PRG Holdings Berhad Annual Report 2017

• PRG HOLDINGS BERHAD 54 INTERNAL AUDIT FUNCTION The internal audit function for the Manufacturing Division is performed in-house and for the Corporate and Property Development & Construction Division, is outsourced to an independent consulting firm, GRC Consulting Services Sdn. Bhd. to provide assurance on the effectiveness as well as the adequacy and integrity of the system of internal control. For the year under review, audits were performed to evaluate and identify any weaknesses of the internal controls affecting the Group, the adequacy of the existing system of internal control and to recommend measures to Management to improve and rectify any weaknesses. The internal audit reviews has been carried out based on compliance and risk-based audit approach and its findings were presented to the Audit Committee on a quarterly basis. During the financial year ended 31 December 2017, the Internal Auditors carried out the following activities: (a) Prepared the annual audit plan for the Manufacturing Division, Corporate and Property Development & Construction Division for review and approval of the Audit Committee. (b) Performed compliance and risk-based audits and tabled its findings to the Audit Committee. (c) Reviewed of the following processes of the Group’s operations: i) Manufacturing Division • Production & quality control including compliance with Environmental & Safety & Health Regulations • Human resource • Purchasing • Inventory • Sales, credit control & account receivables • Finance and Information Technology • Inventory costing (covering raw materials, work-in-progress & finished goods) • Annual stock check • Related party transaction including recurrent related party transactions ii) Corporate and Property Development & Construction Divisions • Compliance audit on Overall Design of the Control Environment of PRG • Risk-based audit on the identified key risk areas of the Construction Division including: (i) Material trading (ii) Uncertainty of economy (iii) Liquidity risk (iv) Credit risk (v) New project funding (vi) Government policy (vii) Market recognition (viii) Sustainability (ix) Staff incentives and benefits • Compliance audit on delegated authority limit (Financial and Non-Financial) • Compliance audit on compliance with organisation policies, contracts, laws and regulations The findings arising from the above reviews were reported to Management for their response and subsequently for the Audit Committee deliberations. Where weaknesses were identified, recommended procedures and/or remedial actions would be put in place to improve and strengthen internal controls. In addition, the Internal Auditors also performed follow-up reviews on the status of implementation of recommendations/corrective actions for reporting to the Audit Committee. The costs incurred for the internal audit function in respect of the financial year ended 31 December 2017 amounted to RM289,000. R E P O R T O N T H E A U D I T C O M M I T T E E ( C O N T ’ D )