Audit Committee Report

Role of the Committee

The Audit Committee is a formally constituted subcommittee of the Board of Directors which operates under a written charter adopted by the Board of Directors. The Committee
is empowered by the Board to assists the Board of Directors in fulfilling its oversight responsibilities relating to:

• Ensure adequacy and effectiveness of the Company’s internal controls over financial reporting systems to provide accurate, appropriate and timely information to the stakeholders.
• Review the appropriateness of accounting policies and their adherence to statutory and regulatory compliance requirements and applicable accounting standards.
• Review the quality and integrity of interim and annual financial statements prepared for publication prior to submission to the Board of Directors
• Ensure the adequacy, design and operating effectiveness of risk management measures, internal control and governance processes in place to identify, avoid and mitigate risks.
• The selection and performance of the Company’s independent Internal and External Auditors; and Independent Auditors’ qualifications and independence.

Rules on Corporate Governance under Listing Rules of the Colombo Stock Exchange and Code of Best Practices on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and Securities and Exchange Commission of Sri Lanka further regulate the composition, role and functions of the Audit Committee.

Composition

The composition of the Committee, which remained unchanged during the financial year is constituted of two Independent Non-Executive Directors. The Committee is chaired by Mr Sanjay Kulatunga who is an Associate Member of the Chartered Institute of Management Accountants (ACMA) as well as a Chartered Financial Analyst (CFA).

The composition of the Committee fulfilled the requirements of the Listing Rule No. 7.10.6 of the Colombo Stock Exchange. Brief profiles of the members are given in the section on Board of Directors of this annual report.

Company Secretaries, S.S.P. Corporate Services (Pvt) Ltd. act as the Secretary to the Audit Committee.

Meetings

The Audit Committee functioned throughout and convened four meetings during the financial year ended 31 March 2023. The attendance of the members of the Audit Committee was as follows:

		27 April 2022	26 July 2022	27 October 2022	26 January 2023	Attendance eligibility	Attended
1.	Mr Sanjay Kulatunga					4	4
2.	Mr Harsha Amarasekera					4	4

Present – Excused

The agenda and the papers for the meetings are circulated among the members with sufficient notice. The Group
CEO, Group Finance Director, CFO and Risk and Control division attended the Audit Committee meetings by invitation. The CEO of Freight and Logistics Sector and Senior Management also attended as and when required. The External Auditors and the Internal Auditors were also invited to attend meetings when necessary.

The Board is apprised of the significant issues deliberated through verbal briefings and Audit Committee meeting minutes and considers and adopts, the recommendations of the Audit Committee as applicable.

Below table depicts the date of the meetings and the key areas of discussion;

Meeting Date	Key Points of Discussion
27 April 2022	Review of Quarterly Financials for the period ending 31 March 2022 including foreign exchange rate impact on the financials. Review of Consolidated Financial Statements for the year ending 31 March 2022 and recommendation to the Board for approval. Meeting with External Auditors, Ernst & Young Partner to review Key Audit Matters, Key Audit Considerations and Audit Deliverable Status of component auditors. Status and progress update on the income tax assessments of the Group.
26 July 2022	Discussion on customer invoicing efficiency, debtor collection and cashflows. Review of Financial Statements for the quarter ending 30 June 2022 and recommendation to the Board for approval. Discussion on strengthening of risk governance and reporting process of the Group including cyber security. Status and progress update on the income tax assessments of the Group.
27 October 2022	Discussion on the timely payment of receivables due from strategic customers. Review of Financial Statements for the quarter ending 30 September 2022 and recommendation to the Board for approval. Status update on J-Sox Readiness Project on the design and implementation and operating effectiveness of key internal controls covering the business and IT processes. Status and progress update on the income tax assessments of the Group.
26 January 2023	Discussion on the timely payment of receivables due from strategic customers. Review of key recommendations for improvement arising from J-Sox Readiness Project. Status update on the internal audits of the Group and performance review of outsourced Internal Auditor. Review of Financial Statements for the quarter ending 31 December 2022 and recommendation to the Board for approval. Review of external audit plan, audit approach, timelines, key audit matters and areas of focus. Status and progress update on the income tax assessments of the Group.

