Frontken Berhad Annual Report 2019

35 Frontken Corporation Berhad (651020-T) ANNUAL REPORT 2019 Statement On Risk Management And Internal Control (cont’d) INTERNAL AUDIT FUNCTION – ITS STRUCTURE AND SCOPE OF COVERAGE (cont’d) In-house internal audit coverage (only Taiwan operations) (cont’d) Business areas covered Transactions/activities covered by internal audit, addressing the key business risks therein Property, plant and equipment management Acquisition, custody, repairs and maintenance, disposal and insurance of assets Production management Inventory and production costing Quality control, product composition labelling and scrap management Sales and receipts management Logistics management, order management, invoicing, discounts, returns, collections, credit control and receivables management Purchases and payments management Requisition, procurement, acceptance and inspection, payment and supplier management Information technology management System development and program modification, application controls, input/output integrity Research and development management Blueprint control, R&D operations, custody of documentation and prototype manufacturing and product testing Computerised information processing system Segregation of functions, system development & programme management, programme and data access controls, file and equipment security, maintenance of hardware and software, system recovery and information flow security inspection The internal audit plan and a summary of the findings of the in-house internal auditor were shared with the Audit Committee of the Company for notation and comments, if any. For the financial year ended 31 December 2019, the Audit Committee of the Company as well as Board of AGTC reviewed the work of the internal audit functions, outsourced and in-house, as the case may be, their observations and recommendations in order to obtain assurance on the adequacy and operating effectiveness of the Group’s risk management and internal control system. The total cost incurred by the Group for the internal audit functions (both in-house and outsourced) for the financial year under review amounted to approximately RM214,000 (2018: RM225,000). External Auditors The external auditors, in the course of their statutory audit of the Group’s financial statements, reviewed the Group’s system of internal control to the extent of their planned reliance as laid out in their audit planning memorandum. Any significant deficiencies in internal controls identified during the audit, together with the improvement measures to strengthen internal controls, were reported in writing to the Audit Committee by the external auditors vide their presentation deck. In assisting the Board to assess the adequacy and operating effectiveness of the Group’s risk management and internal control system, the Audit Committee reviewed the observations raised by the internal and external auditors, as well as actions taken by Management to address the areas of concern for the financial year ended 31 December 2019. The Audit Committee reported to the Board the outcome of its engagement with the internal and external auditors concerning the adequacy and operating effectiveness of the Group’s system of risk management and internal control. BOARD’S COMMENTS ON THE ADEQUACY AND OPERATING EFFECTIVENESS OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM The Board, assisted by its Audit Committee, has reviewed the adequacy and operating effectiveness of the Group’s risk management and internal control system, and that relevant actions have been or were being taken, as the case may be, to remedy the internal control weaknesses identified from the review.