Audit Committee Annual Report for General Assembly of (Retal Urban Development Company) for the year 2022

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:لﺎﻤﻟا سأر ( 400,000,000 Capital:

Retal Urban Development Company (LJS)

Address: 3200 Khobar 34421-8800 C.R: 2051047761 :ت.س T +966 13 801 3777 F +966 13 801 3773 E [email protected]

www.retal.com.sa

Audit Committee Annual Report for General Assembly of (Retal Urban Development Company) for the year 2022

The Audit Committee of Retal Urban Development Company is pleased to present to its esteemed Shareholders the annual report for the fiscal year ending on December 31^st, 2022, regarding the adequacy of the internal control system in the Company, which is one of the main responsibilities entrusted to it. The objectives of the Audit Committee are to oversight the Company’s business with regard to the control environment and financial matters in terms of the Company’s financial reports, auditing and compliance activities, and to provide any recommendations to the Board on a regular basis, which would enhance control procedures, related business cycles, and develop them in a way that in a way that can support the Company in achieving its goals and preserve the interests of the Shareholders.

Results of the annual review for the effectiveness of the Company's internal control procedures:

The Audit Committee performs its terms of competencies and tasks in accordance with its work regulations approved by the General Assembly of the Company, which are in line with the statutory requirements, the Committee exercises its duties in overseeing the Internal Audit Department, discussing its reports, approving its audit plan, ensuring the soundness and effectiveness of applying internal control systems, and reviewing the preliminary quarterly and annual audited financial reports. The Committee also oversights the accounting policies followed by the Company, and endorse recommendations to the Board of Directors to nominate the Company's auditors, determine their fees, and evaluate their performance, in addition to verifying the Company's compliance with relevant regulations, policies, and instructions, the following is a detail of what the Committee has done in those tasks:

Regarding the Internal Audit:

Overseeing the Internal Audit Department, which in turn audited and reviewed the internal control systems to the engagements been done according to an approved annual risk bases internal audit that the Company might face and recorded them in a detailed risk register, discussed the issued internal audit reports and followed up on the implementation of corrective actions for the observations contained therein, and monitored and supervised the performance and activities of the Internal Audit Department in the Company to verify the availability of the necessary resources and their effectiveness in performing the work and the tasks entrusted to them, and to provide the required support to the management through the approval of the internal audit activities regulation, which describes its tasks, scope of work, responsibilities, work

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mechanism and interaction with the various departments in the Company and to ensure that there are no restrictions or obstacles that may affect the progress of audit activities.

Regarding Financial Reports:

Oversighting and reviewing the Company's preliminary quarterly and audited annual financial statements before presenting them to the Board of Directors and expressing their opinion and recommendations in their regard, to ensure its fairness, transparency, and providing a technical opinion on them. reviewing any important or unusual issues contained in the financial reports, and carefully researching any issues raised by the CFO of the Company or whoever undertakes his duties, or the Compliance Officer in the Company or the External Auditors, checking the accounting estimates in the fundamental issues mentioned in the financial reports, and oversighting the financial and accounting policies followed in the Company and provide an opinion and recommendations to the Board of Directors in this regard.

Regarding the External Auditor:

Recommending to the Board the nomination of auditors, determining their fees, evaluating their performance after verifying their independency, reviewing the scope of their work and the terms of contracting with them, and the extent of the effectiveness of audit work, taking into consideration the relevant rules and standards, oversighting the Company’s auditor’s plan and work, and verifying that the auditor does not perform technical or administrative duties outside of The scope of the audit work, providing its opinion on it, answering the Company's external auditor's inquiries, reviewing the external auditor's report and his observations on the financial statements and following up on what was taken in their regard.

Regarding the Compliance Assurance:

Reviewing the results of the regulatory authorities’ reports and verifying that the Company has taken the necessary measures in their regard, verifying the Company’s compliance with the relevant regulations, policies and instructions, reviewing the contracts and transactions proposed to be conducted by the Company with the related parties, presenting its opinion in this regard to the Board and raising what it deems necessary to take actions to the Board, and make its recommendations for the corrective actions to be taken, and ensure the Company's commitment to providing the appropriate general framework and appropriate policies pertaining to the Company's governance and managing its risks.

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Opinion:

Based on what the Audit Committee performed and what was mentioned above in terms of tasks and responsibilities that the Committee carried out during the year 2022, it did not appear that there were any material insufficiency or weaknesses in the internal control environment, or the existence of observations for which corrective measures were not taken and followed up on their implementation in a timely and appropriate manner. This enables the Committee to provide its opinion on the existence of reasonable assurance about the adequacy and effectiveness of the Company's internal control systems for the fiscal year ending on December 31, 2022, knowing that there is no control system that can absolutely assure the adequacy and effectiveness of the internal control environment, while emphasizing to management the necessity continuously ascertaining the suitability of the Company's business policies and procedures and updating them according to any developments on its strategy, business plan, operations, and emerging and changing risks according to internal or external factors related to the Company's sector and activities.