AUDIT COMMITTEE REPORT
4. Review of related party transaction and conflict of interest situation
At each quarterly meeting, the Audit Committee reviews any related party transaction (“RPT”) and conflict of interest (“COI”) situation that may arise within the Group and the Company including any transaction, procedure or course of conduct that raises questions of management integrity.
The Audit Committee reviews RPT and/or COI situation presented by Management prior to the Company or the Group entering into such transaction.
AUDIT COMMITTEE REPORT (CONTINUED)
AUDIT COMMITTEE REPORT (CONTINUED)
As such, the Audit Committee must ensure that:
a. Adequate oversight over the controls on the following:
i. identification of the interested parties;
ii. identification of the related party transactions and possible conflict of interest situations; and
b. Assess and address the reasonableness of the conflict-of-interest situations or the related party transactions to ensure that interested parties do not abuse their powers to gain unfair advantage.
Upon receiving a report of a RPT and/or COI situation, the Audit Committee reviews and determines whether the RPT and/or COI situation is fair, reasonable, on normal commercial terms and in the best interest of the Group and the Company.
The key considerations taken by the Audit Committee in reviewing the RPT and/or COI situation are as follows:
a. Whether the transaction price is at arm’s length basis or whether the terms are fair to the Group and the Company;
b. Whether there are business reasons for the Company to enter into the transaction with the related party and not a third party;
c. Whether the business reasons are in line with the overall strategy and objectives of the Group and the Company;
d. What benefits the interested party will derive from the transaction;
e. What impact the transaction will have on the financial statements;
f. Whether there is economic substance in entering into the transaction; and
g. Enquire to ascertain whether, apart from the review of related party transactions and conflicts of interest, transactions entered into have been disclosed in the Company’s financial statements under the relevant financial reporting standards.
The Audit Committee reports to the Board of any RPT (including recurrent related party transactions) and COI situations that may arise within the Group and the Company.
During the financial year, at each quarterly meeting, the Audit Committee reviewed the recurrent related party transactions of revenue or trading in nature which include the rental payment for renting of lands from the Company’s substantial shareholder. Announcement on the transactions was not required to be made to Bursa Malaysian Securities Berhad as the value of the transactions did not exceed the threshold as stipulated by the Listing Requirements.
INTERNAL AUDIT FUNCTION
The Board recognises that the Internal Audit Function can play an important assurance role in the Group’s governance process, particularly in the area of risk management and control.
The Internal Audit Function assists the Audit Committee to execute its oversight function and discharge its duties and responsibilities by performing independent reviews to ensure the adequacy and effectiveness of the internal control and risk management systems established by the Group.
The internal audit’s role should be separate and independent from management so that it could carry out its work freely and objectively. Hence, over the years and for the financial year ended 31 December 2020, the entire Internal Audit Function of the Group and the Company has been outsourced to an independent internal audit consulting firm. The Board and Audit Committee are responsible for the effectiveness of the Internal Audit Function although all the Internal Audit Function is outsourced.
The Internal Auditors is accountable to the Audit Committee. They provide the results of their audit work to the Audit Committee, outlining their audit findings, risks identified, recommended actions to fix control weaknesses, Management’s feedback on recommended action and progress monitoring.
The Audit Committee reviews periodically the adequacy of the audit scope, audit function and resources made available to the Internal Audit Function as well as the competency of the Internal Auditors to ensure that the internal audit service provider delivers high quality services that meet the Group’s need. The Audit Committee regularly discuss with the Board and Management on the Internal Auditors’ competency and performance.
Internal Audit Plan
The Internal Auditors carry out their functions based on the Internal Audit Plan approved by the Audit Committee. Subject to separate terms of engagement, special and ad hoc audit reviews and assistance shall be approved by the Audit Committee.
Activities of the Internal Audit Function
The activities of the Internal Audit Function for the financial year ended 31 December 2020 included the following:
a. Conducting internal audit reviews in accordance with the Internal Audit Plan approved by the Audit Committee;
b. Reporting the results of internal audits and making recommendations for improvements to the Audit Committee on a periodic basis;
c. Performing follow-up audits to ensure that recommendations for improvement to the internal control systems were satisfactorily implemented;
d. Conducting Annual Risk Assessment Workshop; and
e. Gap Analysis to determine if the current policies and procedures of the Group are sufficient to fulfil the requirements set by Bursa Securities and the adequate procedures on Section 17A of the Malaysia Anti-Corruption Commission (Amendment) Act 2018, focusing on anti-corruption/ bribery across the Group.
During the financial year, the internal audits conducted on the Group did not reveal any significant weaknesses in the internal control system that would result in material losses, contingencies or uncertainties which are necessary to be disclosed in the Group’s Annual Report.
The total cost incurred for the Internal Audit Function of the Group in respect of the financial year ended 31 December 2020 was approximately RM70,000.
AUDIT COMMITTEE REPORT (CONTINUED)
Directors’ Report 51
Statements of Financial Position 58
Statements of Comprehensive Income 60
Statements of Changes in Equity 61
Statements of Cash Flows 63
Notes to the Financial Statements 67
Statement by Directors 140
Statutory Declaration 141
Independent Auditors’ Report 142