I.Objectives

The objective of Audit Committee is to assist the Board of Directors (the Board) of National Water Company (the Company) to fulfill its responsibilities, particularly in ensuring:

1. integrity of the  Company’s financial statements,

2.  the Company’s compliance to the legal and regulatory requirements,

3. the competency and  independency of the external auditor,

4.the Internal Audit  Department is performing its  roles and responsibilities independently; and

5. the adequacy of internal control and the effectiveness of its implementation.

 II. Scope of work

Audit Committee is entitled, without any restrictions, to review entire Company’s records, information, properties, correspondence and other materials which the Audit Committee considers important. The Board is responsible to take all necessary actions for supporting the Audit Committee in carrying out its tasks.

 III.  Responsibilities

The Audit Committee’s role includes all the activities which enable it to achieve its objectives, including:

1. Overseeing the Internal Audit Function, ensuring the independency of the Department and its members, reviewing and approving the Internal Audit Plan, reviewing the scope of the Internal Audit and Internal Audit Reports and recommendations issued by the Internal Audit Function in the Internal Audit Reports.

2. Review the internal control system and prepare a written report for its performance and recommendations.

3. Pre-approve and recommend to the Board all audit and non-audit services to be provided by the nominated external auditor; determine their fees, review their scope of work, ensure their independency and oversee their work and plan.

4.Review and assess all reports and comments provided by the external auditor to the Company and other regulatory authorities such as the General Auditing Bureau, Department of Zakat & Income Tax (DZIT) and Ministry of Water & Electricity, to ensure that the Company is taking appropriate actions to address the contents of these reports and observations.

5. Review the annual and interim financial statements prior to its approval by the Board and shareholders in order to notify the Board that the financial statements does not contain any material misstatement, incorrect data or information; and, there is no material data or information omitted which may result in having misleading financial statements.

6.  Review accounting policies adopted by the Company and any changes on them as presented by the Company’s management. The review should take into consideration the suitability to the Company’s operations and the impact on its financial position and operating results. The Audit Committee should send its opinion and recommendation to the Board for approval.

7.Evaluate the effectiveness of the Company’s key risks assessment which may be performed and the steps taken by the management to monitor and mitigate these risks.

 IV. The formation of the Audit Committee

The Board is responsible for the formation of the Audit Committee which shall include at least three (3) members, whom may be the members of the Board. The Audit Committee has the right to request for Board of Director’s for the addition of new members. The Audit Committee’s members shall select and nominate one of the members as Chairman among them for the Audit Committee’s term. The Board of Directors shall approve the nomination of the Chairman of the Audit Committee.

 V.  Audit Committee membership term

The membership term of the Audit Committee members is valid for three (3) years starting from the date of its formation/nomination. This period can be renewed for a second term, provided that a member is not renewed for more than two consecutive terms.

VI. The prerequisites of a member of the Audit Committee

1. At least one of the members will be financial literate and have adequate academic qualification, familiarity of the financial and accounting aspects, and the nature of the Company’s businesses.

2.  He should not be the member of the Company’s Executive Committee or its subsidiaries, nor holding any technical or administrative position within the Company or its subsidiaries, even through providing consultancy work.

3.He must be independent, and shall not service simultaneously serve on the Audit Committee of any other Company operating in the same business/industry.

 VII. The appointment or the termination of the Audit Committee’s members

1.The Board is responsible for the appointment of the Audit Committee’s members.

2. Any member of the Audit Committee is terminated by a resolution issued by the Board in any of the following cases:

a.   The member requests his resignation from the membership of the Audit Committee.

b.   The termination of the member is in the best interest of the Company.

c.   A member is incapable to meet any of the Audit Committee membership’s requirements as referred in (VI).

3.Upon the expiration of the membership term, because of death, resignation, disability, or termination; the Board shall appoint another member to fill the vacant position for the term of the Audit Committee.

 VIII.  Audit Committee Chairman’s responsibilities

1.Calling the Audit Committee's members for meetings, determining time, date and venue for each meeting.

2. Report the Audit Committee’s activities outcomes and recommendations to the Board.

3.Appoint a Secretary to the Audit Committee, after consulting with the members of the Audit Committee.

4. Preparation of the Audit Committee’s budget, work schedule and its projects in coordination with the Audit Committee’s Secretary and share it with the other members before submitting to the Board for approval.

5. Preparation of periodic reports on the Audit Committee’s activities in coordination with the Audit Committee’s Secretary.

6.Representing the Audit Committee in the Board’s meetings and any other party if needed.

 IX. Audit Committee’s Secretary Responsibilities

1. Preparation and maintenance of the Audit Committee’s minutes of meetings.

2.Communicating to the Audit Committee’s members the agenda, dates and venue of the meetings.

3. Carry out all the administrative tasks of the Audit Committee.

4. Maintain the confidentiality of the Audit Committee’s activities.

X. Audit Committee’s meetings

1.During the first Audit Committee meeting in the financial year, the members shall approve the planned schedule of its periodical meetings.

2.Date for the next meeting will also be agreed during the meeting being held.

3.There should be not be fewer than four (4) meetings during the year. A majority of the members of the Audit Committee shall constitute a quorum.

4. The Audit Committee may hold a non periodical meeting if requested by the Audit Committee’s Chairman or two (2) members of the Audit Committee.

 XI.  Compensation

The Board shall determine the compensation of the Audit Committee’s members and its Secretary.