CAHYA MATA SARAWAK ANNUAL REPORT 2016

A N N U A L R E P O R T 2 0 1 6 Section 06 Governance 69 Cahya Mata Sarawak Berhad b) Reviewed the adequacy and effectiveness of appropriate actions taken by Management in respect of the audit findings and the Committee’s recommendations through review of the status of implementation reports tabled by Group Internal Auditor at each meeting; c) Reviewed the effectiveness of the internal audit function through the following ways: • Ensured the Internal Audit function is in conformance with The Institute of Internal Auditors’ Definition of Internal Auditing, Code of Ethics and the International Standards for Professional Practice of Internal Auditing in achieving an acceptable level of auditing performance; • Appraised the annual performance of the internal audit staff and set and/or review the Key Performance Indicators and Management Performance Appraisal of the Group Internal Auditor to ensure that the quality of team members’ performances are maintained and/or improved; • Reviewed results of internal self-assessment performed by the internal audit function and Management’s feedback on the quality of internal audit services rendered to ensure quality of internal audit work; • Assessed the competency of the internal audit staff and adequacy of resources to achieve the scope as outlined in the annual audit plan; • Reviewed and approved annual training budget to equip the internal audit team with an appropriate level of skills and knowledge to carry out the function effectively; • Ensured that an external Quality Assessment Review of the internal audit function is conducted at least once every five (5) years; and • Reviewed and approved the charter and policies and procedures manual of the Group Internal Audit Department. d) Discussed problems and reservations arising from internal audits and any matters in the absence of Management or the Executive Directors of the Company. The Committee held two (2) meetings with the Group Internal Auditor on 29 February 2016 and 30 August 2016 without the presence of Management to discuss issues and/or any other observations that he may have during the internal audit and the extent of cooperation provided by the Group and its officers. External Audit In ensuring the credibility and reliability of the Company’s financial statements, the Committee: a) Conducted a formal assessment of the external auditor’s performance, independence and objectivity to assess the suitability and independence of the external auditors before recommending to the Board their reappointment as external auditor of the Group. The assessment covered: • Suitability of the firm; • Quality process/performance (audit judgement, risks including fraud risk assessment, reporting process, understanding of key issues and transparency in communication); • Audit team competency (Senior personnel involvement and staff expertise); • Independence and objectivity (compliance to By-Laws on professional independence of Malaysian Institute of Accountants, partner rotation and non-audit services rendered); • Audit scope and planning; • Fees (compared to organisations of similar size, fees in relation to overall external audit firm’s income and limit of non-audit fee size); and • Communications (timeliness and transparency). b) Based on the satisfactory assessment of the suitability of services rendered by the external auditor and the review of the reasonableness of the proposed audit fee (benchmarked to audit fees incurred by other organisations of similar size), recommended to the Board the audit fee payable and their re-appointment as external auditors for the financial year ended 31 December 2017. The reviewed fee is also deemed sufficient to enable a quality audit to be conducted; c) Ensured full compliance with the policy where the cumulative non-audit fee incurred in excess of 50% of the preceding year’s approved audit fee for the Group would require the Committee’s prior approval. In this regard, the Committee had deliberated, during the year, on the appointment of two (2) associate companies affiliated to the external auditor for consultancy services to subsidiary companies of the Group. The Committee considered and was satisfied that the said associate companies affiliated to the external auditor had the relevant expertise and knowledge and recommended their appointment to the Board; d) Reviewed the audit engagement letter on the audit scope, timelines and how key risks (e.g. fraud risk) are factored into their plan including written assurance of independence and objectivity to give assurance that the financial statements are free of material misstatement, whether caused by fraud or error; Group Audit Committee Report