Audit Committee Report

Role

The terms of reference of the Audit Committee, provides guidance to perform the duties of the Committee.

Composition

The Audit Committee comprises of 2 non independent non-executive directors and two independent non-executive directors. Biographical details of the directors are set out in the Board of Directors section.

The composition of the Audit Committee as at 31st December 2013 is as follows;

Mr. Kalinga Indatissa – Chairman
Mr. Chan Chee Beng
Mr. Jayantha Dharmadasa
Ms. Pushpa Wellappili
Mr. Sandip Das who resigned from the Board on 24th April 2013 ceased to hold office.

The Committee members

Mr. Kalinga Indatissa replaced Mr. Jayantha Dharmadasa as Chairman of the Audit Committee in November 2013 on his stepping down as chairman of the Committee. Mr. Dharmadasa remains as a member of the Committee. Details of Mr. Indatissa’ previous roles, experience and qualifications are set out in the Board of Directors section.

The group Chief Executive Officer, the Chief Financial Officer, and the Chief Internal Auditor attend Audit Committee meetings by invitation. The Committee also meets separately with the Chief Internal Auditor and with the external auditor without the management being present.

The Asst. Company Secretary is secretary to the Audit Committee

Meetings

The Committee met Seven (07) times during the year ended December 31, 2013. During the course of the year the Committee has also held closed meetings and also met privately with both the external and internal auditors. Regular attendees at Committee meetings, at the invitation of the Committee, included the Chief Executive Officer, Chief Financial Officer and Chief Internal Auditor. In addition, representatives from the external auditors and the head of divisions were invited when required to review the matters coming under their purview.

The Audit Committee is responsible for exercising the full powers and authority of the Board in accounting and financial reporting matters.

The terms of reference of the Audit Committee, provides guidance to perform the duties of the Committee

The key duties of the Committee include

  • Monitoring the integrity of the Company’s year-end financial statements, the interim financial statements and the recommendation for approval of the Board prior to their submission to the Board and any formal announcements relating to the Company’s financial performance;
  • Review of the Company’s financial statements to ensure that its accounting policies are the most appropriate to the Company’s circumstances and that its financial reporting presents a balanced and understandable assessment of the Company’s position and prospects;
  • Review of the group’s systems for internal financial control, financial reporting and risk management.
  • Monitoring and reviewing the effectiveness of the group’s internal audit function and considering regular reports from the Internal Audit on internal financial controls and risk management.
  • Considering the appointment of the external auditors, overseeing the process for their selection and making recommendations to the board in relation to their appointment to be put to shareholders for approval at a general meeting.

Items reviewed during the year include:

> Financial reporting

The Committee reviewed the draft annual and interim management report before recommending their publication to the Board. The Committee discussed with the Chief Executive officer, Chief Financial Officer and external auditors the significant accounting policies, estimates and judgements applied in preparing these reports.

> Financial Statements

The Committee reviewed the Group’s Quarterly Financial Statements, the Annual Report and Accounts for reliability, consistency and compliance with the Sri Lanka Accounting Standards and other statutory requirements, including the Companies Act, No 7 of 2007. It also reviewed the adequacy of disclosure in the published Financial Statements.

Internal controls

The Committee has an ongoing process for reviewing the effectiveness of the system of internal controls. During 2013 it considered reports from the Chief Internal Auditor summarising the work planned and undertaken, the audit carried out on the existing processes and systems highlighting the gaps identified thereon and recommending improvements and describing actions taken by Management.

Internal audit

Internal audit independently reviews the risks and control processes operated by management. It carries out independent audits in accordance with a risks based audit plan which is agreed with the Audit Committee before the start of the financial year. As part of this process the Committee looks at the resources devoted to the function to ensure they are adequate to deliver the plan. In this regard, the Committee has proposed to out source some of the internal audit assignments which are critical and technical in nature to external consultants who have the relevant expertise. M/s PWC was engaged on special assignments on audits on IT related systems and audits on the operations of Regional Telecom Offices and Outside Plant Maintenance Centres were carried out by M/s KPMG. The findings of the audits by the external auditors were discussed in the presence of the senior management and their recommendations were implemented.

Internal audit reports include recommendations to improve internal controls together with agreed management action plans to resolve the issues raised. Internal audit follows up the implementation of recommendations and reports progress to senior management and the Audit Committee.

During 2013, the Committee reviewed and agreed on the process and on the risk based audit plan and on the resources required. It also evaluated the performance of internal audit from the quality of reports and recommendations from the Chief Internal Auditor.

The Audit Committee reviews the findings of the internal audits completed during the year.

The effectiveness of the internal audit function is reviewed and discussed on an annual basis.

The Committee reviewed the external audit strategy and the findings of the external auditor from its review of the interim announcement and its audit of the annual financial statements. The Committee also reviewed the scope and cost of the external audit and the non-audit work carried out by the auditor.

Auditor independence

The Committee reviews the work undertaken by the external auditor and each year assesses its independence and objectivity. In doing so, it takes into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non-audit services.

The Committee monitors the auditor’s compliance with relevant regulatory, ethical and professional guidance on the rotation of partners, as well as assessing annually its qualifications, expertise, resources and the effectiveness of the audit process, including a report from the external auditor on its own internal quality procedures.

Other issues

Details of the fees paid to the external auditor during 2012/13 can be found in note 6 to the financial statements. The terms of reference of the Committee are reviewed at least annually and any changes are recommended to the Board of Directors. As mentioned above, they were changed to incorporate the latest developments related to the company and industry.

On behalf of the Audit Committee

Kalinga Indatissa
Chairman of the Audit Committee
20 February 2014