The Audit Committee was established by the Board of Directors with the primary objective to assist the Board of Directors in fulfilling its fiduciary responsibilities relating to corporate governance, system of internal controls, risk management processes and management and financial reporting practices of the Group.
MEMBERS OF THE AUDIT COMMITTEE
Dato’ Dr. Freezailah bin Che Yeom Chairman, Independent Non-Executive Director Encik Headir bin Mahfidz Member, Independent Non-Executive Director Encik Megat Abdul Munir bin Member, Independent Non-Executive Director Megat Abdullah Rafaie
(appointed w.e.f. 1 August 2012)
Encik Hasan bin Haji Hamzah Member, Independent Non-Executive Director (resigned w.e.f. 9 July 2012)
TERMS OF REFERENCE Composition
The Board shall appoint the Audit Committee members from amongst themselves, comprising no fewer than three (3) members, all of whom shall be non-executive directors, where the majority shall be independent directors.
All members of the Audit Committee should be financially literate and at least one (1) member:-
• shall be a member of the Malaysian Institute of Accountants (“MIA”); or
• if he is not a member of the MIA, he must have at least 3 years of working experience and:
i. he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or
ii. he must be a member of one (1) of the associations of the accountants specified in Part II of the First Schedule of the Accountants Act 1967.
• fulfills such other requirements as prescribed by Bursa Malaysia Securities Berhad.
No alternate director shall be appointed as a member of the Audit Committee. In the event of any vacancy in the Audit Committee resulting in the non-compliance with its composition as above, the Board shall within three (3) months of the event appoint such number of the new members as may be required to fill the vacancy.
Chairman
The members of the Audit Committee shall elect a Chairman from amongst their number who shall be an independent Non-Executive Director.
Secretary
The Secretary(ies) of the Audit Committee shall be the Company Secretary(ies).
AUDIT COMMITTEE REPORT
Terms of Office
The Board of Directors of the Company shall review the term of office and performance of the Audit Committee and each of its members at least once in every three (3) years.
Meetings
The Audit Committee shall meet regularly, with due notice of issues to be discussed, and shall record its conclusions in discharging its duties and responsibilities. In addition, the Chairman may call for additional meetings at any time at the Chairman’s discretion.
Upon the request of the external auditors, the Chairman of the Audit Committee shall convene a meeting of the Audit Committee to consider any matters the external auditors believe should be brought to the attention of the directors or shareholders.
Notice of Audit Committee meetings shall be given to all the Audit Committee members unless the Audit Committee waives such requirement.
The Chairman of the Audit Committee shall engage on a continuous basis with senior management such as the Chairman of the Board, the Group Chief Executive Officer and the Group Financial Controller, the internal auditors and the external auditors in order to be kept informed of matters affecting the Company.
The Group Financial Controller and a representative of the internal and external auditors respectively should normally attend meetings. Other Board members and employees may attend meetings upon the invitation of the Audit Committee. However, the Audit Committee shall meet with the external auditors without executive Board members present at least twice a year and whenever necessary.
Questions arising at any meeting of the Audit Committee shall be decided by a majority of votes of the members present, and in the case of equality of votes, the Chairman of the Audit Committee shall have a second or casting vote.
Minutes
Minutes of each meeting shall be kept at the registered office and distributed to each member of the Audit Committee and also to the other members of the Board. The Audit Committee Chairman shall report on each meeting to the Board.
Quorum
The quorum for the Audit Committee meeting shall be the majority of members present whom must be Independent Directors.
Objectives
The principal objectives of the Audit Committee are to assist the Board of Directors in discharging its statutory duties and responsibilities relating to accounting and reporting practices of the holding company and each of its subsidiaries. In addition, the Audit Committee shall:
• evaluate the quality of the audits performed by the internal and external auditors;
• provide assurance that the financial information presented by management is relevant, reliable and timely;
• oversee compliance with laws and regulations and observance of a proper code of conduct; and
• determine the quality, adequacy and effectiveness of the Group’s control environment.
AUDIT COMMITTEE REPORT
Authority
The Audit Committee shall, in accordance with a procedure to be determined by the Board of Directors and at the expense of the Company,
(a) investigate any activity within its terms of reference.
(b) have full and unlimited/unrestricted access to all information and documents/resources.
(c) obtain other independent professional advice or other advice and to secure the attendance of outsiders with relevant experience and expertise if it considers necessary.
(d) have direct communication channels with the internal and external auditors.
(e) promptly report any matter reported to the Board that has not been satisfactorily resolved resulting in a breach of the Listing Requirements to Bursa Securities.
