The objective of the Audit Committee is to assist the Board of Directors in meeting its responsibilities for the oversight of:-
the financial reporting process;
the system of Risk Management and Internal Control;
the internal and external audit process; and
the conflict of interest situations and related party transactions.
In addition, the Audit Committee shall:-
a) Oversee and appraise the quality of the audits conducted both by the Company's internal and external auditors;
b) Maintain open lines of communication between the Board of Directors, the internal auditors and the external auditors for the exchange of views and information, as well as to confirm their respective authority and responsibilities; and
c) Determine the adequacy of the Group's administrative, operating and accounting controls.
The Audit Committee shall be appointed by the Directors from among their number (pursuant to a resolution of the Board of Directors) which fulfills the following requirements:-
a) the Audit Committee must be composed of no fewer than 3 members;
b) all members of the Audit Committee must be non-executive directors;
c) a majority of the Audit Committee must be independent directors;
d) all members of the Audit Committee should be financially literate and at least one member of the Audit Committee:-
i) must be a member of the Malaysian Institute of Accountants; or
ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years’ working experience and:-
he must have passed the examinations specified in Part I of the First Schedule of the Accountants Act, 1967; or
he must be a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act, 1967.
iii) fulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad and/or other relevant authorities from time to time.
e) No alternate Director of the Board shall be appointed as a member of the Audit Committee.
The members of the Audit Committee shall elect a chairman amongst themselves who shall be an independent director. In the absence of the Chairman, the members present shall elect a Chairman for the meeting from amongst themselves.
In the event of any vacancy in the Audit Committee (including Chairman) resulting in the non-compliance of item 2 (a) to (d) above, the Board shall upon the recommendation of the Nomination Committee fill the vacancy within 3 months of that event.
The Board of Directors must via Nomination Committee review the term of office and performance of the Audit Committee and each of its members annually to determine whether the Audit Committee and members have carried out their duties in accordance with its Terms of Reference.
The functions of the Audit Committee are as follows:-
a) To review the following and report the same to the Board of Directors:-
i) with the external auditors, the audit plan;
ii) with the external auditors, his evaluation of the system of internal controls;
iii) with the external auditors, his audit report;
iv) the assistance given by the Company’s employees to the external auditors; and
v) any related party transaction 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 and the framework establish or to be established.
b) To evaluate, supervise and monitor any conflict of interest or potential conflict of interest situation that may arise;
c) To nominate and recommend the appointment or re-appointment of the external auditors and any issues regarding resignation or dismissal of the external auditors and to review the letter of resignation from the external auditors, if applicable and report the same to the Board. In considering the appointment or re-appointment of the external auditors; to consider among others:-
(i) the adequacy of the experience and resources of the accounting firm;
(ii) the persons assigned to the audit;
(iii) the accounting firm’s audit engagements;
(iv) the size and complexity of the Group being audited;
(v) the number and experience of supervisory and professional staff assigned to the particular audit;
The Audit Committee is to also consider the performance of the external auditors and its independence inter-alia:
- the external auditors’ ability to meet deadlines in providing services and responding to issues in a timely manner as contemplated in the external audit plan;
- the nature of the non-audit services provided by the external auditors and fees paid for such services relative to the audit fee; and
- whether there are safeguards in place to ensure that there is no threat to the objectivity and independence of the audit arising from the provision of non-audit services or tenure of the external auditors.
d) To discuss with the external auditors before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved in the audit;
e) To review the quarterly and year-end financial statements of the Company, focusing particularly on:-
- Any changes in or implementation of major accounting policies and practices;
- Significant matters highlighted including financial reporting issues, significant judgements made by management, significant and unusual events or transactions and how these matters are being addressed; The going concern assumption; and
- Compliance with accounting standards and other legal requirements;.
f) To discuss problems and reservations arising from the interim and final audits, and any matter the external and internal auditors may wish to discuss (in the absence of management, where necessary);
g) To review the external auditors’ management letter and management’s response;
h) To establish policies and procedures to assess the suitability and independence of the external auditors;
i) To review the competency and performance of the external auditors and whether there is any reason, supported by ground, to believe that the external auditors are not suitable for re-appointment;
j) To do the following, in relation to the internal audit function:-
- Review the adequacy of the scope, functions, 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, processes, the results of the internal audit programme, processes or investigation undertaken and where necessary, ensure that appropriate actions are taken on the recommendations of the internal auditors;
- Review any appraisal or assessment of the performance of members of the internal audit function;
- Approve any appointment or termination of the internal auditors;
- Take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning;
- Investigate or cause to be investigated any activity within its Terms of Reference; and
- To have explicit authority over the resources such as professional advice and full access to information to investigate certain matters.
