Ceylinco Life Insurance Limited


Board Audit Committee Report


The Board Audit Committee (‘the Committee’) which was established on 25 April 2014, appointed by and responsible to the Board of Directors, comprised the following Non-Executive Directors at the end of the year 2016:

J A Setukavalar
(FCA, FCMA-UK, FCMA-SL, CGMA, FCPM) – Chairman – (Independent, Non-Executive Director)

D H J Gunawardena (FCMA-UK, CGMA ) – Member –(Non-Executive Director)

J Wickramasinghe (CILT) – Member –(Independent, Non-Executive Director)

Each of the members has the finance literacy whereas the Chairman is a fellow member of The Institute of Chartered Accountants of Sri Lanka and the Chartered Institute of Management Accountants (UK) and profiles of members which consist of qualifications and experience are given on pages 22 to 24 of this Annual Report.

Charter of the Committee

The Charter of the Committee which clearly defines the Term of Reference of the committee was reviewed on 15 July 2015 by the Audit Committee and amended in order to address new concerns and developments in the current business context. It was approved by the Board of Directors on 27 August 2015.

The principal purpose of the Audit Committee, is to assist the Board of Directors in fulfilling its oversight responsibilities for the financial reporting process of the Company, by way of safeguarding the interests of all stakeholders including, shareholders of the Company.

Authority and Role

Accordingly, the Committee is authorised to seek any information as it considers necessary, from the management of the Company in order to carry out its monitoring and reviewing activities on the following core areas:

  • Preparation, presentation and adequacy of disclosures in the Financial Statements, in accordance with Sri Lanka Accounting Standards comprising SLFRS and LKAS.
  • The Company’s compliance with financial reporting requirements, requirements of the Companies Act, the Insurance Board of Sri Lanka, the Inland Revenue Department and other regulatory bodies.
  • Processes to ensure that the Company’s internal controls and risk management procedures are adequate to meet the requirements of the Sri Lanka Auditing Standards.
  • Assessing the Company’s ability to continue as a going concern in the foreseeable future.
  • Independence and performance of the Company’s External Auditors.


The Audit Committee met four times during the year 2016, in order to fulfil its duties and responsibilities. Attendance by the Committee members at each of these meetings is given in the table on page 135 of this Annual Report.

Chief Financial Officer, Deputy Chief Financial Officer, Senior Manager – Internal Audit and Senior Manager – Information Systems Audit, attended these meetings on the invitation of the Committee.

The engagement Partner and the Manager of the Company’s External Auditors, Ernst & Young attended on the invitation of the Committee, after finalising the audit for the period ended 31 December 2016.

The Audit Committee’s activities were communicated to the Board of Directors at the quarterly Board meetings by way of tabling the reports of the Audit Committee meetings, held during the period.

Summary of ACTIVITIES during the year

Internal Audit and Internal Controls

During the year, the Audit Committee reviewed and approved the internal audit activity after concerning new developments in the current business context in order to set clear guidelines to assist the Company in accomplishing its objectives, by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of the Company’s governance, risk management and internal controls.

As a part of this process, the Committee reviewed the following areas, in order to strengthen the internal control environment of the Company:

  • Risk Management System
  • Departmental Risk Registers
  • Risk-based internal audit plan
  • Internal audit budget and resource plan
  • Independence and objectivity of the Internal Auditors
  • Responsibilities of the Internal Auditors
  • Reporting and monitoring process
  • Significant audit findings and management responses
  • Progress the implementation of internal audit recommendations
  • Quality assurance and improvement programmes of the Internal Audit Department


The Committee reviewed the effectiveness of the system for monitoring compliance with the laws and regulations and the results of Management’s investigation and follow-up, including disciplinary action of any instances of non-compliance.

The Committee reviewed the Quarterly Regulatory Compliance Reports, submitted to it and observed that the Company’s compliance framework provides reasonable assurance that all relevant laws, regulations, code of ethics and standards of conduct have been followed.

Any instances of non-compliance is included in the Audit Committee’s Reports to the Board of Directors and followed up to ensure that appropriate, corrective and timely action is taken.

Financial Reporting

The Committee reviewed and approved the Quarterly Financial Statements and Annual Financial Statements, prior to its submission for Board approval and filing with regulators, in order to ensure compliance with Sri Lanka Accounting Standards, the Companies Act No. 07 of 2007 and the Regulation of Insurance Industry Act No. 43 of 2000. Further, the Committee reviewed and discussed the audit issues communicated by the External Auditors, through their Management Letter for the period ended 31 December 2016.

The Committee reviewed the financial reporting processes in order to ensure the reliability of the information provided for the determination of the most appropriate accounting policies and the fairness of the disclosures made in the Financial Statements. Further, the Committee reviewed the involvement of the Internal and External Auditors with regard to the financial reporting process.

External Audit

The Committee reviewed the independence of the External Auditors by obtaining Statements from the Auditors on relationships between the Auditors and the Company, including non-audit services and discussing the relationships with the Auditors.

The Committee had a meeting with the External Auditors to review the External Auditors’ proposed audit scope and timeline set out in the plan, including approach and co-ordination of audit effort with the Internal Auditors.

The Committee also discussed the key audit issues and their resolution, Management responses with both the External Auditors and the Management and continuously monitored the action taken by the Management to implement the recommendations.

The Committee reviewed the performance of the External Auditor and made the recommendation on the remuneration of the Auditor for approval to the Board.


Internal Audit staff members were provided with hands on training during the year under review on the application of ACL (Audit Command Language) which enhanced their auditing capabilities.


The Committee is satisfied that the Company’s internal controls are effectively implemented as designed to assess and manage risks and that the Company’s assets are adequately safeguarded.

The Committee is satisfied that the Company’s Internal and External Auditors have been effective and independent throughout the period under review.

The Committee is also satisfied that the operational controls and the application of appropriate Accounting Policies, provide reasonable assurance that the Financial Statements of the Company are true and fair.

The Audit Committee has proposed to the Board of Directors that Ernst & Young, Chartered Accountants, be recommended for reappointment as Statutory Auditors of the Company for the financial year ending 31 December 2017, subject to approval by the shareholders at the next Annual General Meeting.

On behalf of the Audit Committee,

J A Setukavalar
Chairman – Audit Committee

23 February 2017