Internal Accounting Controls, Procedures and Records

Corporate Policy No. 3-0004

KBR, Inc. and Subsidiary Companies

Date: December 17, 2009

Purpose:

This Policy establishes guidelines and procedures related to keeping books and records that in reasonable detail accurately and fairly reflect the Company's transactions and dispositions of assets. The Company shall maintain a system of internal accounting controls to ensure reliability and adequacy of its books and records and proper recording of all transactions including dispositions of assets.

Applicability:

This policy applies to all of the Company's operations, including all of the Company's joint ventures and subsidiaries that are controlled by the Company or over 50% owned by the Company. When the Company owns 50% or less of a joint venture or subsidiary, the Company is required to use its best efforts to influence, to the extent reasonable under the circumstances, its partners to maintain a system of internal accounting controls for the joint venture that is consistent with the requirements established by this policy.

Policy:

  1. Authorization. The only transactions to be entered into by the Company are those which are executed in accordance with management's specific approval (as set forth in the following paragraph) or established, formalized policies and procedures.

  2. Approval. No transaction will be recorded in the accounts of the Company unless it is within the scope of written policies and procedures or is specifically and formally approved by an appropriate and designated Employee. Such approval requires the determination that the transaction: (i) has been authorized in accordance with this Corporate Policy and (ii) is supported by documentary evidence to verify the validity of the transaction.

  3. Accounting. All transactions entered into by the Company will be recorded in the accounts of the Company in accordance with normal, standard procedures. Accounting records will be maintained at a reasonable level of detail in order to:

    1. Accurately and fairly reflect the transactions and dispositions of the assets of the Company; and

    2. Comply with applicable regulatory requirements, including the U. S. Foreign Corrupt Practices Act (FCPA) and other statutory requirements.

  4. Reporting. All transactions that have been accounted for in accordance with this Corporate Policy will be accumulated and processed in a manner which will permit timely preparation of financial statements, reports and data for purposes of internal, public and regulatory reporting. Such statements, reports and data must be understandable and prepared in a form sufficient to reflect fully, accurately and fairly the results of transactions entered into by the Company.

  5. Internal Controls. A system of internal accounting controls will be maintained that is sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles or any other criteria applicable to such statements and includes those policies and procedures that:

    1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

    2. Provide reasonable assurance that transactions are executed in accordance with management's general or specific authorization; and

    3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets.

  6. Responsibility. The implementation and maintenance of internal accounting controls, procedures and records that are adequate in all respects to satisfy the requirements of this Corporate Policy will be the primary responsibility of the Chief Financial Officer. In addition, the Chief Executive Officer and Chief Financial Officer are responsible for ensuring compliance with all aspects of Sections 302 and 404 of the Sarbanes-Oxley Act, which requires that management assess and report on the effectiveness of the Company's system of internal control over financial reporting at specified intervals.

  7. Auditing. Compliance with the provisions and requirements of Corporate Policies will be tested and evaluated by the Company's principal Audit Services executive in connection with the ongoing internal audit program. All control failures regarding Corporate Policies will be reported to management, including the Director of Business Conduct, so that deficiencies can be corrected and compliance with the terms of Corporate Policies can be assured.

Procedure:

  1. The Company will continuously evaluate its internal accounting controls, procedures and records to ensure compliance with the requirements of this Corporate Policy. Such evaluation will be documented in a form suitable for inspection by outside parties, such as regulatory authorities, if the need arises.

  2. The Company will take action to remedy any deficiency in internal accounting controls, procedures and records to ensure continuing compliance with the requirements of this Corporate Policy.

  3. The audit services staff, in coordination with the Company's principal Audit Services executive, will ascertain that its audit scope, procedures and programs are adequate: (i) for the purpose of testing and evaluating internal accounting controls, procedures and records; and (ii) for complete reporting of deficiencies in internal accounting controls, procedures and records. Such audit scope, procedures and programs will be sufficient to provide reasonable assurance regarding the Company's compliance with applicable provisions of the Sarbanes-Oxley Act, the FCPA and other statutory requirements.

  4. On or before March 31 of each year, the Chief Financial Officer will prepare a written summary applicable to the preceding fiscal year that sets forth management's evaluation of the Company's internal accounting controls, procedures and records. Such summary will consider management's overall evaluation and results of audits performed during the year, internal and external. For deficiencies noted in the evaluation, remedial action in progress or contemplated will be set forth in the summary. The summary will be addressed to the Audit Committee of the Board of Directors.

  5. The Company's principal Audit Services executive will report to the Audit Committee of the Board of Directors at each full meeting of the Committee on the adequacy of internal accounting controls, procedures and records, and any key matters arising since the previous meeting.

Other References:

The following references should be consulted:

  1. Code of Business Conduct Policy 3-0005 Improper Payments

  2. Code of Business Conduct Policy 3-0007 International Business Relationships

  3. Corporate Policy P-GL-KBR-AF-0110 Internal Control Assessments

  4. Corporate Policy P-GL-KBR-AF-0123 Joint Ventures and Equity Investments

  5. Corporate Policy P-GL-KBR-AF-0100 Accounting for Compliance-Sensitive Payments

Approved as revised:

Board of Directors

December 17, 2009

Revision History:

November 10, 2006