Annual Report of the Audit Committee of the Board 2006-2007

I. BACKGROUND AND OVERVIEW 1. In line with Article 31 of the Agreement Establishing the Asian Development Bank (ADB) and Section 12 of the By-Laws, the Audit Committee of the Board (ACB) assists the Board of Directors in carrying out its responsibilities as they relate to the oversight of ADB’s financial reporting and audits, including internal controls. 2. During the period covered by this report (1 July 2006 to 30 June 2007), the ACB continued to operate under the Terms of Reference (ToR) (included in Appendix 1) approved by the Board of Directors in April 2005. In accordance with its ToR, the ACB agreed with the findings of ADB’s Outside Auditor which concluded that ADB’s financial reporting and audits, including internal controls, were appropriate and in accordance with ADB’s approved policies and generally accepted accounting and auditing standards. 3. The ACB identified a range of issues which formed the basis of its Work Program (included in Appendix 2). The ACB reviewed a series of key issues and actions for the reporting period, which are summarized as follows: (i) Monitoring measures undertaken to address instances of fraudulent activities by staff and consultants; (ii) Review of the Annual Financial Statements and Management's Discussion and Analysis (MD&A) (with ADB’s Outside Auditor), and Quarterly Financial Statements and MD&A; (iii) Review of OCR operating income and net income; (iv) Monitoring the effect of financial ...