Integrated Annual Report 2021

BOARD AUDIT COMMITTEE REPORT GOVERNANCE • Reviewed the minutes of meetings of the Board Audit Committee of Malaysia Marine and Heavy Engineering Holdings Berhad and minutes of meetings of the Audit and Risk Management Committee of AET Pte. Ltd. for an overview of the state of internal control systems of those subsidiaries. • Prior to BAC meetings, the Chairman of the BAC held meetings and discussions with the Head and senior auditors of GIA on internal audit reports and any related matters. External Audit FY2021 Key Audit Matters (KAM) addressed by the BAC KAM Matters Considered BAC Comments Impairment of noncurrent assets • The Group’s assets under review includes goodwill as well as ships, offshore floating assets, other property, plant and equipment and right-of-use assets that had indication of impairment. • Management has carried out impairment review on its assets based on value-in-use (VIU) analysis and market values obtained from independent valuers. • In deriving the VIU, Management is required to make estimates on the expected future cash flows, appropriate discount rates and other key assumptions. The BAC concurred with Management’s assessment on the impairment of assets. 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 BAC concurred with Management’s assessment on the percentage of completion of projects and estimated total project costs. Contingent liability from material litigation • The eventual outcome of claims is uncertain and the positions taken by Management are based on the application of material judgement and estimation. • Management has recorded provision for claims based on its assessment on the facts and circumstances available. The BAC concurred with Management’s assessment on the sufficiency of provision for claims. For more information on the KAM, please refer to the Independent Auditors’ Report on pages 448 to 455 of this Integrated Annual Report. • Reviewed the results and issues arising from the external auditors’ audit, including the KAM and the resolution of issues highlighted in their report to the BAC and Management’s responses thereto. • The BAC had two private meetings with the external auditors without the presence of Management during the year under review (i.e. on 15 February 2021 and 11 November 2021) 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 FY2021. • 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 questionnaire and evaluation forms for the FY2021 Assessment of External Auditors. The Company also engages the external auditors for other non-audit works as and when required. For FY2021, the amount of non-audit fees incurred for services rendered by the external auditors or their affiliates to the Group is RM1,213,000, 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 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 BAC that in accordance with the terms of all relevant professional and regulatory requirements, they had been independent throughout the audit engagement. In line with the Company’s adoption of the Policy on External Auditors, the BAC 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. Tax • Reviewed and recommended the adoption of PETRONAS’ tax policy as the MISC Tax Policy for the Group. The MISC Tax Policy anchors on MISC Group’s commitment to be a responsible taxpayer by: (i) complying in good faith with all applicable tax laws, regulations, guidelines and international tax treaties, and settling tax obligations when legally due, as company and employer; and (ii) maintaining cooperative working relationships with tax authorities. 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, BAC Report and Additional Compliance Information for inclusion in the Integrated Annual Report 2020. • Reviewed and recommended revisions to the Whistleblowing Policy to: (i) encourage adoption and/ or adherence of the Whistleblowing Policy by MISC’s associate companies, companies where MISC is not a controlling stakeholder, and third parties; (ii) emphasise on the whistleblowing channel being secure and confidential; and (iii) provide for anonymous reporting. • Reviewed the Whistleblowing quarterly reports of the Company. • Reviewed the GHSSE Audit and Assurance Bi-Annual Reports focusing on the efficiency and effectiveness of the maintenance of the Group’s vessels and floating assets. • Reviewed and recommended revisions to the BAC Terms of Reference pursuant to the MCCG 2021, for approval by the Board. 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