AUDIT AND RISK MANAGEMENT COMMITTEE REPORT

AUDIT AND RISK MANAGEMENT COMMITTEE COMPOSITION AND MEETINGS

The Audit and Risk Management Committee (ARMC) comprises of three (3) members of the Board all of whom are Non-Executive Directors and two (2) of whom are Independent Directors:-

Chairman:

  • Mohamed Ridza bin Mohamed Abdulla (Senior Independent Non-Executive Director)

Members:

  • Datuk Nor Badli Munawir bin Mohamad Alias Lafti (Independent Non-Executive Director)
  • Dato’ Adi Azuan bin Abdul Ghani (Non-Independent Non-Executive Director)

The ARMC met four (4) times during the financial year 2015 and the record of attendance of the ARMC Members is as follows:-

        Number of Board Meetings
Attended Held
Mohamed Ridza bin Mohamed Abdulla 4 4
Datuk Nor Badli Munawir bin Mohamad Alias Lafti 4 4
Dato’ Adi Azuan bin Abdul Ghani 4 4

Terms of Reference

The objective of the ARMC is to assist the Board to review the adequacy and integrity of Group’s financial administration and reporting, internal control and risk management systems, including the management information system and systems of compliance with the applicable laws, regulations, rules, directives and guidelines.

 

Balance and Composition

  1. The members of the ARMC are to be appointed by the Board and shall comprise of at least three (3) members, all of whom must be Non-Executive Directors, with a majority of them being Independent Directors.
  2. None of the members of the ARMC shall be an Alternate Director. Members of the ARMC shall elect a Chairman from among themselves who is an Independent Non-Executive Director.
  3. At least two (2) members of the ARMC must be financially literate with sufficient financial experience and ability and at least one member of ARMC must be an Accountant or have such other qualification as defined by the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“BMSB”).
  4. The ARMC shall have a mixture of expertise and experience, including an understanding of the industry (ies) in which the Group operates.
  5. A Member of the ARMC may relinquish their membership in the ARMC with prior written notice to the Company Secretary.
  6. The Board shall review the terms of office of the ARMC at least once every three (3) years.
  7. In the event of any vacancies arising in the ARMC resulting in the number of members of the ARMC falling below three (3), the vacancy should be filled within three (3) months of it arising.

 

Authority

  1. In carrying out its duties and responsibilities, the ARMC shall, at the expense of the Company:
  • have the authority to investigate any activity within its Terms of Reference;
  • have full, free and unrestricted access to the Group’s records, properties, personnel and other resources;
  • have direct communication channels with the external and internal auditors;
  • be able to obtain independent professional or other advice in furtherance of its duties; and
  • be able to convene meetings with the external auditors, the internal auditors, or both, excluding the attendance of the other Directors and employees, whenever deemed necessary.
  1. The ARMC is not authorised to implement its recommendations on behalf of the Board but shall report its recommendations back to the Board for consideration and implementation.
  2. Where the ARMC is of the view that a matter reported by it to the Board has been not satisfactorily resolved resulting in a breach of the Main Market Listing Requirements, the ARMC is authorised to promptly report such matter to BMSB

 

Duties and Responsibilities

  1. Nomination and appointment of the external auditors, the audit fee and any questions of resignation or dismissal of the external auditors.
  1. To discuss with the external auditors before the audit commences, the nature and scope of audit, and any other matters as the external auditors may wish to discuss (without the presence of the management, if necessary).
  1. To act as an intermediary between the management or other employees, and the external auditors.
  1. To review the quarterly results and year-end financial statements before submission to the Board for approval, focusing particularly on:
  • any changes in accounting policies and practices;
  • significant adjustments arising from the audit;
  • litigation that could affect results materially;
  • the going concern assumption; and
  • compliance with accounting standards in Malaysia and other legal requirements.
  1. To review the external auditors’ management letter and management response.
  2. In relation to the internal audit function:
  3. review the adequacy of the scope, function, competency and resources of the internal audit function, and that it has necessary authority to carry out its work;
  4. review the internal audit plan and result of internal audit process and where necessary ensure that appropriate action is taken on the recommendations of the internal audit function;
  5. review the appraisal or assessment of the performance of members of the internal audit function;
  6. review the independence of internal audit function;
  7. approve any appointment or termination of senior staff members of the internal audit function; and
  8. being informed of any resignation of internal audit staff members and to provide the resigning staff member an opportunity to submit his/her reasons for resigning.
  9. To review and report back to the Board any related party transaction and conflict of interest situation that may arise within the Group including any course of conduct that raises questions of management integrity.

 

  1. To review and deliberate the major findings of internal investigation and management response.

 

  1. To review and verify the allocation of share options given to the Group’s eligible employees is in accordance with the criteria for the employees share option scheme (“ESOS”) and the Main Market Listing Requirements of BMSB at the end of each financial year.

