MISC Annual Report 2019

The Company also engages the External Auditors for other non-audit works as and when required. For FY2019, the amount of non-audit fees incurred for services rendered by the External Auditors or their affiliates to MISC Group is RM1,119,000, which includes limited review of semi-annual financial results and tax advisory. To ensure that the External Auditors’ independence is not impaired, the Audit Engagement Partner in charge of the Company is changed every seven years and is required to observe a cooling-off period of five years before being reappointed, which is in line with the recommendation by the Malaysian Institute of Accountants (MIA). Internally, the External Auditors conduct an Independent Partner Review in order to preserve their independence. The External Auditors had also provided written assurance to the BARC that in accordance with the terms of all relevant professional and regulatory requirements, they had been independent throughout the audit engagement. The Company has also revised its policy on the assessment of External Auditors as part of the revised Policy on External Auditors adopted during the year. With this policy, the BARC had carried out an assessment on the performance, suitability and independence of the External Auditors based on the following criteria, and will continue to do so on an annual basis: • Quality of engagement team (including sufficiency of resources); • Quality of communication and interaction; and • Independence, objectivity and professional scepticism. Corporate Governance and Regulatory Compliance • Reviewed and deliberated on the Related Party Transactions (RPTs) and Recurrent Related Party Transactions (RRPTs) reports on a quarterly basis. • Reviewed and recommended to the Board the SORMIC, BARC Report and additional compliance information for inclusion in the 2019 Annual Report. • Reviewed the Directors’ Conflict of Interest report for MISC Group. • Reviewed the whistleblowing quarterly reports of the Company. • Reviewed the Group Health, Safety, Security and Environment (GHSSE) Audit & Assurance Bi-Annual Reports. The annual audit plan and strategy including the scope of works and resources are approved by the BARC. The audit plan is established primarily using a risk-based approach as well as input gathered from various sources, including feedback from Management and the BARC, trends and findings from past audit engagements. GIA conducts scheduled audits independently to ensure there is effective risk monitoring, internal controls, governance processes and compliance procedures to provide the level of assurance required by the Board. GIA also supports and conducts special reviews upon request by Management or the BARC. GIA submits its audit reports to the Management Committee (MC) for executive review. Subsequently, the reports together with deliberations by the MC are tabled at the BARC meetings for endorsement. At the Board meetings, the BARC Chairman highlights the key audit issues and overall decisions and resolutions made during the BARC meetings to the Board. The audit reports prepared by GIA provide details of audit findings and corresponding Agreed Corrective Actions (ACAs). The status of implementation of these ACAs are captured through the Quarterly Audit Status Reports, from which, the ACAs are monitored and analysed. The consolidated reports are submitted and presented to the MC and BARC for deliberation and endorsement on a quarterly basis. Such regular monitoring is essential to ensure the integrity and effectiveness of the Group’s systems of internal controls. During the financial year, GIA completed and reported the following audits as per the approved internal audit plan: Subsidiary • Audit on AET Offshore Services Inc. • Audit on Malaysian Maritime Academy (ALAM) Activities • Audit on MISC Maritime Services Sdn. Bhd. (MMS) • Audit on AMI Manning Services Pvt. Ltd. Joint Venture Entities • Audit on Eagle Star Crew Management Corporation • Audit on Malaysia Vietnam Offshore Terminal (L) Ltd. Procurement • Audit on Procurement Activities - Human Resource • Audit on Procurement Activities – Offshore Business Unit (OBU) • Audit on Fleet Maintenance & Procurement Activities – Eaglestar ICT • Audit on SAP Financial & Controlling (FICO) and Material Management (MM) - MMS Others • Audit on Staff Claims and Travel Desk – MISC • Audit on Crew Payroll Management, Compensation and Benefits - Eaglestar Crew • Audit on LNG Japan Liaison Office • Audit on Post Implementation of Companies Act 2016 – MISC • Audit on Post Implementation of Companies Act 2016 – AET • Audit on Asset Management Activities – OBU In addition, GIA assisted with the Tax Risk Assessment for entities within MISC Group related to the LNG, OBU and MMS businesses, which was conducted by PETRONAS Group Tax. GIA also conducted quarterly reviews on the internal control process and records of RPTs and RRPTs to provide assurance to the BARC that its implementation conforms to the requirements of Bursa Malaysia. All internal audit activities for the financial year under review were performed by 23 internal auditors from diverse backgrounds, disciplines and operational experiences such as accounting and finance, business administration, information technology and shipping & logistics. In maintaining independence and objectivity, GIA ensures that the internal auditors are free from any relationship or conflict of interest when performing their duties. GIA continues its commitment to equip the internal auditors with adequate knowledge and proficiencies to discharge their duties and responsibilities by providing sufficient and relevant functional trainings. The total cost incurred in discharging the internal audit functions during FY2019 was RM7.0 million. • Reviewed the initiatives by Management in relation to Compliance and Ethics, which included the following: (i) See.Speak.Support. Campaigns • “You Matter. Combat Bribery. Uphold Integrity: ISO 37001:2016 Journey”, in conjunction with the ISO 37001:2016 Anti-Bribery Management System (ABMS) accreditation award ceremony; • “Competition Law: Implications & Compliance”; and • “Safeguarding Personal Data & Cybersecurity Risk”; (ii) MISC Annual Conflict of Interest Disclosure 2019; (iii) Corruption Risk Management Workshop; (iv) High Risk Work Positions Identification; (v) Implementation of Corporate Privacy Policy; (vi) Human Rights Working Group, including the adoption of MISC Human Rights Commitment, Modern Slavery Policy and Modern Slavery Statement 2018/2019; and (vii) MISC Third Party Due Diligence Operational Guidelines. Ship Management Audit (SMA) • Review ed the SMA’s semi-annual and annual audit reports focusing on the efficiency and effectiveness of the maintenance of the Group’s vessels and floating assets. Statement on Internal Audit Function The internal audit function of the Company was carried out in-house by the Group Internal Audit Department (GIA). GIA undertakes a systematic and disciplined approach to evaluate and improve the effectiveness of governance, risk management and control processes within the MISC Group. The Head of GIA reports functionally to the BARC and administratively to the President/CEO of MISC. On 1 September 2019, Mohammad Romzi Shafi’e was appointed as the new Head of GIA. He is a Fellow Member of the Institute of Chartered Accountants in England and Wales (ICAEW) and holds a Bachelor of Science (Honours) Degree in Accounting and Finance from the University of Wales, UK. GIA adopts the Standards and Principles outlined in the Institute of Internal Auditors’ International Professional Practices Framework (IPPF) and the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework; a comprehensive, structured and widely used auditing approach, in conducting the audit activities. The conduct of internal audit work is also governed by the MISC Internal Audit Charter and GIA’s established procedures and guidelines. Board Audit and Risk Committee Report 217 216 OUR GOVERNANCE MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019