INTERNAL AUDIT FUNCTION The internal audit function of the Company was carried out in house by the GIA, which reports functionally to the BAC in discharging its duties. GIA conducted scheduled audits independently to ensure there were effective risk monitoring, internal controls, governance processes and compliance procedures to provide the level of assurance required by the Board. GIA also conducted additional assurance assignments and/or special reviews upon request by the Management or BAC. In the conduct of their audits, GIA placed emphasis on a risk-based auditing where the focus was given on higher risk areas. Audit reviews the adequacy of the identified mitigations and evaluates the effectiveness and efficiency of the controls to mitigate the risk events. The key in solving lapses in internal control was the submission of audit findings, recommendations on audit issues and execution of the Agreed Corrective Actions (“ACA”) which were encompassed in the audit reports. GIA monitored the status of implementation of these ACA through the Quarterly Audit Status Reports, of which, the ACA were recorded and analysed. The consolidated reports were submitted and presented to the MC and BAC for deliberation and endorsement on a half-yearly basis. Such regular monitoring was essential to ensure the integrity and effectiveness of the Group’s system of internal control. GIA submitted their findings and recommendations on audit issues to the MC for executive review. Subsequently, the reports together with deliberations by the MC were tabled at the BAC Meetings for decisions. At the Board Meetings, Chairman of the BAC highlighted the key audit issues and overall decisions and resolutions made during the BAC Meetings to the Board Members. During the financial year, GIA had carried out audits according to the internal audit plan approved by the BAC. The total cost incurred in discharging the internal audit functions during the financial year ended 31 December 2015 was RM5.61 million. The conduct of internal audit work was governed by the Internal Audit Charter and the Internal Audit Charter Memorandum. In addition, the internal audit work also conforms to the Institute of Internal Auditor’s International Standards for the Professional Practice of Internal Auditing. STATEMENT ON RRPTs The BAC has reviewed the internal guidelines pertaining to the governance of Related Party Transactions (“RPTs”) and RRPTs as outlined on pages 110 to 111 of this Annual Report and is of the view that the said guidelines are sufficient to ensure that the RPTs and RRPTs are fair, reasonable and in the best interest of the Group. The BAC was satisfied that the Group has put in place adequate procedures and processes to monitor, track and identify RPTs and RRPTs in a timely and orderly manner to ensure that the RPTs and RRPTs were, at all times, carried out on normal commercial terms and consistent with the Group’s practices and were not to the detriment of the minority shareholders. The procedures and processes will be reviewed from time to time based on recommendations from the internal audit team of the Company. The GIA has also conducted an audit on RPTs and RRPTs as at 31 December 2015 and reviewed the internal control process and records of RPTs and RRPTs within the affected scope to verify the procedures and relevant approvals have been obtained. The established procedures were adequate and RPTs and RRPTs were fairly concluded on prevailing market rates/prices, normal commercial terms/conditions, applicable industry norms and not detrimental to the interests of MISC and its minority shareholders. The audit report was tabled to the BAC on 3 February 2016. This report is made in accordance with the resolution of the Board of Directors duly passed on 23 February 2016. MISC BERHAD Annual Report 2015 127
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