Duties and Responsibilities
The key duties and responsibilities of the Audit Committee are as follows:-
(a) To consider the appointment of the external auditors, the audit fee and any question of resignation or dismissal;
(b) To establish policies governing the circumstances under which contracts for the provision of non- audit services can be entered into and procedures that must be followed by the external auditors;
(c) To discuss with the external auditors the nature and scope of the audit, system of internal controls, management letter and responses and any matter the auditor may wish to discuss;
(d) To review the quarterly and year-end financial statements of the Company and the Group before submission to the Board, focusing particularly on:–
• any change in accounting policies and practices
• significant adjustments arising from the audit
• the going concern assumption
• compliance with applicable financial reporting standards and other legal requirements (e) To do the following, in relation to the internal audit function:-
• review the adequacy of the scope, function, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work
• review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function
• review the internal audit plan, consider the internal audit reports and findings of the internal auditors, fraud investigations and actions and steps taken by Management in response to audit findings
• review any appraisal or assessment of the performance of members of the internal audit function
• approve any appointment or termination of internal auditors
(f) To consider any related party transactions and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity;
(g) To report its findings on the financial and management performance, and other material matters to the Board;
AUDIT COMMITTEE REPORT
(h) To consider major findings of internal investigations and management’s response;
(i) To verify the allocation of Employees’ Share Option Scheme (“ESOS”) in compliance with the criteria as stipulated in the by-laws of ESOS of the Company;
(j) To review the adequacy and effectiveness of risk management, internal control and governance systems;
(k) To consider other topics as defined by the Board; and
(l) To consider and examine such other matters as the Audit Committee considers appropriate.
Frequency and Attendance of Meetings
The Audit Committee shall meet as the Chairman decides and deems necessary but not less than four (4) times in a financial year. The meeting will normally be attended by the members of the Committee and the Group Financial Controller, who is primarily charged with the duties, functions and responsibilities of the Group’s finance. The presence of the external auditors will be requested, if required and the external auditors may also request a meeting if they consider it necessary.
During the financial year ended 31 October 2012, there were six (6) meetings held. The details of the attendance of each member are as follows :-
Audit Committee Members No. of meetings attended
Dato’ Dr. Freezailah bin Che Yeom 5 out of 6
Encik Headir bin Mahfidz 6 out of 6
Encik Megat Abdul Munir bin Megat Abdullah Rafaie 2 out of 2 (Appointed w.e.f. 1 August 2012)
Encik Hasan bin Haji Hamzah 3 out of 3
(Resigned w.e.f. 9 July 2012)
Summary of Duties and Activities of the Committee
During the financial year ended 31 October 2012, the Committee has discharged its duties and functions effectively and the activities carried out by the Audit Committee included, among others, the following:- a. reviewed the audited financial statements of the Group for the financial year ended 31 October 2012
prior to the Board’s approval for release to Bursa Malaysia Securities Berhad;
b. reviewed the unaudited quarterly reports on the consolidated results and financial statements and financial results prior to tabling of the same to the Board for approval;
c. reviewed the recurrent related party transactions of a revenue of trading nature of the Company;
d. reviewed the year end financial statements of the Company and the Group, prior to their approval of the Board, focusing in particular on the following :-
i. changes in or implementation of any major accounting policies, if any ii. significant and unusual events, if any and
iii. compliance with accounting standards, regulatory and other legal requirements;
e. discussed and reviewed with the external auditors, the applicability and the impact of the new accounting standards and new financial reporting regime issued by the Malaysian Accounting Standards Board and the scope of work and audit plan of the Company and its Group for the financial year ended 31 October 2012 and discussed any significant issues and concerns arising from the audit;
AUDIT COMMITTEE REPORT
f. deliberated on major issues the external auditors raised, and to review the financial statements to which the Committee would focus on the changes in accounting policies, if any and accounting practices, significant adjustments arising from the audit, the going concern assumptions, compliance with the accounting standards and other legal requirements and compliances with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and problems and reservations arising from the interim and final external audits, if any;
g. reviewed the external audit reports and assessed the auditor’s findings and the management’s responses thereto and thereafter, made the necessary recommendations/changes to the Board of Directors for their approval;
h. reviewed with the external auditors, the adequacy of the internal control and risk management systems and evaluated the systems with the external auditors;
i. evaluated the performance of the external auditors for recommendation to the Board on their re- appointment and to determine their audit fees;
j. reviewed the adequacy of the scope, functions, competency and resources of the outsourced internal auditors and that they have the necessary authority to carry out their work;
k. reviewed the internal audit plan and reports presented on the state of internal control of the Group;
l. advised the Group on the implementation of its Standard Operating Policies and Procedures covering areas of sales administration, procurement, purchasing, project management and implementation, etc; and
m. discussed and ensure the external auditors’ review of the Statement on Internal Control of the Group for inclusion in the Annual Report for the year 2012.
Internal Audit Function
The Company acknowledged and the Audit Committee had put emphasis on the importance of having an internal audit function within the Group and as such, had outsourced its internal audit function to a professional service firm to assist the Board and the Audit Committee in providing independent assessment of the adequacy, efficiency and effectiveness of the Company and the Groups’ internal control system.
The costs incurred for maintaining the outsourced internal audit function for the financial year ended 31 October 2012 amounted to RM60,000.
A summary of the activities of the internal audit function for the financial year ended 31 October 2012 is as follows:-
(a) Evaluation of the Group’s internal control systems in the areas of mapping out the business processes on the scope defined, performing a system of controls evaluation on high-risk areas within the business processes and reviewing the overall control environment where there is a significant amount of implementation lapses;
(b) Review of the accounting records;
(c) Presentation of audit findings and corrective actions to be taken by Management in the quarterly Audit Committee meetings; and
(d) Conducted follow-up audits to ensure corrective actions had been taken.