Audit Committee Annual Report 2021
Saudi Steel Pipe Company
Table of Content
Part 1: Introduction ... 2
Part 2: Audit Committee Members ... 3
Part 3: Audit Committee Roles And Responsibilities ... 3
Part 4: Audit Committee Meetings ... 4
Part 5: Audit Committee Activities in 2021 ... 5
Part 6: Audit Committee Opinion ... 6
1. Introduction:
To: Shareholders of Saudi Steel Pipe Company ('SSP')
Greetings,The existence of an effective internal controls system is one of the primary responsibilities assigned to the Board of Directors. The main task of the Audit Committee ('AC') is to verify the adequacy of the internal controls system, make any necessary recommendations to the Board of Directors to enhance the system, and efficiently protect shareholders' and investors' interests in a cost‐efficient manner.
On the other hand, management is responsible for preparing and implementing the internal controls system.
The Audit Committee is also responsible for verifying the integrity of the financial statements, coordinating and communicating with the Company's external auditors, and verifying the Company's compliance with rules, regulations, policies, and instructions mandated by different government authorities in Saudi Arabia.
In this context, the Audit Committee prepares this report to highlight the major activities undertaken during 2021 by the Committee, as per its authorities and responsibilities, and provide an opinion on the adequacy and effectiveness of the internal controls system during this period.
Audit Committee.
2. Audit Committee Members:
The Fourteenth General Assembly, which was held on Tuesday 02/09/1440H corresponding to 07/05/2019G, approved the formation of the Audit Committee for a new period that will be extended for three years starting from 07/06/2019G. The Sixteenth General Assembly held on Wednesday 23/09/1442H corresponding to 05/05/2021G approved the Board of Directors appointing (Maged Al‐
Dakheel and Claudio Tocco) members in the Audit Committee succeeding to the two resigned members (Nader Ashour and Carlos Ferreyra).
Audit Committee Members:
3. Audit Committee Roles and Responsibilities:
The duties of the audit committee include the following:
A. Financial Reports:
1. Analyzing the Company's interim and annual financial statements before presenting them to the Board and providing its opinion and recommendations thereon to ensure their integrity, fairness and transparency;
2. Providing its technical opinion, at the request of the Board, regarding whether the Board's report and the Company's financial statements are fair, balanced, understandable, and contain information that allows shareholders and investors to assess the Company's financial position, performance, business model, and strategy;
3. Analyzing any important or non‐familiar issues contained in the financial reports;
4. Accurately investigating any issues raised by the Company's chief financial officer or any person assuming his/her duties or the Company's compliance officer or external auditor;
5. Examining the accounting estimates in respect of significant matters that are contained in the financial reports; and
6. Examining the accounting policies followed by the Company and providing its opinion and recommendations to the Board thereon.
B. Internal Audit:
1. Examining and reviewing the Company's internal and financial control system.
2. Analyzing the internal audit reports and following up the implementation of the corrective measures in respect of the remarks made in such reports;
Sn.
Name Position
1 Mousa Al‐Mousa Independent Board Member (Chairman)
2 Maged Al‐Dakheel Independent Board Member from 27/10/2020G (Member) 3 Claudio Tocco Non‐Board Member from 05/11/2020G (Member)
3. Monitoring and overseeing the performance and activities of the internal auditor and internal audit department of the Company, if any, to ensure the availability of the necessary resources and their effectiveness in performing the assigned activities and duties. If the Company has no internal auditor, the Committee shall provide a recommendation to the Board on whether there is a need to appoint an internal auditor.
4. Providing a recommendation to the Board on appointing the manager of the internal audit unit or department, or the internal auditor and suggest his/her remunerations.
C. External Auditor:
1. Providing recommendations to the Board to nominate external auditors, dismiss them,
determine their remunerations, and assess their performance after verifying their independence and reviewing the scope of their work and the terms of their contracts;
2. Verifying the independence of the external auditor, its objectivity, fairness, and effectiveness of the audit activities, taking into account the relevant rules and standards;
3. Reviewing the plan of the Company's external auditor and its activities, and ensuring that it does not provide any technical or administrative works that are beyond its scope of work, and provides its opinion thereon;
4. Responding to queries of the Company's external auditor; and
5. Reviewing the external auditor's reports and its comments on the financial statements, and following up the procedures taken in connection therewith.
