CORPORATE GOVERNANCE Key Audit Matters In the review of the financial statements of CLAS for FY 2023, the ARC has discussed with Management the accounting principles that were applied and their judgement of items that might affect the integrity of the financial statements and also considered the clarity of key disclosures in the financial statements. The ARC reviewed, amongst other matters, the following key audit matter as reported by the external auditors for FY 2023. Key audit matter How this issue was addressed by the ARC Valuation of investment properties, land and buildings and investment properties under development The ARC considered the valuation methodologies and key assumptions applied by the valuers for investment properties, land and buildings and investment properties under development in arriving at the valuations and also evaluated the valuers’ objectivity and competency. In order to provide fresh perspectives to the valuation process, the valuers do not value the same property for more than two consecutive years. This practice has been consistently adhered to over time. The ARC reviewed the outputs from the valuation process and held discussions with Management and the external auditors to review the valuation methodologies, focusing on significant changes in fair value measurement and key drivers of the changes including assessing the reasonableness of the discount rates, terminal capitalisation rates, capitalisation rates, revenue per available unit and gross development costs adopted by the valuers. The valuation of investment properties, land and buildings and investment properties under development was also an area of focus for the external auditors. The ARC considered the findings of the external auditors, including their assessment of the appropriateness of valuation methodologies and the key assumptions applied in the valuation. The ARC was satisfied with the valuation process, the methodologies used and the valuation of the investment properties, land and buildings and investment properties under development. The Managers confirm, on behalf of CLAS, that CLAS complies with Rules 712 and 715 of the Listing Manual in relation to the appointment of its external auditors as KPMG LLP is registered with the Accounting and Corporate Regulatory Authority. Internal Audit The Managers have in place an internal audit function supported by CLI’s Internal Audit Department (CLI IA). The head of the CLI IA is Ms Jenny Tan. CLI IA is independent of the activities it audits and has unfettered access to CLAS’ documents, records, properties and employees, including access to the ARC, and has appropriate standing with respect to the Managers. The primary reporting line of CLI IA in respect of the Stapled Group is to the ARC, however, the ARC does not decide on the appointment, termination and remuneration of the head of CLI IA as it operates at the CLI Group level. While this is a deviation from Provision 10.4 of the Code which requires the ARC to decide on the appointment, termination and remuneration of the head of the internal audit function, CLI IA is able to carry out its role effectively for the reasons below and is accordingly consistent with the intent of Principle 10 of the Code. 122 CAPITALAND ASCOTT TRUST
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