Governance

Governance

Internal Control System

One of the implementations of good corporate governance is to ensure that the Internal Control System operates effectively. The implementation of the Internal Control System is directed at ensuring that the Company has already had reliable financial statements and information, compliance with the applicable laws and regulations, as well as efficiency and effectiveness of operational activities. The Internal Control System is a process designed and performed by the Board of Commissioners, Board of
Directors, and other members of the management as part of the implementation of the check and balance mechanism.

FINANCIAL AND OPERATIONAL CONTROL
The financial control system is implemented by the Company by providing financial information for every management level, Shareholders, and Stakeholders, which is used as the basis for decision making. This system can be used by the management to plan and control the Company’s operations. Meanwhile, the operational control system is carried out by implementing policies and procedures that are directly used to achieve goals and targets as well as guaranteeing or providing accurate financial statements and ensuring compliance with or adherence to laws and regulations. The implementation of these two control systems, both the financial control system and the operational control system, covers all elements within the Company.

THE OBJECTIVES OF INTERNAL CONTROL
The objectives of implementing Indocement’s Internal Control System are:
1. To fulfill the compliance with regulations and laws issued by the government as well as internal policies, provisions, and Company regulations;
2. To ensure that financial and management information is accurate, complete, transparent, and on time;
3. To ensure that the Company’s assets are used effectively and efficiently to protect the Company against the risk of loss and leakage;
4. To reduce the risk and impact of losses, irregularities, fraud, and misuse;
5. To embed corporate culture in identifying weakness and fraud early, assessing fairness of policies, and improving the related procedures;
6. To ensure that factory management is performed according to the agreed standard operating procedures.


CONFORMITY OF INTERNAL CONTROL WITH COSO FRAMEWORK
Indocement’s internal control system is already in conformance with the Internal Control Integrated Framework developed by The Committee of Sponsoring Organization of the Treadway Commission (COSO) and the objectives of internal control according to COSO includes operations, reporting, and compliance. The objectives of the operations are related to the effectiveness and efficiency of operations. Objectives of reporting relate to the financial reporting that satisfies the criteria of reliable, timely, transparent, and other requirements stipulated by the regulator and the Company. Objectives of compliance relate to the Company’s compliance with the applicable laws and Regulations. According to COSO, internal control elements include the following components:

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EVALUATION OF INTERNAL CONTROL SYSTEM IMPLEMENTATION
The Management is responsible for implementing a reliable and effective Internal Control System and ensuring that Internal Control System has been embedded in every organizational level. Internal Control Unit evaluates the adequacy and effectiveness of Internal Control System as a whole and the supervision conducted to support the Board of Directors’ assertions on the effectiveness of the applied Internal Control System. Evaluation results are submitted to the management for follow up and the implementation is monitored to ensure that the Internal Control System runs effectively. The evaluation conducted during 2020 showed that the internal control system at Indocement was adequate.

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