ensure broadly understood security and safety of the Group’s operations, while supporting the implementation of the Strategy’s objectives. As part of its control and audit activities, the Group strives to increase the predictability of achieving strategic goals – including stable achievement of the assumed financial result – by also focusing on the potential risks that may threaten the value levers (drivers) that are key for the implementation of the Strategy.
The main goals of the Audit and Internal Control Area at TAURON Polska Energia include planning and implementation of the audit and control tasks within TAURON Group, creating and coordinating of the principles of the functioning of the audit and internal control at TAURON Group as well as providing support for the organization in maintaining an effective internal control system.
The audit activities are carried out by the Audit Teams of the Audit and Internal Control Area at TAURON Polska Energia, conducting planned and ad hoc audit tasks both at TAURON Polska Energia, as well as at TAURON Capital Group’s subsidiaries. The Audit Teams, based on the Annual Audit Plan for the given calendar year, while performing process based audit tasks, assess the current level of the individual risks and the effectiveness of the management thereof. As part of the audit activities, the correctness of the audited processes as well as the adequacy and the implementation of the control mechanisms in the audited processes are also verified. If any irregularities are identified, the auditors recommend taking adequate corrective actions (remedies). The implementation of the recommendations is the responsibility of the management of the audited entities, and the degree of the implementation of the audit recommendations is monitored on an ongoing basis.
Internal control (conducted by the owner) is understood as a set of activities of a detective (detection control), preventive (preventive control) and corrective (correction of irregularities and deficiencies) nature. The control (audit) tasks are performed in the form of ad hoc and scheduled controls (audits) by the audit teams composed of the employees holding the Autonomous (Independent) Specialist for the Transaction Control (Audit) Positions as part of the Audit and Internal Control Area at TAURON Polska Energia, as well as by the organizational units competent for the internal control operating at some of the subsidiaries.
A new model for the periodic Evaluation of the Internal Control System has been implemented to provide the Management Board of TAURON Polska Energia and the Audit Committee of the Company’s Supervisory Board with independent and objective information on the functioning of the control mechanisms in the business processes. As part of the above mentioned model, the assessment of the adequacy, implementation and effectiveness of the selected control mechanisms related to the risks assessed as significant for the Internal Control System was initiated, for the first time, in 2022.
The goal of the organization of the Audit and Internal Control Area is to enable the scope of audits and controls to cover the entire operations of the organization, both from the perspective of the needs of TAURON Group as well as those of the individual subsidiaries. On the other hand, the direct organizational reporting to the President of the Management Board allows the Area to maintain the necessary independence and objectivity required to perform its duties effectively. The Executive Director for Audit and Internal Control has also been provided with the ability to periodically report directly to the Audit Committee, as a standing committee established within the Supervisory Board of TAURON Polska Energia. This empowerment is implemented in the Company’s Organizational Regulations currently in force.
Most important aspects relate to the internal controls and risk management with respect to the process of drawing up financial statements and consolidated financial statements
In order to ensure consistent accounting principles based on International Financial Reporting Standards (IFRS ), approved by the European Union, the Accounting Policy of TAURON Polska Energia S.A. Capital Group (Accounting Policy) was developed and implemented by TAURON Capital Group. This document shall be accordingly updated in case there are changes to the regulations. The rules defined in the Accounting Policy shall be applicable to TAURON’s standalone financial statements and TAURON Capital Group’s consolidated financial statements. TAURON Capital Group’s subsidiaries shall be obligated to apply the Accounting Policy when preparing the reporting packages that provide the basis for preparing TAURON Capital Group’s. consolidated financial statements.
In addition, TAURON Capital Group developed and implemented an intra-group regulation that comprehensively regulates issues related to the rules and deadlines for preparing the reporting packages for the purpose of consolidated financial statements. The reporting packages shall be validated by the holding company’s Consolidation and Reporting Team and by an independent certified auditor during an audit or review of TAURON Capital Group’s consolidated financial statements.
The Company has implemented financial statements’ authorization procedures. Quarterly, half year and full year financial statements of the Company and TAURON Capital Group’s consolidated financial statements shall be approved by the Company’s Management Board before being published. Full year financial statements of TAURON and TAURON Capital Group’s consolidated financial statements shall be additionally presented for evaluation to the Company’s Supervisory Board before being published. The Company’s Vice President of the Management Board for Finance (Chief Financial Officer) shall oversee the preparation of financial statements, while the Management Boards of the subsidiaries included in the consolidation shall be responsible for preparing the reporting packages for TAURON Capital Group’s consolidated financial statements.
