MISC Annual Report 2019

BARC meetings together with the tentative agendas are scheduled in advance of any new financial year to allow the BARC members to plan ahead and incorporate the year’s meetings into their respective schedules. The agenda and meeting papers are distributed to the BARC members via a secured collaborative software, which eases the process of distribution of meeting papers and minimises leakage of sensitive information, as well as enabling the Directors to have access to the papers electronically, anytime and anywhere. All proceedings of the BARC meetings are duly recorded in the minutes and are properly kept by the Company Secretary. Summary of the BARC’S work in respect of FY2019 Appended below is a summary of the BARC’s work in respect of the financial year under review, in discharging its functions and duties: Financial Reporting • Reviewed the quarterly results for announcements to Bursa Securities, focusing on compliance with the Malaysian Financial Reporting Standards (MFRS), International Financial Reporting Standards (IFRS), the MMLR and other relevant regulatory requirements, before recommending the same for approval by the Board. • Reviewed the audited financial statements of the Company prior to submission to the Board for approval, upon being satisfied that the audited financial statements were drawn up in accordance with the MFRS, IFRS and provisions of the Companies Act 2016 in Malaysia. The abovementioned reviews were conducted together with the President/CEO and Vice President, Finance. Risk Management and Internal Controls • Reviewed and endorsed the MISC Group Risk Profile for FY2019, including the Financial Risk Appetite for MISC Group. • Reviewed the adequacy and effectiveness of the MISC Group Risk Management Framework and the on-going activities for identifying, evaluating, monitoring and mitigating risks. • Reviewed the proposed revision to MISC’s Limits of Authority Manual. • Reviewed the proposed adoption of Enhanced PETRONAS Risk Policy. • Discussed the emerging risks updates for MISC Group. • Received and reviewed reports on key strategic and operational risk issues arising from quarterly Risk Management Committee (RMC) meetings, including identification of the risk appetite at the enterprise level and review of the mitigation plans to address the said risks. External Audit FY2019 Key Audit Matters (KAM) addressed by the BARC KAM Matters Considered BARC Comments Impairment of non-current assets • The Group’s assets under review included ships, right of use assets of in-chartered ships, offshore floating assets and other property, plant and equipment that had indication of impairment and goodwill. • Management has carried out impairment review on its assets based on value-in-use (VIU) analysis and market values by engaging independent ship valuers. The BARC concurred with Management’s assessment on the impairment of assets. Material adjudications / arbitrations • Recoverability of existing trade receivables and sufficiency of provision for claims for material adjudication/arbitrations involving the Group. The BARC concurred with Management’s assessment on the recoverability of the trade receivables and sufficiency of provision for claims. Recognition of revenue and cost for construction and marine projects • A significant portion of the Group’s revenues and profits are derived from long-term construction and marine projects which span more than one accounting period. • The Group uses the percentage-of-completion method in accounting for these long-term contracts. • Management applies significant judgement and estimation in determining the stage of physical completion in respect of heavy engineering and marine projects, and in estimating total project costs. The BARC concurred with Management’s assessment on the percentage-of-completion of projects and estimated total project costs. For more information on the KAM, please refer to the Independent Auditors’ Report on pages 374 to 381 of this Annual Report. • Reviewed the results and issues arising from the External Auditors’ audit, including the Key Audit Matters and the resolution of issues highlighted in their report to the BARC and Management’s responses thereto. • The BARC had two private meetings with the External Auditors without the presence of Management during the year under review (i.e. on 18 February 2019 and 7 November 2019) to discuss any matters the External Auditors may wish to present and to ensure that there were no restrictions in the scope and discharge of their audit activities. • Reviewed and approved the External Auditors’ terms of engagement, audit plan, nature, scope and proposed fees for FY2019. • Reviewed the Policy on the Assessment of External Auditors and Provision of Non-Audit Services by External Auditors, which is now renamed to the Policy on External Auditors. • Reviewed and recommended the External Auditors’ re-appointment to the Board to be proposed for shareholders’ approval at the last AGM. • Reviewed and endorsed the Group’s FY2019 Enterprise Risk Management Risk Register emanating from the annual planning cycle and ensured that appropriate systems and processes are in place to effectively monitor and manage the identified risks. • Reviewed the Statement on Risk Management and Internal Control (SORMIC) for inclusion in the Company’s 2019 Annual Report pursuant to Paragraph 15.23 and Part II, Practice Note 9 of the MMLR. • Reviewed the Cyber Security risk assessment findings and recommendations/action plans. Internal Audit • Reviewed internal audit reports issued by GIA based on the approved Annual Internal Audit Plan (AIAP) and ensured that appropriate agreed corrective actions are taken by the Management on the gaps in controls as identified by GIA. • Reviewed and approved GIA’s AIAP for the financial year ending 31 December 2020 as guided by the approved Enhanced Risk Based Internal Audit Framework of MISC in order to ensure adequacy of coverage on auditable entities and resources allocated. • Reviewed the responses and action plans provided by Management on the deliberated audit reports. • Reviewed the adequacy and effectiveness of agreed corrective actions taken by Management on all significant and secondary issues raised in the audit reports. • Reviewed the adequacy of resources and competencies of GIA’s staff to execute the audit plan. • Discussed the proposed appointment of a new Head of GIA. • Conducted half-yearly and yearly assessments on the performance of GIA. • Reviewed the minutes of meetings of the Board Audit and Risk Committee of Malaysia Marine and Heavy Engineering Holdings Berhad and minutes of meetings of the Audit and Risk Management Committee of AET Tanker Holdings Sdn. Bhd. for overview of the state of risk management and internal control systems of those subsidiaries. • Reviewed the updates on the implementation status of GIA’s action plans following a quality assessment by the Institute of Internal Auditors Malaysia (IIAM). • Prior to BARC meetings, the Chairman of the BARC held private meetings and discussions with the Head and senior auditors of GIA on internal audit reports and any related matters. Board Audit and Risk Committee Report 215 214 OUR GOVERNANCE MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019