 

  1. To review the appropriateness and adequacy of internal process for risk oversight and management. In particular, the ARMC shall:
  2. review the Enterprise Risk Profile/Register to ensure comprehensive and effective management key risks;
  3. review and recommend risk management strategies, policies and risk tolerance limits for Board’s approval;
  4. develop and implement adequate risk assessment, monitoring and management policies and procedures;
  5. ensure the risk management framework is embedded and consistently applied throughout the Group;
  6. review the appropriateness of management response to key risk areas and follow-up on management risk treatment action plans reported by the Risk Working Committee (“RWC”);
  7. provide regular reporting and timely update on the operations of the Enterprise Risk Management (“ERM”) framework to the Board; and
  8. receive regular reports on the risk profile, material risks (both financial and non-financial) faced by the Group and action plans taken by the management to mitigate the risks.

 

  1. In relation to major business investment proposals and/or feasibility:
  2. to review and evaluate the viability of the proposal/feasibility study prepared that all risks have been considered and are within the Group’s strategic goals; and that action plans or strategies to mitigate identified risks are adequate;
  3. to conduct meetings with the project sponsor(s) and Chief Executive Officer (“CEO”), if necessary, to discuss risk matters related to the proposal; and
  4. to make recommendation to the Board on the appropriate course of action to take.

 

  1. To oversee the Group’s internal compliance and control systems established by the management, including reviewing the effectiveness of these systems and approving management’s programmes and policies to ensure effectiveness.

 

  1. To review and recommend the proposed provisions, allowances and/or writing off of assets in excess of RM1,000,000.00

 

  1. To recommend the disposal(s) of assets in excess of RM1,000,000.00

 

  1. Any other functions as directed by the Board.

 

Meeting and Minutes

 

  1. The ARMC shall meet at least four (4) times during a financial year, but additional meetings may be called at any time at the discretion of the Chairman. In order to form a quorum, the quorum for meeting shall be at least two (2) members where a majority of members present must be Independent Directors.
  2. The Executive Directors and Senior Management shall normally attend the meetings but may be asked to leave a meeting as and when deemed necessary by the ARMC. Other relevant persons may attend meetings only upon the invitation of the ARMC. However, at least twice a year the ARMC shall meet with the external auditors without the presence of executive board members and employees.
  3. The Company Secretary is the Secretary of the ARMC.
  4. Minutes of the meetings shall be duly entered into the books provided for the purpose of all resolutions and proceedings of all meetings of the ARMC. The minutes shall be formally tabled to the Board for noting and action.

 

Summary of Activities of the ARMC

 

A summary of the ARMC activities for the financial year ended 31 December 2015 are as follows:-

 

  1. reviewed the Group’s audited financial statements for the financial year ended 31 December 2014 and discussed significant audit findings with the external auditors before recommending the same for the Board’s approval.
  2. reviewed the performance and independence of external auditors.
  3. reviewed and recommended the unaudited quarterly financial results for the Board’s approval prior to their release to BMSB.
  4. reviewed and discussed with the external auditors the nature and scope of their audit plan and the proposed audit fees for the Group for the financial year ended 31 December 2015 before the commencement of the audit.
  5. discussed the updates of new developments in accounting standards issued by the Malaysian Accounting Standards Board.
  6. reviewed the internal auditors’ plan for year 2015 before recommending the same to the Board.
  7. reviewed the related party transactions that arose within the Group.
  8. reviewed the internal audit reports issued by the Internal Audit Department and thereafter discussed the management’s actions taken to improve the systems of internal control.
  9. reviewed The Statement on Internal Control prior to submission to external auditors for review and to the Board for consideration and inclusion in the Annual Report.

The Internal Audit & Risk Management Department is independent of the activities or operations of other operating units.

 

The Internal Auditor reports directly to the ARMC, to perform regular review and appraisal of the effectiveness of risk management, internal control and governance processes of the Group. Accordingly, activities carried out included risk assessment and internal audits addressing both financial and operational aspects.

 

In carrying out internal audit review, detailed reports were issued to the ARMC covering areas on all sides of procurement, contracts or agreements management, costing analysis and tendering. Apart from highlighting any deficiency or areas requiring the management’s attention, the reports also included recommendations as well as proposed corrective actions to be implemented by the management. Follow-up audits were then carried-out to determine whether corrective actions had been taken by the management.

 

During the year, an internal audit and follow up audit was carried out on the Telecommunication Business Unit which covered the areas mentioned above. The selection and the areas covered were prioritized largely based on the risk profiles of the business units within the Group.

The cost incurred by the in-house Internal Audit & Risk Management Department in relation to the conduct of the Internal Audit Functions of the Group for the financial year ended 31 December 2015 amounted to RM207,770.