BIMB Integrated Annual Report 2017

• Internal Audit The internal audit function of BHB and its subsidiaries (save for Takaful Malaysia) is carried out by the Internal Audit Division of Bank Islam. For Takaful Malaysia, the internal audit function is carried out by its own independent internal audit department. The Internal Audit assesses compliance with policies and procedures and the effectiveness of the Group’s internal control systems. The Internal Audit undertakes regular reviews of BHB and its subsidiaries’ operations and business processes. It examines and evaluates the adequacy and efficiency of financial and operating controls and highlights significant risks and non-compliance. Where applicable, the Internal Audit will provide recommendations to improve the management of risks, control and governance processes. The AEC regularly reviews the status of rectification actions on the findings or recommendations by the internal auditors. Further details on the internal audit activities are provided in BHB’s AEC report. Internal audit is performed on all key divisions in BHB Group, providing the respective AEC with an independent assurance on the operational, financial, compliance and risk related activities within the Group. The risk-based internal audit plan is approved by the AEC of the key operating subsidiaries on annual basis. All internal audit observations are highlighted in the internal audit reports and reviewed by the AEC. • Shariah Advisory It is a fundamental requirement of an Islamic financial institution that its entire business practices and operations are based on Shariah rules and principles. Islamic finance derives its value proposition from the application of Shariah contracts in financial transactions that provide for different risks and return profiles. Adherence to Shariah principles under such distinct contracts preserves the validity and sanctity of any Islamic financial transactions. BHB is committed to upholding these principles via strict observance of the Shariah Governance Framework outlined by Bank Negara Malaysia (“ BNM ”). The Shariah advisory function of BHB and its subsidiaries (save for Takaful Malaysia and BIMB Securities) is carried out by the Shariah Supervisory Council (“ SSC ”) of Bank Islam. For Takaful Malaysia and BIMB Securities, the Shariah advisory function is carried out by its own independent Shariah committee. One of the key responsibilities of the SSC/Shariah committees is to advise its respective Board on Shariah matters in relation to business operations, compliance with Shariah principles at all times, auditing the operational aspect of BHB and endorsing the zakat computation and distribution. OTHER KEY ELEMENTS OF INTERNAL CONTROL The other key elements of the internal control systems are described below: • Board Meetings At a minimum, the Board meets six (6) times a year and has a formal agenda on matters for discussion. The CEO leads the presentation of board papers and provides explanation on pertinent issues. A thorough deliberation and discussion by the Board is a prerequisite before arriving at any decision. In addition, the Board is kept updated on the Group’s activities and operations on a timely and regular basis. • Group Organisation Structure The Board has established an organisation structure with clearly defined lines of responsibilities, authority limits, and accountability aligned to business and operations requirements which support the maintenance of a strong control environment. 143 Overview Value Creation Accountability Financial Statements Sustainability Performance Data Shareholders Information 21 st AGM Information Management Discussion & Analysis