Financial Reporting

The Committee oversees the Company’s financial reporting on behalf of the Board of Directors as part of its responsibility and reviews the Quarterly and Annual Financial Statements with the Management and the External Auditors and recommends them to the Board for its deliberations. Accordingly, the Committee reviewed the following;

• Adequacy and effectiveness of the internal controls, systems, and procedures to provide reasonable assurance on the reported financials.
• Appropriateness of the accounting policies adopted, key judgments and estimates used in preparation of Financial Statements.
• Compliance with Sri Lanka Accounting Standards (SLFRSs & LKASs) and other regulatory provisions relating to financial reporting and disclosures and monitored the progress on the implementation of any new Accounting Standards.
• Quarterly financial reports and Annual financial reports prior to the recommendation of the same to the Board for approval.

The Committee is satisfied that the Company and its subsidiaries are able to continue as a going concern. Further, the Committee is also satisfied that the Company has made adequate disclosures in the Financial Statements in relation to the same.

Internal Audit, Internal Controls and Risk Management

The Audit Committee, as a subcommittee of the main Board exercises oversight over the internal audit function. The risk based internal audit plans are approved by the Audit Committee which reviews the internal audit findings, recommendations and action plans with the Management and the Internal Auditors.

The Committee reviewed the ongoing effectiveness of the Company’s processes as a part of its wider review of the effectiveness of internal controls. Review of risks and internal controls encompassed periodic discussions with Senior Management and meetings with External and Internal Auditors. The Committee is also updated on the business risk, legal & compliance risk, operational risk etc. of the Group through the Risk Committee minutes which are tabled at Audit Committee meetings. The Committee deliberates on the findings with management, advice and where necessary escalate to the Board for further action. The key risks associated with the business are given in the Risk Management Report.

Internal control self-assessment for the companies within Expolanka Group and compliance audit on the same was carried out twice during the year to ensure internal controls specified by Japan’s Financial Instruments and Exchange Law are being established group-wide as part of continuous listing requirement of the ultimate parent company. The Committee noted that all the internal controls assessed under the scope for the period 2022/23 was reported as effective in the assessment report issued by the auditors of the ultimate parent company.

Further, the Committee noted that J-sox self-assessment exercise, an in-depth review of internal controls pertaining to business processes of key entities and application controls and information technology General Controls (ITGC) of key systems within the Group was performed during the year to test the design and implementation and operating effectiveness related to financial reporting. This self-assessment is a requirement under J-Sox compliance which is mandatory to be performed annually for continuous listing requirement of SGH, the parent company of Expolanka Holdings PLC. Deloitte, Japan was engaged to provide advisory and EY, Sri Lanka assigned by Deloitte, Japan provided independent assurance on the operating effectiveness of internal controls covered under the scope.

External Audit

The Audit Committee met the Company’s Principal Auditors Messrs. Ernst & Young along with the management prior to the commencement of the external audit and discussed the External Auditor’s Audit plan, audit approach and scope of the audit.

The Committee reviewed the quality of the financial reporting, the reasonableness of significant accounting judgments and estimates and the clarity of disclosures in the Financial Statements, along with the assessment of the Company’s internal controls over financial reporting with the Auditors and the Management. The Interim Financial Statements of the Company have been reviewed by the Audit Committee Members at Audit Committee Meetings, prior to release of same to the Regulatory Authorities and to the shareholders.

Further, a quarterly accounts review engagement is performed by Ernst & Young for the key entities of the Group in collaboration with the component auditors as per the requirement of the auditors of the parent company to provide greater assurance on the reported financials.

The Committee reviewed the results of the external audit and the recommendations of the Auditors and discussed key points with the management in order to take necessary action.

The Committee reviewed the nature of services provided by the Auditors and has determined that the Auditors were independent on the basis that they did not carry out any management related functions of the Company. The Committee has recommended to the Board, having considered their independence and performance, Messrs. Ernst & Young (EY), re-appointed as the lead/ consolidation Auditors of the Group for the financial year ending 31 March 2024 subject to the approval by the shareholders at the forthcoming Annual General Meeting.

Conclusion

The Audit Committee is of the view that the internal control environment within the Company is satisfactory and provides reasonable assurance that the financial position of the Company is adequately monitored based on the reports submitted by the External Auditors and the Internal Auditors Of The Company, assurance provided by the Senior Management, and the discussions with the Management and the Auditors.

On behalf of the Audit Committee

SANJAY KULATUNGA
Chairman
Audit Committee

30 June 2023