The internal audit function of the Company was carried out in-house by the GIA. GIA undertakes a systematic and disciplined approach to evaluate and improve the effectiveness of governance, risk management and control processes within the Group. The Head of GIA reports functionally to the BAC and administratively to the President/Group CEO of MISC. Mohammad Romzi Shafi’e is the 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) in Accounting 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. The annual audit plan and strategy including the scope of works and resources are approved by the BAC. 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 BAC, 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 (which also includes investigations) upon request by Management, BAC and ARMC of AET Pte. Ltd. GIA submits its audit reports to the Management Audit Committee (MAC) for executive review. Subsequently, the reports together with deliberations by the MAC are tabled at the BAC Meetings for endorsement. At the Board meetings, the BAC Chairman highlights the key audit issues and overall decisions and resolutions made during the BAC meetings to the Board. STATEMENT ON INTERNAL AUDIT FUNCTION STATEMENT ON RPTs and RRPTs 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 MAC and the BAC for deliberation and endorsement on a quarterly basis. Such regular monitoring is essential to ensure the integrity and effectiveness of the Group's internal controls. During the financial year, GIA reported the following audits as per the approved internal audit plan: Subsidiary • Audit on AET Chartering, Commercial Operations and Post Fixture Activities • Audit on AET Business Development and Joint Venture Management • Audit on AET Payroll, Compensation and Benefit – Shore • Audit on Malaysian Maritime Academy Sdn. Bhd. • Audit on Eaglestar Finance Activities & Review of Agency Model (Post Implementation) • Audit on Eaglestar Payroll, Compensation and Benefit – Shore • Audit on Code of Conduct & Business Ethics (CoBE) for Eaglestar • Audit on CoBE for Malaysian Maritime Academy Sdn. Bhd. • Audit on CoBE for MISC Maritime Services Sdn. Bhd. • Audit on Sungai Udang Port Sdn. Bhd. Joint Venture Entities • Audit on Future Horizon (L) Pte. Ltd. Procurement • Audit on MISC Procurement (Tendering Activities) • Audit on AET Procurement (Tendering Activities) • Audit on Eaglestar Procurement (Tendering Activities) Others • Audit on Fixed Asset Management and Finance Lease Receivables – MISC Berhad • Audit on Finance Shared Service Centre (FSSC) • Audit on Talent Management System of MISC Berhad • Audit on Investment Project Governance of Gas Assets & Solutions (GAS) Business • Audit on MISC Payroll, Compensation and Benefit • Audit on CoBE for MISC Berhad MISC as a Group has been able to consistently achieve high percentage of closure for the audit findings through close monitoring thereof. The status of the audit findings are reported to the BAC on a quarterly basis. In FY2022, a 97% closure rate was recorded, with the balance 3% being carried forward to FY2023. GIA conducted quarterly reviews on the internal control process and reporting of RPTs and RRPTs to provide assurance to the BAC that its implementation conforms to the requirements of Bursa Securities. GIA also facilitated Project Independent Review (PIR) on a major project currently under execution, supported by independent external consultants. The objectives of the PIR are as follows: • Providing an independent review of the status of the project in meeting its time, cost and quality of work; • Review project activities during the execution phase to verify compliance and readiness to meet the contractual, statutory and regulatory requirements, international and industrial standards as well as project specific procedures during execution phase; • Identifying significant gaps and providing recommendations to overcome any inadequacies; and • Highlighting good practices to be adopted for future projects. All internal audit activities for the financial year under review were performed by 24 internal auditors as of 31 December 2022 from diverse backgrounds, disciplines and operational experiences such as accounting and finance, business administration, human resource, engineering, information technology, and shipping and 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. All auditors have declared their independence through the annual conflict of interest declaration. 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 FY2022 was RM9.1 million. MISC has put in place internal controls, guidelines and procedures to ensure that RPTs and RRPTs are entered into on normal commercial terms and on terms which are not more favourable than those generally available to third parties dealing on arms’ length basis and are not detrimental to the minority shareholders of the Company. In ensuring adequate procedures and processes are in place, the BAC is responsible to ensure the following: a) That a framework and appropriate procedures are in place for the purposes of identifying, monitoring, evaluating, reporting and approving RPTs and RRPTs; b) That a review of any RPTs or RRPTs and conflict of interests that may arise within the Group is conducted; and c) That the established procedures are adequate in order to ensure that the RPTs and RRPTs are entered into in the best interest of the Company, on fair and reasonable commercial terms and not detrimental to the interest of minority shareholders. The Group’s internal Guidelines on RPTs and RRPTs are summarised as follows: • Information on related parties and procedures applicable for RPTs and RRPTs which involve interest, direct or indirect, of such related parties shall be disseminated from time to time to all MISC’s business and service units as well as subsidiaries, for their reference. • All business segments and service units shall review their existing information systems on an on-going basis to ensure that relevant features are incorporated in the systems for capturing information on RPTs and RRPTs at source. All Heads of Departments are required to report on all transactions with related parties. BOARD AUDIT COMMITTEE REPORT 209 208 Governance Governance MISC Berhad Integrated Annual Report 2022
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