External Auditors (Provisions 10.1(d) and 10.1(e)) Cognisant that the external auditors should be free from any business or other relationships with the Group that could materially interfere with their ability to act with integrity and objectivity, the ARC undertook a review of the independence of KPMG and gave careful consideration to the Group’s relationships with them during 2023. In determining the independence of KPMG, the ARC reviewed all aspects of the Group’s relationships with them including the policies, processes and safeguards adopted by the Group and KPMG to protect and preserve audit independence. The ARC had considered the guidance from the International Ethics Standards Board for Accountants and adopted a Non-Assurance Services Pre-approval Policy to safeguard auditor independence. All non-prohibited nonassurance services require the approval of the ARC with the exception of non-prohibited pre-approved services below certain fee thresholds. The ARC also considered the nature and volume of the provision of the non-audit services by KPMG in 2023 and the corresponding fees and noted that the fees for nonaudit services had not exceeded 50% of the aggregate amount of all fees paid/payable to KPMG in 2023. Based on the review, the ARC is of the opinion that KPMG is, and is perceived to be, independent for the purpose of the Group’s statutory financial statements audit. CORPORATE GOVERNANCE Internal Audit (Provisions 10.4 and 10.5) The Internal Audit (“IA”) function is independent of the activities it audits. The Head of IA’s primary reporting line is to the ARC. The appointment, resignation and dismissal of the Head of IA is reviewed and/or approved by the ARC. The ARC also provides input on the annual performance appraisal of the Head of IA and reviews his compensation within the compensation policies of the Company. The ARC meets the Head of IA at least once annually without the presence of Management. The Head of IA has unfettered access to the ARC, the Board and Management as well as the Group’s documents, records, properties and personnel relevant for the performance of audits. IA operates within the framework stated in its IA Charter which is approved and reviewed by the ARC on an annual basis. The standards of the IA Charter are consistent with the International Standards for the Professional Practice of Internal Auditing (the Standards) set by the Institute of Internal Auditors (IIA), an international professional association with global headquarters in the United States of America. The Head of IA, Mr Benson Seah, is a Certified Internal Auditor and a member of various professional bodies, with over 20 years of experience. He has been with the Company since June 2019. All his team members have the relevant qualifications and experience and are members of The Institute of Internal Auditors of Singapore (IIAS) and/ or members of other relevant professional bodies. The IA function is a corporate member of IIAS, an affiliate of the IIA. Processes are in place to ensure that the professional competence of IA staff is maintained and upgraded through continuing professional education programmes which comprised technical and non-technical training for the development of the IA staff. Role and Activities of IA The primary role of IA is to assist the Board to evaluate the reliability, adequacy and effectiveness of the internal controls and risk management processes of the Company, reviewing the internal controls of the Company to ensure prompt and accurate recording of transactions and proper safeguarding of assets and reviewing the Company’s compliance with the relevant laws, regulations and policies of the Company. The ARC approved the annual IA plan and received regular reports during 2023 on the progress of the audit work under the IA plan. All IA reports are given to the ARC, the ExCo and the Heads of the relevant business divisions, with a summary report of IA results presented at the ARC meetings. IA observations on internal control, operational and control lapses and recommendations to address them were also reviewed and discussed at ARC meetings. The ARC was satisfied that recommendations made were dealt with by Management in a timely and appropriate manner, with outstanding exceptions or recommendations being closely monitored and reported back to the ARC. The ARC reviewed the effectiveness and adequacy of the IA function including its resources through a review of the IA activities on a regular basis as well as its annual assessment of the IA function. The assessment was facilitated through the use of an evaluation framework which covers IA organisation, resources and continuing professional development, audit plans, work scope, quality of reports and recommendations, IA Charter and IA selfassessment. Based on the assessment conducted for the year under review, the ARC is satisfied with the quality and effectiveness of the IA function and that the IA function is currently adequately resourced and has appropriate independent standing within the Group to perform its functions effectively. The IA function has a Quality Assurance and Improvement Programme (QAIP) in place to ensure that its audit activities confirm to the IIA Standards. As part of the QAIP, internal Quality Assurance Reviews (QAR) are conducted at least once every three years, and an external QAR is carried out at least once every five years by qualified professionals from an external organisation. In 2023, Ernst & Young (EY) was appointed to conduct the external QAR. Based on EY’s assessment, the IA function has been rated to have conformed with the IIA Standards. Provision 10.5 The ARC held six meetings during the year and carried out its duties as set out within its terms of reference. The Company Secretaries maintain records of all ARC meetings including records of discussions on key deliberations and decisions taken. The ARC meets with the internal and external auditors, each separately without the presence of Management, at least once annually. The ARC members continually keep themselves abreast of changes to accounting standards, risks and other issues which may have a material impact on financial statements. For the financial year under review, the ARC conducted a self-assessment of its own effectiveness in the discharge of its roles and responsibilities, which was facilitated through the use of a self-assessment checklist (“ARC SelfAssessment Checklist”). The ARC Self-Assessment Checklist covered, inter alia, the responsibilities of the ARC under its terms of reference and considered the contribution of the ARC members to the ARC’s deliberation and decision-making process. Based on the self-assessment, the ARC is of the view that it has fulfilled its responsibilities and discharged its duties as set out in its terms of reference. Details of the fees paid and/or payable by the Group in respect of audit and non-audit services for FY 2023 are set out below: $’million Audit fees paid to: - auditors of the Company and other firms affiliated with KPMG International Limited 6.9 - other auditors 0.3 Non-audit fees paid to: - auditors of the Company and other firms affiliated with KPMG International Limited 2.9 - other auditors 0.5 In reviewing the nomination of KPMG for re-appointment for the financial year ending 31 December 2024, the ARC had considered the adequacy of the resources and experience of KPMG and the audit engagement partners assigned to the audit, the size and complexity of the audit engagement for the Group, and the number and experience of the supervisory and professional staff assigned to the Group’s audit through a review of the curriculum vitae of the KPMG audit team. The ARC also considered the quality of discussions with the findings raised by KPMG, including the Audit Quality Indicators presented. KPMG has confirmed that they are registered with ACRA. The Company is thus in compliance with Rule 712 and Rule 715 (read with Rule 716) of the Listing Manual in relation to the appointment of its auditors. Based on the above, the ARC has recommended to the Board the nomination of KPMG for re-appointment as external auditors at the 2024 AGM. Whistle-blowing Policy (Provision 10.1(f)) CDL has in place a whistle-blowing policy and procedure where employees of the Company can in confidence, whether anonymously or otherwise, raise concerns on possible improprieties relating to accounting, financial reporting, internal controls and auditing matters or other matters without fear of reprisals in any form. The ARC has the responsibility of overseeing this policy to ensure that it is properly administered with the assistance of the Head of IA. Under these procedures, arrangements are in place for independent investigation of such matters raised and for appropriate follow-up action to be taken. The Company is committed to maintaining procedures for the confidential submission of reports and the identity of the whistle-blower concerned will not be disclosed if so requested by the whistle-blower who lodged the report. Investigations of such reports will be handled on a confidential basis to the extent permissible or deemed appropriate under the circumstances and involve persons who need to be involved in order to properly carry out the investigation and will, on a best-efforts basis, be carried out in a timely manner. CORPORATE GOVERNANCE 55 54 CORPORATE GOVERNANCE ANNUAL REPORT 2023 CITY DEVELOPMENTS LIMITED
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