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Audit & Compliance Committee

Composition as at 31 December 2014:
Mohamed Darwish Al Khoori (Chairman), Aysha Al Hallami, Abdulla Khalil Al Mutawa, Omar Liaqat
Secretary: Rami Raslan

Statement from the Chairman of the Audit & Compliance Committee

Dear Shareholders,

During 2014, the Audit & Compliance Committee continued focusing on integrity and transparency of the Bank’s financial statements, the effectiveness of the Bank’s internal audit activities, Internal Controls and Compliance functions, and reviewed the work carried out by the Bank’s statutory auditors, PricewaterhouseCoopers.

The Committee held nine meetings in 2014 during which the Committee discussed, reviewed and worked on the following matters:

• overseeing and continuously assessing the effectiveness of the financial reporting and disclosure process;
• monitoring the choice of accounting policies, principles and judgements;
• overseeing regulatory compliance and the activities of the Bank’s Compliance function;
• overseeing and continuously assessing the effectiveness of the external audit process;
• monitoring internal controls;
• approving the annual audit plan;
• discussing the annual audited financial statements with management and the external auditor, and, in particular, considering the appropriateness of the Bank’s specific and general provisions;
• overseeing the performance and activities of the Internal Audit function. This included reviews of the Internal Audit function’s performance, budgeting, staffing and training activities;
• reviewing audit issues raised by the internal and external auditors, as well as the Central Bank, Abu Dhabi Accountability Authority and other regulators, and management’s responses;
• evaluating the external auditor’s qualifications, performance and independence. This included oversight of all non-audit activities of the external auditors and review of the scope of work proposed by the external auditors for the year;
• review of the Committee’s terms of reference and other policies sponsored by the Committee (including the Bank’s audit rotation policy);
• discussing risk management policies and practices with management;
• arranging an external review and quality assurance on the activities of the internal auditor and reviewing the results; and
• reporting regularly to the Bank’s Board of Directors.

The Committee regularly met separately with the external auditors and internal auditors in the absence of the Bank’s management. In addition, the Committee members attended joint meetings with the members of the Risk & Credit Committee to discuss risk-related issues.

The Board approved the 2014 annual accounts at the Committee’s recommendation based on the external auditors’ report and the Committee’s view that, as a whole, the accounts accurately reflected the Bank’s performance in 2014 and that they were fair, balanced, and provided the information required by shareholders to assess the Bank’s performance. The Committee considered, amongst other things, the correct approach to provision for key restructured accounts.

The Board Audit & Compliance Committee has received confirmation from the management that the Bank’s internal controls have been assessed to be effective and are operating as designed, and the Committee is confident that the management has taken or is taking the necessary action to remedy any failings or weaknesses identified.

In 2014, the Board Audit & Compliance Committee commissioned an independent Quality Assurance Review of the Bank’s Internal Audit Group (IAG). A report by KPMG concluded the following: “we noted that the ADCB IAG has consistently adopted highly effective internal audit practices to deliver on its mandate. Such internal audit practices meet current professional standards and are superior to generally accepted industry practices in the Financial Services sector in the region. We reviewed Internal Audit’s conformance with The Institute of Internal Auditors’ (IIA’s) 18 Attribute and 33 Performance International Standards and there were no instances of non-conformances to the IIA International Attribute and Performance Standards.”

The Committee considers that it made positive progress during 2014 towards meeting its responsibilities.

Looking at 2015

Late in 2014, the Committee approved its schedule for 2015. The 2015 schedule envisages continued focus on the activities of the Internal Audit and Compliance functions and ensuring the adequacy of the Bank’s internal controls and compliance activities. The Bank will tender for its external audit early in 2015, and the Committee will oversee this process. The Committee intends to deepen the coordination of its activities with those of the Board Risk & Credit Committee.

Mohamed Darwish Al Khoori

Chairman of the Board’s Audit & Compliance Committee