Audit Committee Report

As the newly appointed Chairman of the Audit Committee, with effect from 03 February 2025, I am pleased to present this statement for the year ending 31 December 2024. Under the leadership of my predecessor, Mr Naresh Abeyesekera, the Audit Committee diligently fulfilled its oversight responsibilities throughout the year. I sincerely appreciate his valuable contributions and those of the committee members. I look forward to continuing our commitment to strong governance and financial integrity.

This report outlines the key activities undertaken by the committee in fulfilling its responsibilities in accordance with the regulatory and governance framework governing the Bank.

*** Prof. Kithsiri M Liyanage appointed to the Board Audit Committee w.e.f. 05.02.2024

***** Mr Jehaan Ismile appointed to the Board Audit Committee w.e.f. 03.04.2024

* Mr Naresh Abeyesekera relinquished his position as a member of the Board Audit Committee w.e.f. 13.11.2024

** Mr R M P Rathnayake relinquished his position as a member of the Board Audit Committee w.e.f. 06.11.2024 with his retirement from his position as Deputy Secretary to the Treasury.

*** Prof. Kithsiri M Liyanage relinquished his position as a member of the Board Audit Committee w.e.f. 28.11.2024 with his resignation from the Board.

**** Major General (Rtd.) G A Chandrasiri VSV relinquished his position as a member of the Board Audit Committee w.e.f. 07.01.2024 with the ending of his tenure of 3 years.

Mr Jayamin Pelpola appointed to the Board Audit Committee w.e.f. 03.02.2025 as the Chairman.

Dr. Kapila Senanayake appointed to the Board Audit Committee w.e.f. 03.02.2025

The Secretary, Bank of Ceylon/Secretary to the Board Ms Janaki S Siriwardane who is an Attorney-at-Law and a Senior Deputy General Manager, functions as the Secretary to the Committee.

● Chief Internal Auditor
● Chief Risk Officer

● Chief Compliance Officer
● Assistant General Manager (Operational Audit)
● Assistant General Manager (Credit Audit)
● Assistant General Manager (Investigations)
● Assistant General Manager (Information Systems Audit)
● Assistant General Manager (Risk Management)
● Internal Auditor
● IT Risk Officer
● Representatives of the Auditor General (the External Auditor of the Bank)

● General Manager
● Chief Financial Officer
● Deputy General Manager (Finance and Planning)
● Any other member of Corporate or Executive Management
● Any other Staff Member

The Terms of Reference of the Audit Committee are governed by the Audit Committee Charter, approved and adopted by the Board.

The Committee also ensured that the scope and coverage of its functions addresses the requirements of the Banking Act Direction No. 11 of 2007 on "Corporate Governance for Licensed Commercial Banks in Sri Lanka" and its subsequent amendments issued by the Central Bank of Sri Lanka.

The Audit Committee primarily focuses on assisting the Board in fulfilling its duties by providing an independent and objective review of the Bank's financial reporting process.

The proceedings of the Audit Committee meetings are tabled and ratified at the Board meetings, where all key issues, concerns, actions taken, outcomes achieved or pending, and follow-up initiated, are clarified, discussed and Board approval obtained thereof.

a) Reviewed the monthly, quarterly and annual unaudited/ audited Financial Statements to ensure that they are prepared and published in accordance with the requirements prescribed by the supervisory and regulatory authorities and applicable Accounting Standards.

b) Review the liquidity management, capital adequacy and foreign currency management.

c) Evaluated significant financial reporting issues and judgments.

a) Reviewed compliance with mandatory banking and other statutory requirements.

b) Reviewed the progress of action taken in relation to the findings of the statutory examinations carried out by regulators.

c) Reviewed reports on Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) measures.

a) Reviewed the adequacy and effectiveness of the internal control mechanism of the Bank in line with Section 3(8) (ii) (b) of the Banking Act Direction No.11 of 2007 through the Internal Control Matrix.

b) On a regular basis and when specific events or cases warranted,

conducted root cause analysis and made improvements to the systems, procedures and internal controls.

c) Monitored the risk management framework in alignment with regulatory expectations.

d) Recommended improvements in internal controls based on internal audit findings.

a) Reviewed the independence, objectivity, and performance of the internal audit function.

b) Obtained strategies to improving audit ratings as a proactive approach to strengthening internal controls, compliance and risk management.

c) Effectively managed the whistle-blowing complaints by maintaining transparency, accountability and ethical business practices while ensuring timely and impartial investigations.

d) Evaluated the quality of the credit portfolio of the bank and recommended necessary initiatives to improve the credit quality.

e) Approved the Internal Audit Plan and reviewed the effectiveness of the implementation of the Plan throughout the year.

f) Monitored the progress of the initiatives taken by the Internal Audit Department to improve Internal Control Monitoring Process.

g) Conducted regular and thorough process reviews in the areas including credit, cash, deposit and Property Plant and Equipment (PPE) while identifying the areas of improvement, reducing risk and enhancing overall performance.

h) Evaluated the performance of the Chief Internal Auditors and senior staff of Internal Audit Division.

i) Monitored the progress of the Internal Audit function of the subsidiaries.

j) Special Reviews on Expected Credit Loss Models, Cybersecurity, Loans granted on Donor Agency Funding, IT Governance, Service Level

Agreements and Business Continuity Test.

a) The external audit of the Bank is carried out by the Auditor General in terms of the Constitution of the country. The Committee ensured that the external audit is carried out effectively and independently and maintained a continuous rapport with the representatives of the Auditor General in relation to the audit approach and procedure.

b) Facilitated close door meetings with external auditors.

During the year, the Audit Committee paid special attention to the following:

• Strengthening cybersecurity and IT risk management.

• Enhancing fraud detection mechanisms.

• Addressing operational risks emerging from global economic uncertainties.

Annual evolution of the committee was carried out.

The Audit Committee will foster a positive and effective internal control environment by committing to achieve the objectives set out in the Audit Committee Charter during 2025 and beyond and remains committed to upholding the highest standards of financial integrity, risk management, and regulatory compliance.

On behalf of the Audit Committee.