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SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201133The AC comprises Mr Koh BengSeng as Chairman, Mr VenkatachalamKrishnakumar and Dr Stanley Lai.All the members of the AC areindependent directors.The AC held five meetings during theyear. In the meeting in February 2011,AC had private sessions with theexternal and internal auditors, withoutmanagement, before commencementof the meeting. During the year, theAC reviewed and recommended tothe Board the release of the 2010 fullyear, 1Q2011, 2Q2011 and 3Q2011financial statements, and consideredand approved the 2011 Audit Plan andthe 2011 Internal Audit (IA) Plan. Inaddition, the AC reviewed the adequacyof internal control procedures includingIT security issues, Interested Persontransactions and the issues raised inIA reports.The AC reviewed the level of non auditservices performed by its externalauditors to satisfy itself that non auditservices performed by the auditors didnot compromise their independenceunder regulatory requirements. For thefull year 2011, $4,975,000 was paid tothe external auditors for audit and nonauditservices, of which $1,629,000 or33% were for non-audit services.The AC is routinely updated on theproposed and impending changesin accounting standards and theirimplications for the Group.Internal Control (Principle 12)Internal Audit (Principle 13)The AC oversees and appraises thequality of the Company’s IA function.The Board, through the AC and theRisk Review Committee, is responsiblefor oversight of the risk managementresponsibilities, internal controls andgovernance processes delegated toManagement.The IA supports the AC in reviewingthe adequacy of the Company’sinternal control system. Staffed byqualified auditors, IA has unrestricteddirect access to the AC. The Head ofIA’s primary line of reporting is to theChairman of the AC, although shereports administratively to the President& CEO of the Company.IA plans its internal audit schedules inconsultation with, but independently of,management. The IA Plan is submittedto the AC for approval at the beginningof each year. The AC also meets withIA at least once a year without thepresence of management to gatherfeedback on management’s level ofcooperation and other matters thatwarrant AC’s attention. All audit reportsare submitted to the AC for deliberationwith copies of these reports extendedto the relevant senior management,for prompt corrective actions, asrecommended. Furthermore, IA’ssummary of findings, recommendationsand updates on management actionstaken are discussed at the quarterlyAC meetings.During the year, IA worked withManagement to align newly acquiredcompanies to the Group’s internalcontrol environment and compliancestandards in order to strengthen theself-regulating checks and balances.IA also made periodic visits to overseassubsidiaries to review their operationsto ensure compliance with the internalcontrols framework. An externalaccounting firm was engaged to assistIA. In accordance with its plan, surpriseaudits were conducted in the courseof the year on selected areas includingtreasury activities and reviewing ofdormant bank accounts against bankmandates, bank statements, balances,etc. There were no material issueshighlighted following the surpriseaudits.There were no significant control issueshighlighted by IA in 2011.The IA continued with its systemof rating a company at the end ofan internal audit for the purpose ofdifferentiating the high risk issues whichrequire immediate attention.The Board, with the concurrence ofthe Audit Committee, is satisfied thatthe Company’s framework of internalcontrols and procedures is adequateto provide reasonable assuranceof achieving its internal controlobjectives and addressing financial,operational and compliance risks.The Board is satisfied that problemsare identified on a timely basis andfollow up actions are taken promptlyto minimise unnecessary lapses. TheBoard, through the board committees,is supported in these areas by theInternal Audit and Risk Managementteams of the Company.