BOC Hong Kong : Mandate of the Audit Committee

The Committee shall review and monitor the effectiveness of the financial reporting processes implemented by the Management, and encourage the sufficient disclosure of information reasonably required by shareholders to make an investment decision on a fair and timely basis and to comply with applicable laws, regulations and best practices of the market.

The Committee shall review with the Management and the internal and external auditors:

• the appropriateness of the Group's accounting and financial reporting, including complex or unusual transactions, accounting treatment of significant risks and uncertainties and highly judgmental areas;

• significant accounting and financial reporting issues raised by internal and external auditors; and

• any new or significant changes to the Group's existing accounting policies and advise the Board on any significant new policies or significant changes to existing policies.

  
  

The Committee shall review with the Management and the internal and external auditors and approve or, if appropriate, recommend for approval by the Board:

• the annual audited financial statements, together with the report of the external auditors thereon;

• the half-yearly financial statements;

• the quarterly financial results;

• all financial information in material public disclosure documents including prospectuses and other offering documents.

  
  

In reviewing such financial reports the Committee shall focus particularly on:

• compliance with applicable accounting standards;

• compliance with Hong Kong Stock Exchange listing rules, regulations of the Hong Kong Monetary Authority, and other legal and regulatory requirements;

• any changes in important accounting policies and practices;

• the presentation and impact of significant risks and uncertainties as well as major areas of judgment of the Management that may be material to the statements or disclosure;

• significant adjustments resulting from audit adjustments required;

• alternative accounting treatments within generally accepted accounting principles;

• disclosure of related party transactions and any unusual items that have occurred during the period under review;

• any significant or unusual items that are, or may need to be, reflected in such reports and accounts and must give due consideration to any matters that have been raised by the Group's staff responsible for the accounting and financial reporting function, compliance officer or auditors;

• completeness and adequacy of disclosures, ensuring that these are consistent with the information known to Committee members; and

• the going concern assumption.

  
  

If the dividend proposal submitted by the Management deviates from the dividend policy approved by the Board, the Committee shall review the dividend proposal and provide its recommendations to the Board.

Committee shall review with the Management and the internal auditors the controls and processes that are used for the preparation and presentation of the Group's regulatory filings, including reports filed with the Hong Kong Monetary Authority.

The Committee shall review and evaluate whether the Management is setting the appropriate 'control culture' to make all employees understand their roles and responsibilities. The function of the Committee is one of oversight. It is the responsibility of the Management to establish a sound and effective risk management and internal control system.

The Committee shall review the effectiveness of the system of internal control, and, with the assistance of the internal auditors, conduct at least annually a review of the effectiveness of risk management and internal control system of the Group, which should cover all material controls, including financial, operational and compliance controls and risk management functions. The annual review to be conducted by the Committee (taking into account the Board's allocation of responsibility for oversight of all risks other than financial reporting risk to the Risk Committee) shall, in particular, consider:

• the changes since the last annual review in the nature and extent of significant financial reporting risks, and the Group's ability to respond to changes in its business and the external environment;

• the scope and quality of the Management's ongoing monitoring of financial reporting risks and of risk management and internal control

  system and compliance processes for accounting and external reporting;

• the effectiveness of the risk management and internal control system established by the Management to monitor transactions entered into or to be entered into between any member of the Group and any connected person or related party within the meaning or intent of the Listing Rules, the Banking Ordinance or other applicable regulatory requirements;

• the work of the internal audit function and other providers of assurance including reports (both regular and exceptional) produced by the internal auditors, any management letters submitted by the external auditors as well as the Management's responses, and any examination reports issued by regulatory authorities and the Management's responses. The Committee shall also meet with the internal auditors, the external auditors and the Management to discuss findings from their work and the resolution, or otherwise, of the points arising including any difficulties encountered;

• the extent and frequency of communication of monitoring results to the Committee which enables it to build up a cumulative assessment of the state of control in the Group and the effectiveness with which financial reporting risk is being managed;

• the incidence of significant control failings or weaknesses that have been identified at any time during the period and the extent to which they have resulted in unforeseen outcomes or contingencies that have had, could have had, or may in the future have, a material impact on the Group's financial performance or condition; and

• the adequacy of resources, qualifications and experience of staff of the Group's accounting and financial reporting function, and their training programs and budget.

  
  

Taking into account the Board's allocation of responsibility for oversight of risk management to the Risk Committee, the Committee shall:

• review reports from the HKMA and other regulators regarding risk management matters that may have a significant impact on the Group's financial standing and reputation, and ensure that the matters have been properly addressed; and

• ensure that any significant impact of these issues is reflected in the financial statements.