FRONTKEN CORPORATION BERHAD 200401012517 (651020-T) ANNUAL REPORT 2024 43 INTERNAL AUDIT FUNCTION – ITS COMPOSITION AND SCOPE OF COVERAGE The Group has two (2) groups of internal auditors, i.e. one covering the operations of the Group (save for Taiwan operations), and the other covering solely the Taiwan operations. The internal audit function of the Group (save for Taiwan operations) is outsourced to an independent professional firm, namely Sterling Business Alignment Consulting Sdn Bhd. The internal audit function for the Taiwan operations is an in-house function, i.e. the internal audit personnel are employees of the subsidiary in Taiwan, namely Ares Green Technology Corporation (“AGTC”). The appointment of the outsourced internal audit service provider followed an assessment of its suitability and capability by the Audit Committee of the Company whilst the performance of the in-house internal audit function is under the oversight of AGTC’s Board. Outsourced internal audit coverage – Group (save for Taiwan operations) The outsourced internal audit team is helmed by an average of four (4) professionals from the firm, a corporate member of the Institute of Internal Auditor Malaysia. The team, led by Dr So Hsien Ying, a Certified Internal Control Professional, was to conduct an assessment of the Group’s system of internal control during the financial year under review, focusing on selected significant business units and reporting its observations, including Management’s response and action plans thereto, directly to the Audit Committee. The internal auditor also conducted follow-up reviews on the status of implementation of action plans by Management on the recommendations highlighted, as deemed relevant. The Audit Committee took note of the recommended improvement actions and questions were posed to Management on the timeliness of measures to implement the recommendations as reported. The internal audit plan for the financial year was prepared based largely on the Group’s financial information and the relative risks of the business units to the achievement of the Group’s business objectives. This approach deployed aligns with the International Professional Practices Framework of the Institute of Internal Auditors Inc. (“IIA”), which encompasses, inter-alia, the Definition of Internal Auditing, Code of Ethics, Core Principles and International Standards for the Professional Practice of Internal Auditing, and the IIA Risk Based Internal Auditing Guidance. For the financial year ended 31 December 2024, Sterling has carried out internal audit reviews of two (2) business units, namely, Frontken (East Malaysia) Sdn Bhd (“FEM”) and Frontken (Johor) Sdn Bhd (“FJSB”) covering the following areas:- • Procurement and Sourcing; • Engineering Services and Project Management; • Billings Process; and • Safety, Health and Environment. Sterling also carried out two (2) follow-up status reviews for the financial year to update the Audit Committee on the status of management actions for previously reported audit findings. At the Audit Committee Meeting in February 2025, Sterling reported that FEM had closed all 12 audit findings and 2 observations during the year under review. For FJSB, 7 out of 17 audit findings remained open and are to be completed by the extended deadline. Sterling will monitor the status in their follow-up reviews throughout the year. Internal audit tests were carried out by the internal audit function to assess the adequacy and operating effectiveness of the business units’ system of internal controls in achieving corporate objectives. Transactions and activities were selected for testing on a sample basis. Observations on systems weakness and areas for improvement, including recommended mitigating measures to address the concerns raised, were highlighted in the internal audit reports presented to the Audit Committee during the financial year under review. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT’D)
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