MSM Malaysia Holdings Berhad Annual Report 2019

• Presented and reviewed quarterly reports summarising the following at every quarterly meeting during the FY 2019: • The observations from the internal audit reports issued during the quarter. The AC gave direction to management on key matters requiring management’s special and immediate attention. The AC has reported to the Board on these key significant matters. • The progress of implementation of the recommendations from internal audit reports issued. • The progress of implementation of the MSM Group Annual Internal Audit Plan. • Considered major findings, key significant internal audit matters, outcome of any special reviews and investigations, including those arising from management and recommendation raised by AC Chairman and AC members and management’s response and follow-up actions thereto, and reported to the Board. • Reviewed the performance of the Chief Internal Auditor and competency of the internal audit functions to ensure that the internal audit team has the required expertise and professionalism to discharge its duties. Reviewing the External Audit Process • Held two private discussion sessions with external auditor, Messrs Pricewaterhousecoopers PLT (PwC) without management on 11 February 2019 and 13 August 2019. In these sessions, the matters discussed include the following: (i) Finance function in improvement of consolidating the account (ii) Transfer of MSM Perlis Sdn Bhd operation to Johor (iii) The implications of closing down MSM Perlis Sdn Bhd (iv) Sales of plantation land in Perlis (v) MSM Sugar Refinery (Johor) Sdn Bhd’s Plan • Reviewed the financial results prior to the approval by the Board and discussed the key matters highlighted by PwC. During the year, amongst matters discussed include the following: (i) Assessment of onerous contracts provision in respect of forward sales export contracts. (ii) Impairment assessment on Goodwill from Sugar Cluster (iii) Status of construction of the Johor Refinery (iv) Assessment of the Group Plantation operations in accordance with MFRS 5 (v) Recoverability of Trade Receivables above credit terms and credit limit assessment • Reviewed and approved the External Auditor’s Audit Plan and scope of work in August 2019. • PwC presented the MSM 2020 Group Audit Plan at the AC meeting held on 13 August 2019. During their presentation, PwC confirmed their independence as auditor. As included in the 2020 Group Audit Plan, PwC also highlighted to the AC (a) MSM’s 2020 focus areas: i) Risk of Management override of controls (in line with International Standard of Auditing requirement) ii) Recoverability of non-current assets (including Goodwill) iii) Recoverability of inventories and adequacy provision of onerous contracts iv) Risk on non-compliance of financial covenants attached to the construction of new sugar refinery v) Ensuring restructuring of CIMB long term loan is accounted for in accordance with MFRS 9 vi) Risk of inconsistency of practice and account treatment in MSM Sugar Refinery (Johor) Sdn Bhd 85 CORPORATE GOVERNANCE 07