10. Internal Control

The Audit Committee is responsible to ensure that the Company’s audit
policies and regulations are in accordance to the laws, regulations, as
well as international standards. In addition, the committee is
responsible for reviewing the Company’s internal control system,
internal audit system and the risk management system that they are
appropriate, up-to-date, and efficient. This committee is independent
and has an Audit Office reporting direct to it. The Committee is also
responsible for the regular liaising with outside auditors, advisors,
and legal and accounting experts.

The Audit Office directly reports to the Audit Committee to ensure
confidence in supervising and reviewing the accuracy of financial
statements, the sufficiency of information disclosure, and the
transparency of information, the internal controls and risk management.
The Audit Office has concentrated on preventive and proactive audit
policy by closely following the guidelines on the international audit
standards and the concept of good governance. The Audit Office has
expedited the development of audit work in compliance with the
prevailing to the new environment for the image of transparent,
accountable and creditable business operations.

(Details of Internal Control are on page 102-103)

The Audit Committee’s Report

The Audit Committee performed its duties in 2006 as assigned by the
Board in accordance with the Charter of the Audit Committee. These
duties included reviewing the Company’s financial statements, good
governance practices to conform with SCG Corporate Governance and SCG
Code of Ethics, risk management, internal audit and internal control as
well as the appointment of the Company’s auditors for the year 2007.
During the year 2006, the Committee held six meetings and the attendance
of Audit Committee members was 93 percent. The duties are summarized as
follows:

1. Review the financial statements The presences of the Company’s
auditors were requested at the meetings every time the Audit Committee
reviewed the Company’s quarterly and annual financial statements as well
as SCG’s consolidated financial statements to provide any relevant
information. Based on the auditor’s comments concerning material issues,
the Committee accordingly adjusted certain transactions within the
accounting system to ensure their compliance with relevant laws and
accounting standards. It also ensured sufficient and timely disclosure
of information contained in the financial statements to better benefit
users of these financial statements presented herein. Advanced
technology has been utilized to enhance accounting efficiency. The
efforts have enabled the Company to propose unaudited financial
statements ahead of the quarterly and annual submission deadlines of the
Stock Exchange of Thailand (SET) since 1998. There were no significant
changes made after the auditors’ review.

2. Review of corporate governance SCG stresses the importance of good
corporate governance. The Governance and Nomination Committee has
provided constant monitoring of the Company’s operations to ensure
compliance with the international standards related to the Company’s
business. In 2006, the regulations of The Audit Committee were updated
to conform to the announcements of the government supervision bodies.
The update of the SCG Code of Ethics is also underway to cater to the
ever-changing economic circumstances.

The Company was considering the implementation of the whistle blower
policy to protect employees and individuals who report financial
improprieties or suspected violations of laws, rules, regulations, and
Code of Ethics to the Company. The implementation of the policy is
expected to begin in 2007.

SCG’s good corporate governance practices were applauded, earning the
Company both domestic and foreign awards as shown in this annual report.
In addition, the Board of Directors and the Audit Committee conducted
self-assessment both as a group and individually in line with the rules
and regulations of the Securities Exchange Commission (SEC) and SET as
well as international practices. The results were considered very
satisfactory as they were last year.

3. Review of risk management The Audit Committee monitored the risk
management practices in all business units on a quarterly basis in
accordance with the stipulated guidelines. The Committee reviewed both
the annual project risk management plans and actual performance of the
projects. The focus was on risk analysis and finding ways to manage
risks. Thus with an early warning signs indicating business troubles,
the identified risk/s would be promptly managed to reduce their
likelihood or impact. For instance, in the light of the risk associated
with the rapidly-changing production technology for the CRT business,
the Company systematically managed the risk, resulting in the divestment
of its CRT business. The solution brought about an acceptable level of
loss and ensured fairness to all concerned parties. Details about other
material risks of all business units are also shown in this annual
report. The Audit Committee put an emphasis on risk management
assessment. To that effect, the Committee disseminated knowledge to
employees at all levels and constantly enhanced risk management
efficiency.

4. Monitoring and development of internal control system Information
technology was employed to review the internal control system. The
objective was to computerize and automate all review procedures and
conditions with the focus on key controls. In addition, the Office of
Internal Audit was responsible for assessing the internal control of all
business units in every audit. In 2006, it was found that the Company’s
internal control was sufficient and effective with no significant issues
or short comings that could affect the business operations. The findings
were confirmed by the independent auditors who assessed the internal
control system annually. To ensure the sufficient and timely control of
operations, all the business units adopted the control self-assessment
(CSA) system which has been continually developed to boost efficiency.
Moreover, a data and reporting system was established to review
connected transactions to ensure compliance with SEC and SET
regulations.

5. Monitoring of internal audit To ensure an internal audit function
that benefited the Company’s operations to the fullest, the Audit
Committee supervised the Office of Internal Audit in devising short-and
medium-term plans that are reviewed annually. The aim was to maintain an
effective internal audit function that conformed to international
standards. The Office of Internal Audit also emphasized its activities
on preventive issues and made internal audit a tool to boost efficiency
and facilitate performance improvements for all business units. In
addition to the implementation of strategies and action plans, key risk
indicators were also used to monitor the performance of the Office of
Internal Audit on a quarterly basis. In 2006, a Web-based consulting
system was introduced to provide consultancy on issues related to
operations. The consultancies were grouped into major categories for
easy access and utilization. This ensured effective business operations
in line with rules, regulations, relevant laws as well as code of ethics
and good corporate governance from the beginning. This initiative has
provided consultancies and recommendations to many business units,
resulting in fewer operational flaws. These solutions served as best
practice guidelines and invited further inquiries that are related to
similar such issues.

6. Appointment of the Company’s auditors for 2007 The Audit Committee
examined the performance of the Company’s auditors as regards their
preparedness, compliance with the generally accepted auditing standards,
and the audit report, and considered it satisfactory. The Committee also
reviewed the qualifications of the auditors and found they were in
compliance with the rules and regulations of SEC and SET. Consequently,
the Audit Committee recommended that the Board of Directors seek
approval at the ordinary general shareholders’ meeting for the
appointment of Mr. Winid Silamongkol, certified public accountant
Registration No. 3378 or Mr. Pisit Chiwaruangroch, certified public
accountant Registration No. 2803 of KPMG Phoomchai Audit Ltd., as the
Company’s auditors for 2007.

On behalf of the Audit Committee

Air Vice Marshal

(Kamthon Sindhvananda)

Chairman of the Audit Committee