k) To discuss and review the major findings of any internal investigations and the management’s response;
l) To ensure the internal audit function is independent of the activities it audits and the head of internal audit reports directly to the Audit Committee. The head of internal audit should have relevant qualifications and be responsible for providing assurance to the Audit Committee that the internal controls are operating effectively. The head of internal audit will be responsible for the regular review and/or appraisal of the effectiveness of the risk management, internal control, and governance processes within the Company (in the absence of management, where necessary).
m) To discuss the contracts and nature for the provision of non-audit services which can be entered into by the Group with the external auditors or its affiliates and procedures that must be followed to ensure that the objectivity and independence of the external auditors are not impaired. The contracts cannot be entered into should include:-
i) Strategic decision;
ii) Internal audit; and
iii) Policy and standard operating procedures documentation.
In the event that the non-audit fees paid to the external auditors, or a firm or corporation affiliated to the external auditors’ firm are significant which constitute 50% of the total amount of audit fees paid to the external auditors, the Company is required to state the details on the nature of non-audit services-rendered in the Audit Committee report.
n) To review the adequacy and effectiveness of the risk management process to identify key organisational risks and the systems/processes in place to monitor and manage risks prepared by the Internal Auditors.
o) To review with the external auditors the statement of Internal Control for inclusion in the Annual Report; and
p) To consider other areas as defined by the Board or as may be prescribed by Bursa Malaysia Securities Berhad or any other relevant authority from time to time.
The Audit Committee shall, whenever necessary and reasonable for the Company to perform of its duties, in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:-
a) have explicit authority to investigate any matter within its terms of reference;
b) have the resources which it needs to perform its duties;
c) have full and unrestricted access to any information, documents and resources pertaining to the Company and Group in the course of performing its duties;
d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity;
e) be able to obtain independent professional or other advice as and when necessary;
f) be able to convene meetings with the external auditors, the persons carrying out the internal audit function or both, excluding the attendance of other Directors and employees of the Company whenever deemed necessary; and
g) be able to make relevant reports when necessary to the relevant authorities if any breach of the rules, regulations and/or Listing Requirements of Bursa Malaysia Securities Berhad has occurred and has not been satisfactorily resolved.
The chairman of the Audit Committee should engage on a continuous basis with senior management, such as the chairman, the chief executive officer, the financial controller, the head of internal audit and the external auditors in order to be kept informed of matters affecting the Company.
The Audit Committee shall meet at least 4 times a year and such additional meetings as the Chairman shall decide in order to fulfill its duties. However, at least twice a year the Audit Committee shall meet with the internal and external auditors without any executive Board members and management present.
In addition, the Chairman may call a meeting of the Audit Committee at the request of any committee member, the Company’s Chief Executive, or the internal or external auditors.
The Company Secretary or his/her representative or other appropriate senior officer shall act as secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it, supported by explanatory documentation to committee members prior to each meeting.
The Company Secretary or his/her representative or other appropriate senior officer shall also be in attendance at each Audit Committee meeting and responsible for keeping the minutes of meetings of the Audit Committee, and circulating them to committee members and to the other members of the Board of Directors.
The quorum for a meeting shall be 2 members of the Audit Committee who are both independent directors.
By invitation of the Audit Committee, the Group Chief Executive Officer and other appropriate officer(s) may be invited to attend the Audit Committee, where their presence are considered appropriate as determined by the Audit Committee chairman.
The Audit Committee may deal with matters by way of circular reports and resolutions in lieu of convening a formal meeting. A resolution in writing signed by all members in lieu of convening a formal meeting shall be as valid and effectual as it had been passed at a meeting of the Audit Committee duly convened and held. Any such resolution may consist of several documents in like form, each signed by one or more members.
6. REVISION OF THE TERMS OF REFERENCE
This Term of Reference shall be reviewed annually by the Audit Committee.
Any revision or amendment to this Terms of Reference, as proposed by the Audit Committee or any third party, shall first be presented to the Board for its approval.
Upon the Board’s approval, the said revision or amendment shall form part of this Terms of Reference and this Terms of Reference shall be considered duly revised or amended.
This Terms of Reference is reviewed and approved by the Board of Directors on 16 August 2016.