ST Engineering Sustainability Report 2020

CORPORATE GOVERNANCE The appointment of external auditors is subject to approval at each AGM. In making its recommendations to shareholders on the appointment and re-appointment of external auditors, the Board relies on the review and recommendations of the AC. The AC reviews the adequacy, effectiveness, independence, scope and results of the external audit and makes recommendation to the Board on the appointment, removal, remuneration and the terms of engagement of the external auditors. In compliance with SGX requirements, an audit engagement partner may only be in charge of an audit for up to five consecutive years. PricewaterhouseCoopers LLP, first appointed in 2020, has met this requirement, and the current audit engagement partner also took over ST Engineering's audit in 2020. Fees paid to the external auditors for audit and non-audit services of the Group for financial year 2020 totalled $4.3m, of which $0.16m or 4% were for non-audit services. The AC was satisfied that the non-audit services provided by the external auditors did not compromise their independence. The Company has complied with Rules 712 and 715 of the SGX Listing Manual in relation to the engagement of its auditors. AC met 5 times in 2020 The AC also met with the external auditors, and with the internal auditors, in each case without the presence of Management. The AC reviewed the financial statements of the Group before the announcement of the Group's half-yearly and full-year results. In the light of the COVID-19 pandemic impacting the Group's businesses, the AC focused its review on the areas of financial statements affected by the pandemic. Amongst the matters discussed with Management and the external auditors, the following significant matters impacted the financial statements, and were reviewed by the AC in relation to their materiality and appropriateness in approach, methodology and assessment: Significant matters How the AC reviewed these matters Impairment assessment of non-financial assets – goodwill The AC reviewed the reasonableness of cash flow forecasts, the long-term growth rates and discount rates used in the valuation models in goodwill impairment assessments, as well as how the impact of COVID-19 has been considered in the cash flow forecasts. The AC also reviewed the stress test- ing of the valuation and its sensitivity to changes in key assumptions used in the valuation model. Revenue recognition based on stage of completion The AC reviewed the various controls that were designed and applied by the Group in the recognition of revenue and profit from contracts with customers to ensure that the estimates used in determining the amount of revenue and costs recognised for the performance obligations were appropriate. During the year, the AC held five meetings, including a joint meeting with the RSC to review significant risks of the Company and related key controls. / ST ENG I NEER I NG 122