Scania annual report 2006 by the Board after preparation by its Remuneration Committee. The principles for remuneration to the President and CEO , other members of the Executive Board as well as the heads of corporate units are decided by the AGM, based on a proposal by the Board. The proposal is prepared by the Remuneration Committee. Share-related incentive programmes are decided by the AGM. Compensation to executive officers, including the President and CEO and other members of Group Management, is stated in the Annual Report, notes to the financial statements, Note 28, “Compensation to executive officers”. Internal control of financial reporting at Scania The description below has been prepared in compliance with the Swedish Code of Corporate Governance and according to the instruction issued by the Swedish Corporate Governance Board in September 2006. The description follows the guidelines provided by the Swedish Institute of Authorised Public Accountants (FAR ) and the Confederation of Swedish Enterprise. Control environment Internal control at Scania is based on organisational structure, decision making procedures, powers and responsibilities which are documented and communicated in governing documents, such as internal policies, manuals and codes between, on the one hand, the Board of Directors and, on the other hand, the President and CEO and other bodies that the Board has established. Internal control is also based on instructions on powers and authorisation rights as well as reporting instructions in the form of manuals. Risk assessment and control activities Risks that have been identified in Scania’s financial reporting are handled through its control structure. The company’s control structure, like financial responsibility, follows its organisational and responsibility structure. Responsibility for activities and control measures aimed at ensuring that financial reporting provides a true and fair view of the company’s financial position follows its control structure. Information and communication In order to inform, instruct and coordinate financial reporting, Scania has formal information and communications channels to affected employees regarding policies, guidelines and reporting manuals. Monitoring Scania monitors compliance with the above-described governing documents and the effectiveness of the control structure. Monitoring and evaluation are performed by the company’s corporate controller departments in industrial operations, all sales and service companies and Customer Finance operations. During the 2006 financial year, in its control and investigative activities the company prioritised areas and processes with large flows and values, for example material and inventory accounting. Monitoring compliance with the Scania Corporate Governance Manual and Scania Financial Reporting Guide were also high-priority areas, along with units and companies which are, or were, in a growth or change phase. During the year internal Group seminars and conferences were also held, with a focus on quality assurance in financial reporting and governance models. In preparation for every meeting, the Board of Directors’ Audit Committee receives an internal control report for review. The Board receives monthly financial reports, except for January and July. This financial information increases in terms of content in the run-up to each interim report, which is always preceded by a Board meeting where the Board approves the interim report. Through the organisational structure and the work methods described above, the company has decided that the internal control system concerning financial reporting is well suited to the company’s operations. Accordingly, the company, including Group Management and the Board of Directors, has deemed a separate audit department unnecessary at present.