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The Audit Committee (“AC”) of Kulim (Malaysia) Berhad is pleased to present the AC Report for the financial year ended 31 December 2017.




AC COMPOSITION AND ATTENDANCE
The AC comprises three (3) members as follows:

MEMBER

DIRECTORSHIP

Dr. Radzuan A. Rahman (Chairman)

Non-Executive Director

Wong Seng Lee

-

Aziah Ahmad

-


The attendance record of each member was as follows:

MEMBER

DATE OF MEETING

27/02/2017

07/08/2017

27/11/2017

Dr. Radzuan A. Rahman

/

/

/

Wong Seng Lee

/

/

/

Aziah Ahmad

/

/

/


SUMMARY OF WORK
The AC has a responsibility to oversee the Group’s internal control and risk management systems. The AC continues to monitor and review the effectiveness of the Group’s internal control and risk management systems with the support of Head of Audit, Risk Management and Compliance function. 

The summary of work and the main matters that the AC considered during the year are described below:


SCOPE OF RESPONSIBILITIES

SUMMARY OF WORK

Financial Reporting

·   The AC assisted the Board to review the financial statements of the Group and Company and ensuring that the financial statements have been prepared in accordance with all applicable Malaysian Financial Reporting Standards and the Companies Act, 2016.

Risk Management and Internal Control

·  The Board is responsible for establishing and maintaining the Group’s system of internal control and risk management and reviewing their effectiveness. The AC assisted Board in ensuring that a robust process for identifying, evaluating and managing the significant risks faced by the Group is in place and operating effectively. 

·  Further details on the Group’s risk management process are included in the Statement on Risk Management and Internal Control on page 118 of this Integrated Annual Report.

Internal Audit

·   Reviewed and approved the annual audit plan and budget for activities to be undertaken during year 2017.

·    Reviewed the adequacy of the scope, functions, competency and resources of the internal audit function.

·    Reviewed internal audit report issued by Internal Auditors on the effectiveness and adequacy of governance, risk management, operational and compliance processes.

·   Reviewed the adequacy and effectiveness of corrective actions taken by management on all significant matters raised.

External Audit

·    Discussed with External Auditors before the audit plan, nature and scope of the audit, area of audit emphasis, as well as the External Auditors’ evaluation of the system of internal controls and audit reports.


INTERNAL AUDIT FUNCTION



The Head of Internal Audit Division, who is a Certified Internal Auditor (“CIA”), reports functionally to AC. The AC approved the internal audit charter, which sets out its role, accountability and authority. 


The Group’s Internal Audit function provides the AC with independent and objective reports on the state of internal controls of the operating units within the Group and the extent of compliance by such units with the Group’s established policies and procedures and the regulatory requirements of the relevant authorities. The Group’s Internal Audit function is carried out by the Internal Audit Department (“IAD”) in accordance with The International Professional Practices Framework (“IPPF”) set by The Institute of Internal Auditors (“IIA”).


IAD adopts a risk-based approach towards planning and conduct of audits which is partly guided by an Enterprise Risk Management (“ERM”) framework. The AC reviewed and approved the Internal Audit plan of the Group submitted by the Head of Internal Audit. Audit reports were issued to AC and Board during the year incorporating findings, recommendations to improve on the weaknesses noted in the course of the audits and management’s comments on the findings.


The management is responsible to ensure that corrective actions on reported weaknesses as recommended are taken within the required time frame to ensure that all potential weaknesses in system and risks under reviewed are mitigated or remain within acceptable levels. 


A reliable follow up system has been put in place to ensure that all remedial actions are carried out based on the agreed action plans as highlighted in the audit report.


Resources
As at 31 December 2017, the total IAD’s manpower was 10 comprised of auditors of different background as follows:

DISCIPLINE

NO. OF INTERNAL

PERCENTAGE (%)

Accountancy

8

80

Agriculture

1

10

Business Administration

1

10

Total

10

100


Coverage

The IAD audit universe which consists of auditable areas or activities that are available to be audited, considers and reflects the overall Kulim’s planned business activities and designs that may affect the organisation. In determining the audit universe, IAD has taken into consideration the current operational structure, functions, systems, processes and business activities of Kulim. 


In year 2017, the audit coverage was focused on high risk areas which were identified by leveraging the organisation’s risk management framework as well as IAD’s own risk assessment. It also covered management request as well as consulting activity which are in line with the Audit Charter.


The Group’s Internal Audit maintains a Quality Assurance and Improvement Programme (“QAIP”) and continuously monitors its overall effectiveness. In year 2017, periodic assessment to evaluate conformance with the International Standards for the Professional Practice of Internal Auditing (“Standards”) was conducted by the department.


The total cost incurred for the Internal Audit function at the Group’s Corporate Office level for the financial year ended 31 December 2017 was approximately RM1,886,000 (2016: RM2,140,000).