Internal Accounting Controls, Procedures and Records

KBR, Inc. and Subsidiary Companies
Corporate Policy

Date: November 10, 2006
Index No.: 3-0004

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.

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. Each entry will be coded into an account which accurately and fairly reflects the true nature of the transaction.

  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 and to permit proper accountability for assets.

  5. 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.

  6. Auditing. Compliance with the provisions and requirements of this Corporate Policy will be tested and evaluated by the Company's Director-Audit Services in connection with the ongoing internal audit program. All control failures regarding this Corporate Policy will be reported to management so that deficiencies can be corrected and assurance of compliance with the terms of this Corporate Policy maintained.

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 Director-Audit Services, 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.

  4. On or before March 31 of each year, the Chief Financial Officer and the Company's Director-Audit Services will prepare a written summary applicable to the preceding fiscal year which sets forth financial management's evaluation of the Company's internal accounting controls, procedures and records. Such a summary will consider financial 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 Director-Audit Services will, on an annual basis, report to the Audit Committee of the Board of Directors on the adequacy of internal accounting controls, procedures and records.

Other References:

1. Corporate Policy 3-0233 (Investments in Joint Ventures or Jointly Owned Companies) or its successor Policy should be consulted.

Approved: Board of Directors
November 10, 2006