Audit Committee activity report for the year ended 20 December 2017

INTRODUCTION

According to good governance practices, supreme council must have a number of specialized committees in place so as to ensure it performs its duties effectively. One of this committee is an audit committee. This committee is comprised of 3 non executive members appointed by supreme council.

The Audit Committee examined DAB’s financial reporting process on behalf of the Board of Directors. The DAB’s management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the Committee reviewed and discussed the audited financial statements, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements.

Audit Committee discharged its responsibilities in accordance with Audit Committee Charter in the year 1396 ( 2017) in areas of internal control effectiveness, sound and transparent financial reporting practices, independent internal audit function, external auditor performance and compliance with applicable laws and regulations.

Internal audit work plan was reviewed and approved by Audit Committee; The Audit Committee met on four occasions over the course of 2017, all meetings were chaired by Dr. Shah Mohammad Mehrabi attendance of the meetings is part of this report. These meetings, and the main issues discussed are described below:

Audit Committee membership during the year

Financial Reporting

Audit Committee had received regular reports from CFO about compliance with monthly preparation of Performa balance sheet in accordance with DAB Law. During the mentioned year an expenditure policy was prepared by finance department for the purpose of dedicating the authorities and it was approved by Supreme Council. Ernst and Young (E&Y) the external auditor`s meetings with audit committee were arranged for two times and after the detailed discussions necessary instructions were given to the Finance Department.The key findings and concerns of E&Y were presented to Audit committee, CFO briefed the Audit committee about the importance of IFRS 9 and it was decided DAB should become incompliance with the captioned standard.

Audit Committee discussed major accounting issues between management and external auditors and advised both parties to come up with a proper solution in compliance with IFRS.

Internal Audit

The Audit Committee’s functions include “supervision of the internal audit service” and “awareness and knowledge of the financial reporting process, internal control systems and the risks within organization.

In order to oversee the sufficiency, suitability and efficient working of the internal control, the committee received regular information in 2017 from the Comptroller General’s office.

The annual internal audit plan and the degree to which it had been met: progress and conclusions on the internal audit work performed, which essentially comprises the tasks of auditing financial statements, reviews of critical projects and construction work, and reviews of special areas, among others.

External auditors findings especially in the area of independent IT security function, review of database and vulnerability of access to ICBS from public IP was discussed in audit committee meetings and it was decided that within the General Comptroller’s Office there should be IT systems auditors to fulfill this activity and technically audit the respective departments.

As part of IMF’s recommendations for internal audit function, tracking mechanism for follow up reports was prepared by CG office and was approved by audit committee.

For the year ended 2017 internal audit 88% implemented its annual plan.

The percentage of implementation of issued recommendations was reviewed and appropriate instruction was given to CG office for improvement.

Due to challenging and unfavorable security situation in some areas of Afghanistan where on-site audit was not feasible off-site assessment was conducted by the relevant teams.