D. Compliance:
1. Reviewing the findings of the reports of supervisory authorities and ensuring that the Company has taken the necessary actions in connection therewith;
2. Ensuring the Company's compliance with the relevant laws, regulations, policies and instructions;
3. Reviewing the contracts and proposed Related Party transactions, and providing its recommendations to the Board in connection therewith; and
4. Reporting to the Board any issues in connection with what it deems necessary to take action on and providing recommendations as to the steps that should be taken.
4. Audit Committee Meetings:
The Audit Committee held four meetings during the year 2021 as follows:
AC Member Feb 24, 2021 Apr 27, 2021 Aug 04, 2021 Nov 03, 2021 Total
Mousa Al‐Mousa ✓ ✓ ✓ ✓ 4
Maged Al‐Dakheel ✓ ✓ ✓ ✓ 4
Claudio Tocco ✓ ✓ ✓ ✓ 4
5. Audit Committee Activities in 2021:
A. Financial Reports:
1. The Committee reviewed Company's preliminary consolidated financial statements for Q1, Q2, and Q3 for the year 2021 and the Audited Annual Consolidated Financial statements for the year 2020 in addition to the announcements related thereto. The Committee submitted its recommendations regarding them to the Board of Directors.
2. The Committee met with the Company External Auditor, reviewed their Audit Plans and reports, responded to their queries, and discussed their comments.
B. Internal Audit:
1. The Committee approved the Risk‐Based Internal Audit Plan for 2021. Accordingly, after completing the audit activities, the Committee received the Audit Reports issued by the Audit team. The Committee directed the team to review and follow up with the management on implementing the agreed‐upon actions in the audit reports and update the Committee on the status of action implemented.
2. According to the Committee's direction, a Saudi Senior Internal Auditor was hired in the Internal Audit department in April 2021.
3. According to the Committee's direction, the Company's Internal Audit, with the support of Tenaris Compliance team, has implemented the (Self‐Assessment of Internal Controls) process in October 2021 through an automated system (Workiva).
The Audit Committee reviewed the result of the process and provided advice on future improvements.
C. Compliance:
1. The Audit Committee has developed a new Audit Committee Charter, reviewed/endorsed by the Board of Directors. The Sixteenth General Assembly was held on Wednesday 23/09/1442H corresponding to 05/05/2021G and approved the final version of the Audit Committee Charter.
2. Based on the Audit Committee recommendation, driven by the assessment of different systems in meeting # 98, the Board of Directors held on December 01, 2021, and approved the engagement of (Business Keeper ‐ BKMS) as a vendor to implement the Compliance Line (Whistleblowing) system.
D. External Auditor:
The Audit Committee, after the assessment of received proposals, recommended to the Board of Directors to endorse to the Company General Assembly to engagement with one of the below‐shortlisted firms to carry out external audit activities for Q2, Q3, annual 2021, and Q1 2022;
- Ibrahim Ahmed Albassam & Co. (PKF) - KPMG professional services (KPMG)
This selection was based on the Committee's commitment to; only engage with qualified firms, according to the following criteria:
- Approved by Capital Market Authority ('CMA') for auditing Publicly Listed companies;
- Independence;
- Strong presence in Eastern Province;
- The competency of the audit team;
- Saudi members in the audit team who will perform the audit is mandatory;
- Competitive and acceptable audit fees.
6. Audit Committee Opinion:
The Internal Audit Control System and the effectiveness of its procedures play a key role in achieving the Company's objectives and providing assurance to Stakeholders.
The Executive Management is responsible for establishing and maintaining a System of Internal Control that is effective, comprehensive, and at a reasonable cost, that contributes to achieving its objectives and ensures the accuracy and integrity of financial reports and compliance with applicable laws and regulations.
According to its Authorities and Responsibilities, the Audit Committee has reviewed the reports submitted by External and Internal Auditors for the year 2021 and the progress made by
management in closing pending audit findings.
Accordingly, and in light of the above, the Audit Committee did not notice any fundamental
weakness in the Company's Internal Control System. Considering that, any internal control system, regardless of its efficiency and effectiveness, cannot provide absolute assurance.
