Audit Committee Terms of Reference

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Terms of Reference of Audit Committee

Objectives of the Audit Committee

1. Provides assistance to the Board in discharging its oversight responsibilities and fulfilling its fiduciary responsibilities by:

  • Reviewing the integrity and adequacy of the Company’s and Group’s accounting policies and internal controls,
  • Financial reporting practices and policies.
  • Risk management and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

2. Reinforce the independence of the external auditors, assure that they will have free rein in the audit process and provide a line of communication between the Board and the external auditors

3. Enhance the internal audit function by increasing the objectivity and independence of the internal auditors and provide a forum for discussion that is independent of the management. The quality of the audits conducted by the internal and external auditors of the Company shall be reviewed by the Committee.

4. Encourage high standards of corporate disclosure and transparency and the Committee will endeavour to adopt certain practices aimed at maintaining appropriate standards of corporate responsibilities, integrity and accountability to the Company’s shareholders.

Membership

1. The Audit Committee shall consist a minimum of three members, of which a majority must be independent directors. All members of the Audit Committee should be non-executive directors.

2. The Chairman of the Audit Committee shall be an independent non-executive director.

3. There should be at least 1 (one) member:

  • Who is a member of the Malaysian Institute of Accountants; or
  • Should have 3 years working experience and passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act, 1967; or
  • Is a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or
  • Must have a degree/master/doctorate in accounting or finance; or
  • Have at least 7 years’ experience being a chief financial officer of a corporation; or
  • Having the function of being primarily responsible for the management of the financial affairs of a corporation.

4. Vacancies in the Audit Committee must be filled within 3 (three) months. The Nomination and Remuneration Committee will review and recommend to the Boards for approval, another director to fill up such vacancies.

5. The terms of office and performance of the Audit Committee must be reviewed by the Board once every 3 (three) years.

6. Alternate directors are not eligible to become members of the Audit Committee.

7. All members of the Audit Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company.

8. Members of the Audit Committee may relinquish their membership in the Committee with prior written notice to the Company Secretary and may continue to serve as a Director of the Company.

9. All Committee Members including the Chairman should be persons of good social standing and possess relevant skills and good track record in the corporate or business field.

Functions of the Audit Committee

Corporate Financial Reporting

1. To review the quarterly and year end financial statements of the Company and the Group before recommendation to the Board for approval, focusing particularly on

  • Any significant change in accounting policies and practice
  • Significant adjustments arising from the audit
  • The going concern assumption
  • Compliance with accounting standards and legal requirements

2. Review with management and the external auditors the results of the audit, including any difficulties encountered.

Risk Management

1. Assist the Board of Directors in ensuring that there exist adequate and effective systems of governance, control and risk management.

2. Assist the Board of Directors in identifying the principal risks in the achievement of the Company’s objectives and ensuring the implementation of appropriate systems to manage these risks.

3. Review and recommend:

  • The risk management policy,
  • Procedures and risk management framework for the approval and acknowledgement of the Board;
  • Provide guidance on the overall risk strategy and directives for implementation;
  • Ensure that the principles and requirements of managing risk are consistently adopted throughout the Group.

4. Review periodically the risk management framework and risk profile and to be satisfied that the methodology employed allows the identification, analysis, assessment, monitoring and communication of risks in a regular and timely manner that will allow the Group to minimize losses and maximize opportunities.

5. Commission, where required, special projects to investigate, develop or report on specific aspects of the risk management processes of the Company.

Internal Control

1. To determine that established policies, procedures and guidelines, operating and internal accounting controls are:

  • Adequate, functioning, and effective
  • Reduce the risk of unreliable financial reporting
  • Protect the Company’s assets from misappropriation
  • Encourage legal and regulatory compliance in promoting efficiency and proper conduct of business of the Company and other companies in the TEB Group.

2. Review with the internal and external auditors their evaluation of the systems and standards of the internal control and any comments they may have with respect to improving control.

3. Monitor the Group’s operations via appropriate internal audit reviews, to ascertain if adequate attention is given to attributes of efficiency, effectiveness and economy.

