• Reviewed the minutes of meetings of the Board Audit Committee of Malaysia Marine and Heavy Engineering Holdings Berhad and the Audit and Risk Management Committee of AET Pte. Ltd. (ARMC) minutes of meetings for an overview of the state of internal control systems of those subsidiaries. • Reviewed the result of the External Quality Assessment Review performed on GIA by the Institute of Internal Auditors Malaysia (IIAM). • Reviewed and endorsed amendments to the Internal Audit Charter for alignment with the International Professional Practices Framework (IPPF) requirements issued by the Institute of Internal Auditors (IIA). • Prior to BAC meetings, the Chairman of the BAC held private meetings and discussions with the Head and Principal Auditors of GIA on internal audit reports and any related matters. External Audit FY2022 Key Audit Matters (KAM) addressed by the BAC KAM Matters Considered BAC Comments Impairment of non-current assets • The Group’s assets under review includes goodwill as well as ships, offshore floating assets, other property, plant and equipment, right-of-use assets and other intangible 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 of 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 in the Financial 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 11 February 2022 and 14 November 2022) 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 endorsed the external auditors’ terms of engagement, audit plan, scope and proposed fees for FY2022. • Reviewed and recommended the external auditors’ re-appointment to the Board to be proposed for shareholders’ approval at the AGM. • Reviewed and endorsed the questionnaire and evaluation forms for the FY2022 Assessment of External Auditors. The Group also engages the external auditors for other non-audit works as and when required. For FY2022, the amount of non-audit fees incurred for services rendered by the external auditors or their affiliates to the Group is RM1,410,000, which includes limited review of semi-annual financial results and tax advisory. The Group also paid RM975,000 to EY PLT for other audit services incurred in relation to the issuance of Global Medium Term Note (GMTN) in the financial year ended 31 December 2022. 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 re-appointed, 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 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 adequacy of resources); • Quality of communication and interaction; and • Independence, objectivity and professional scepticism. Tax • Noted the introduction of Global Minimum Tax. 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 (particularly items related to internal controls), BAC Report and Additional Compliance Information for inclusion in the Integrated Annual Report 2021. • 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 endorsed the GHSSE Annual Audit and Assurance Plan for FY2023. • Reviewed and endorsed proposed amendments to the BAC TOR to align with the revised MISC Internal Audit Charter, for approval by the Board. BOARD AUDIT COMMITTEE REPORT 207 206 Governance Governance MISC Berhad Integrated Annual Report 2022
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