AUDIT COMMITTEE TERMS OF REFERENCE

MESB Berhad[Registration No. 199501008356(337554-D)]

 

AUDIT COMMITTEE TERMS OF REFERENCE

 1.   Composition

 1.1       The Audit Committee shall be appointed from amongst the Board and shall comprise no fewer than three (3) members, a majority of whom shall be independent directors and all members should be non-executive directors.

At least one (1) member must:

i.   be a member of the Malaysian Institute of Accountants (“MIA”) or possess such other qualifications and/or experience as approved by the Bursa Malaysia Securities Berhad (“Bursa Securities); or

ii.  if he is not a member of the MIA, he must have at least three years of working experiences and:

 a.  He must have passed the examination specified in Part I of the 1st Schedule of the Accountant Act 1967; or

b.   He must be a member of one of the Association of Accountants specified in Part II of the 1st Schedule of the Accountants Act, 1967.

or

iii.  fulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.

 1.2      No alternate director shall be appointed as a member of the Audit Committee.

1.3       No former key audit partner of the Company shall be appointed as a member of the Audit Committee before observing a cooling-off period of at least two (2) years since his/her ceased to be the audit partner.

1.4       In the event of any vacancy with the result that the number of members is reduced to below three, the vacancy shall be filled within three (3) months. Therefore a member of the Audit Committee who wishes to retire or resign should provide sufficient written notice to the Company so that a replacement may be appointed before he leaves.

1.5       No member of the Audit Committee shall be employed in an executive position in the Company, Group or its related corporations or otherwise have a relationship which in the opinion of the Board will interfere with the exercise of independent judgment in carrying out the functions of the Audit Committee.

The terms of office and performance of an Audit Committee and each of its members must be reviewed by the Nomination and Remuneration Committee annually to determine whether such Audit Committee and its members have carried out their duties in accordance with their terms of reference.

 

2.   Chairman

The Chairman, who shall be elected by the Audit Committee, shall be an independent director. In the even of the chairman’s absence, the meeting shall be chaired by an independent director.

The Chairman should engage on a continuous basis with Chairman of the Board, the Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”), Senior Management internal auditors and the external auditors in order to be kept informed of matters affecting the Group, such as the Group’s reporting process, internal controls, risk management and governance with the aim to ensure effectiveness and efficiency of the internal control system and the risk management framework.

The role of the Chairman is planning and conducting meetings, overseeing reporting to the Board, encouraging open discussion during meetings and developing and maintaining active on-going dialogue with CEO, CFO, Senior Management and both internal and external auditors.

3.   Secretary

The Company Secretary or his/her nominee 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 prior to each meeting.

The Secretary or his/her nominee shall also be responsible for attending, recording and keeping the minutes of meetings of the Audit Committee and circulating them to the Committee members. The Committee members may inspect the minutes of the AC Meeting at the Registered Office or such other place as may be determined by the AC.

4.   Meetings

The Audit Committee shall meet at least four (4) times in each financial year. The quorum for a meeting shall be two (2) members, provided that the majority of members present at the meeting shall be independent.

The Audit Committee may call for a meeting as and when required with reasonable notice as the Committee members deem necessary. The Committee members may participate in a meeting by means of conference telephone, conference videophone or any similar or other communications equipment by means of which all persons participating in the meeting can hear each other. Such participation in a meeting shall constitute presence in person at such meeting.

All decisions at such meeting shall be decided on a show of hands on a majority of votes and that the Chairman shall have the casting vote should a tie arise.

The CEO, CFO, internal auditors and/or external auditors may attend any meeting at the invitation of the Audit Committee and shall appear before the Audit Committee when required to do so by the Audit Committee.

The Chairman shall upon request of the internal auditors and/or external auditors, convene a meeting with the Audit Committee to consider any matter the internal auditors and external auditors believe shall be brought to the attention of the directors or shareholders.

At least twice a year and whenever deemed necessary, the Audit Committee shall meet with the external auditors without presence of Executive Director and the Management.

Any resolution in writing signed or approved by letter or telefax or other electronic means by majority of the members who are Independent Directors shall be as valid and effectual as if it had been passed at a meeting of the Audit Committee duly called and constituted, and may consist of several documents in the like form, each signed by one or more members of the Audit Committee.

5.   Rights and Authority

The Audit Committee shall:

(a)        have authority to investigate any matter within its terms of reference;

(b)        have the resources which are required to perform its duties;

(c)         have full and unrestricted access to any information pertaining to the Group;

(d)         have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity;

(e)        have the right to obtain independent professional or other advice at the Company’s expense;

(f)         have the right to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Group, whenever deemed necessary;

(g)        promptly report to Bursa Securities or such other name(s) as may be adopted by Bursa Securities, matters which have not been satisfactorily resolved by the Board of Directors resulting in a breach of the listing requirements; and

(h)        meet as and when required on a reasonable notice.