4. Assist the Board of Directors in setting appropriate policies on internal control system and ensure that the system is functioning adequately and that its integrity is maintained in managing the risks of the Company and companies within the Group.

Internal Audit

1. Review the adequacy of the scope, functions and resources of the internal audit function, and that it has the necessary authority to carry out its work independently and objectively.

2. Review and approve the Annual internal audit plan and ensure adequate risk and governance coverage and results of the internal audit process and ensure that appropriate action is taken on the recommendations of the internal audit function.

3. Review the extent to which internal audit recommendations are implemented and the timeliness of responses received.

4. Review any appraisal or assessment of the performance of members of the internal audit function and their overall performance and effectiveness to ensure consistency with the approved plans, the internal audit plans and relevant professional standards.

5. Approve any appointment or termination of senior staff members of the internal audit function.

6. To request that the Audit Committee be informed of any resignation of Internal Audit staff and if need be, to provide the resigning staff the opportunity to discuss reasons for his resignation.

7. To consider the major findings of internal investigations, Management’s response thereon and direct Management to take appropriate action.

External Audit

1. To recommend to the Board on the appointment and annual reappointment of the external auditors and their audit fee after taking into consideration the independence, competency, effectiveness and objectivity of the external auditors and the cost effectiveness of the audit and any questions of their resignation or dismissal.

2. To discuss with the external auditors before the audit commences, the nature and scope of the audit, and ensure coordination where more than one audit firm is involved.

3. To discuss problems and reservations arising from the interim and final audits, and any other matters the auditors may wish to discuss (in the absence of Management where necessary).

4. Review the external auditors’ audit report, management letter and responses thereto.

5. Monitor developments in the external audit field and standards issued by professional bodies and other regulatory authorities.

6. Oversee external audit arrangements in place at the various controlled entities or subsidiaries.

Others

1. To act as independent and objective party in reviewing the financial information of the Company and companies in the Group presented by Management.

2. Review the assistance and co-operation given by the Company and its Group’s officers to the external and internal auditors.

3. To consider any related party transactions and conflict of interest situations that may arise within the Company or Group including any transaction procedure or course of conduct that raises question of management integrity.

4. Avail any external and internal auditors a private, confidential audience at any time they desire and request it through the Chairman of the Audit Committee, with or without the prior knowledge of the Management.

5. Examine and commission appropriate investigation on instances and matters, including disclosures from whistle blower that may have compromised the principles of corporate govenance and the Group’s code of conduct or ethics policy.

6. To consider other matters as defined by the Board.

Power of the Audit Committee

To enhance the effectiveness of the Audit Committee in the discharge of its duties, the Audit Committee will have the following rights:-

  • Authority to investigate any matter within its Terms of Reference and to appoint such investigator(s), as appropriate.
  • To resources that are required to perform its duties.
  • Full, free and unrestricted access to any information, records, properties and personnel of the Company and other companies in the Group.
  • Have direct communication with the external auditors and head of internal audit department/function.
  • To obtain external professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.
  • The attendance of any particular Audit Committee meeting by other directors and employees shall be at the Audit Committee’s discretion; and must be specific to the relevant meeting.
  • To convene meetings with the external auditors without executive board member(s) being present, at least twice a year.

Frequency and Attendance at Audit Committee Meetings

1. The Audit Committee shall convene meetings as and when required. The quorum shall comprise a majority of independent directors.

2. Recommendations of the Committee are submitted to the Board for approval.

3. A resolution in writing signed and approved by all the Committee members who may at the time be present in Malaysia and who are sufficient to form a quorum, shall be valid and effectual as if it had been passed at a meeting of the Committee duly called and constituted. All such resolution shall be forwarded or otherwise delivered to the Secretary without delay and shall be recorded by them in the Company’s Minute Book. Any such resolution may consist of several documents in like form each signed by one or more Committee members.

4. A meeting of the Audit Committee may be held by means of telephone, videoconference or telephone conference or other telecommunication facilities, which permits all persons participating in the meeting to communicate with each other. A person so participating shall be deemed to be present in person at such meeting and shall be counted in a quorum and be entitled to vote.