The Supervisory Board’s structure includes the Audit Committee of the Supervisory Board of TAURON Polska Energia S.A.
TAURON Capital Group’s subsidiaries maintain accounting books (ledgers) which constitute the basis for preparing financial statements using ERP grade financial and accounting computer systems, enabling system audits of the correctness of the document flow and classifying of the business events. Consolidated financial statements are prepared using an IT tool used to consolidate financial statements, providing system control with respect to the consistency (integrity) and timeliness of preparing the consolidation data.
TAURON Capital Group’s subsidiaries have implemented IT and organizational solutions that provide control of access to the financial and accounting system and ensure adequate protection and archiving of the accounting books. Access to IT systems is restricted based on applicable access rights assigned to authorized personnel. Control mechanisms are applied in the process of granting and changing access rights to the financial and accounting systems. The rights granted are also subject to periodic verification.
The accounting functions at TAURON Group’s subsidiaries are to a significant degree integrated – TAURON Capital Group’s material subsidiaries’ financial and accounting services are performed by CUW-R (Shared Cervices Center – Accounting) and as a result of that TAURON Capital Group’s financial and accounting processes are to a large degree unified. The subsidiaries adjusted their own procedures to the flow of the financial and accounting processes, taking into account the specifics of the individual segments. In 2022, as part of the implementation of the government’s program of Poland’s electricity sector’s transition, which envisages the spinning off of the coal assets from power companies that the State Treasury is a shareholder of to the National Energy Security Agency, the reorganization works were carried out to integrate the assets intended to be spun off into a single entity (i.e. TAURON Wytwarzanie S.A subsidiary), which also included the transfer of the accounting services for the assets to be spun off to TAURON Wytwarzanie S.A
TAURON Capital Group’s Business Model clearly distributes responsibilities with respect to the financial and accounting processes between the Company (indicated as the Corporate Centre) and the subsidiaries and CUW-R, indicating that the Corporate Centre is the owner of processes associated with accounting and reporting of TAURON Capital Group. With respect to the tasks of the Corporate Centre, strategic functions associated with the development of the model of operations and standards of TAURON Capital Group were indicated in the area of accounting and supervision of the implementation of standards in the accounting area in the subsidiaries and CUW-R. Moreover, it was indicated that the Company as the Corporate Centre is responsible for drawing up the Company’s financial statements and the consolidated financial statements of TAURON Capital Group. A clear split of responsibilities and strong emphasis on the fulfillment of the supervisory functions by the Corporate Centre in relation to CUW-R and the subsidiaries is, inter alia, aimed at improving the process of preparing the financial statements.
The Company’s full year financial statements and TAURON Capital Group’s full year consolidated financial statements are subject to an audit by a certified auditor. In November 2021, the Company selected an entity authorized to audit and review the financial statements as well as the consolidated financial statements of the Company and to audit the financial statements of selected TAURON Capital Group’s subsidiaries, The contract with the entity authorized to audit financial statements was concluded for the audit of the financial statements and the consolidated financial statements for the years 2022-2024, as well as for the review (audit) of the interim financial statements and the interim consolidated financial statements for the 6- month periods ending on June 30, 2022, June 30, 2023 and June 30, 2024.
The Company has in place the Policy for selecting an audit firm to conduct an audit and review of the financial statements and the consolidated financial statements of TAURON Polska Energia S.A., adopted by the Audit Committee of the Company’s Supervisory Board, which includes the following rule:
- 1. Maximum duration of continuous audit engagements (mandates) carried out by the same audit company or an entity related to that audit company or any member of the network operating in the UE countries that such audit companies are members of, shall not exceed 10 years,
- After the 10-year duration of the mandate (engagement) neither the audit company, nor any member of its network operating within the European Union shall conduct an audit of the Company for the subsequent 4 years,
- A key certified auditor shall not conduct an audit of the Company for a period longer than 5 years,
- A key certified auditor may again conduct an audit of the Company after at least 3 years have elapsed from the completion of the last audit.