6.   Duties

       6.1  Risk Management & Internal Control

 i.   Review the adequacy of and recommend such measures to the Board on the effectiveness of the Group’s risk management and risk assurance process;

ii.   Evaluate the quality and effectiveness of the Group’s Internal Control system and management information systems, including compliance with applicable laws, rules, corporate governance requirements and guidelines;

iii.   Review  and  approve  the  statements  to  be  included  in  the  Annual  Report  concerning internal  controls and risk management; and

iv.   Recommend to the Board the Director’s Statement on Risk Management and Internal Control and any changes to the said Statement.

6.2  Financial Reporting

i.   Review the quarterly results and annual financial statements before recommending to the Board for approval and release to Bursa Securities, focusing particularly on:

        a.   any changes in or implementation of accounting policies and practices;

b.   significant or material adjustments with financial impact arising from the audit;

c.   significant unusual events or exceptional activities;

d.   financial decision-making with the presumptions of significant judgments;

e.   the going concern assumptions;

f.   the appropriateness of management’s selection of accounting policies and disclosures in compliance with approved accounting standards and other regulatory requirements;

g.   compliance with applicable financial reporting standards; and

h.   litigation and/or other matters that could affect the results material.

ii.  To propose best practices on disclosure in financial results and annual reports of the Company, to be in line with the recommendations set out in the Malaysian Code of Corporate Governance and other applicable laws, rules, directives and guidelines.

6.3  External Audit

 i.   To recommend the appointment or re-appointment of the external auditors and audit fee to your Board, after reviewing the suitability, resources, competency, independence of external auditors;

ii.   To review and assess the suitability and independence of the external, including reviewing the external auditor’s non-audit services and related fees;

iii.   To Make appropriate recommendations to  Board on matters of resignation, dismissal or cessation of office of the external auditors and secure the reason of such resignation, dismissal or cessation of office;

iv. To review and discuss the nature and scope of the external audit strategy and plan for the year;

v.   To review and discuss issues arising from the audit of the Company and Group, including management responses and the external auditor’s evaluation of the system of internal control and any other matters the external auditor may wish to discuss (in the absence of Management, if required);

vi.   To review the significant financial reporting issues and judgements made in connection with the preparation of the annual financial statements; and

vii.   To  review  and  discuss  with  the  external  auditors,  any  suspected  fraud  or  irregularity, or suspected infringement of any applicable law, rules or regulations, which  has  or  is  likely  to  have  a  material  impact  on  the  Company’s and Group’s operating  results or financial position, and Management’s response.

6.4 Internal Audit

 i.   To review and assess the adequacy of the scope, functions, competency, resources and authority of the internal audit function in carrying out its work;

ii.   To review the risk-based internal audit plans and programmes;

iii.    To  review with the internal audit on the assistance given by the Chief officers of the Group to the internal auditors, including any difficulties or disputes with Senior Management encountered during the audit;

iv.   To review and discuss with the internal auditors, their audit findings, recommendations made, Senior Management’s response to the audit findings and proposed action plans, including those issues arising during the course of audit;

v.   To review the major findings reported by the internal auditors and follow up on Senior Management’s implementation of the recommended actions; and

vi.   To annually assess performance of services provided by the internal audit function.

6.5  Related Party Transactions

 i.   To review and monitor related party transactions entered into by the Company and/or the Group and to determine if such transactions are undertaken on an arm’s length basis and normal commercial terms and on terms not more favourable to the related parties than those generally available to the public;

ii.   To ensure that the Directors report such transactions annually to shareholders via the annual report, and to review conflicts of interest that may arise within the Group including any transaction, procedure or course of conduct that raises questions of management integrity; and

iii.   To announce to Bursa Securities, if there is any related party transactions which exceed the Shareholder Mandate and provide full reason and detailed explanations.

6.6  Other Matters

 i.   To report to Bursa Securities, if the Audit Committee views that a matter resulting in a breach of the Main Market Listing Requirements of Bursa Securities reported by the Audit Committee to the Board has not been satisfactorily resolved by the Board;

ii.   To highlight such matters as the Audit Committee considers appropriate or as defined by the Board from time to time;

iii.   Direct and where appropriate supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts;

iv.   To review the Company’s and the Group’s procedures for detecting fraud; and

v.   To cultivate the awareness of the employees and ensure the whistleblower could report directly to the Audit Committee on any possible wrongdoings or fraud detected.

6.7  Reporting Responsibilities

The Audit Committee Chairman shall report formally to the Board on its proceedings after each meeting on  all   matters   within   its   duties   and   responsibilities.

The  Audit Committee   shall   make   whatever recommendations  to  the  Board  it  deems  appropriate  on  any  area  within  its  remit  where  action or improvement is needed.

The  Audit Committee  shall  compile  a  report  to  shareholders  on  its  activities  to  be  included  in  the Company’s  Annual  Report.  The  Annual  Report  should  explain  to  shareholders  how,  if  the  auditor provides non-audit services, auditor objectivity and independence is safeguarded.