5. Minutes of each meeting should be kept and distributed to each member of the Committee. The Secretary to the Committee should be the Company Secretary.

6. The Head of Finance (or a person of similar capacity), Head of Internal Audit and a representative of the external auditors shall normally be entitled to attend any meeting of the Committee and to make known their views on any matter under consideration by the Committee, or which in their opinion, should be brought to the Committee’s attention.

7. Upon the request of the auditor(s), the Committee Chairman shall also convene a meeting of the Committee to consider any matter the auditor(s) believes should be brought to the attention of the Board or the shareholders.

Audit Committee Report

The Audit Committee must publish its report in the Company’s Annual Report and shall include therein:

1. Membership of the Audit Committee of which the minimum details are specified in the Listing Requirements.

2. The Terms of Reference of the Audit Committee.

3. The number of Audit Committee meetings and details of attendance of each Audit Committee members.

4. Summary of the activities of the Audit Committee for the year.

5. Disclosure of the existence of an internal audit function and its activities, and where such a function does not exist, it should be explained what mechanism was in place for the Audit Committee to discharge its functions effectively.

6. To ensure that the Board of Directors make the following additional statement in the Company’s Annual Report:

  • A statement explaining the Board of Directors’ responsibility for preparing the annual audited accounts; and
  • A statement about the state of internal controls of the Company as a group (after the same is reviewed by the external auditors with regard to the state of internal controls and the results thereof reported.)

Reporting of Breaches

The Audit Committee must promptly report any matter to the Bursa Malaysia Securities Berhad, if in its view such matter has not been satisfactorily resolved by the Board of Directors resulting in a breach of Listing Requirements.

Support

The Company Secretary shall provide the necessary support to enable members of the Audit Committee to discharge their functions effectively.

Position Descriptions

1. CHAIRMAN OF THE AUDIT COMMITTEE

The following are the main duties and responsibilities of the Committee Chairman.

  • Assists the Committee fulfil the goals it sets by assigning specific tasks to members of the Committee and identifies guidelines for the conduct of the members and ensures that each member is making a significant contribution.
  • Looks to the Company Secretary for guidance to the Committee on what their responsibilities are under the rules and regulations to which they are subject to and how those responsibilities should be discharged. The compliance advice should extend to embrace all laws and regulations and not merely the routine filing requirements and other administrative requirements of the Companies Act, 1965.
  • Provides a reasonable time for discussion at the meeting. Organises and presents the agenda for regular or special committee meetings based on input from members and ensures that all relevant issues are on the agenda. In addition, the Chairman should encourage a healthy discussion on the issues brought before the Committee
  • Provides leadership to the Committee and ensures proper flow of information to the Committee, reviewing the adequacy and timing of documentation.
  • Secures good corporate governance and ensures that members look beyond their Committee function and accept their full share of responsibilities of governance materials in support of Management’s proposals.
  • Manages the processes ad working of the Committee and ensures that the Committee discharges its responsibilities in accordance with the Terms of Reference. Appropriate procedures may involve the Committee meeting on a regular basis without the presence of management.
  • Ensures that consensus is reached on every Committee resolution and where considered necessary, call for a vote and to ensure that it is the will of the majority that prevails. Dissenting opinions should be captured.
  • Engages on a continuous basis with senior management, such as the Chairman, Chief Executive Officer, the Chief Financial Officer, the head of Internal Audit and the external Auditors in order to be kept informed of matters affecting the Company.

2. AUDIT COMMITTEE MEMBERS

Each Committee member is expected to:

  • Provide individual external independent opinions to the fact-finding, analysis and decision making process of the Committee, based on their experience and knowledge.
  • Consider viewpoints from the other Committee members; make decisions and recommendation for the best interest of the Company and the Group collectively.
  • Keep abreast of the latest corporate governance guidelines and best practices in relation to the Audit Committee and the Board as a whole.
  • Continuously seek out Best Practice in terms of the processes utilised by the Audit Committee, following which these should be discussed with the rest of the Committee for possible adoption.

Revision of the Terms of Reference

1. Any revision or amendment to the Terms of Reference, as proposed by the Committee, shall first be presented to the Board for its approval.

2. 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.