52 MEMBERS Dato Yeoh Eng Khoon Chairman (Independent Non-Executive Director) Datuk Abdul Rahman bin Mohd. Ramli (Independent Non-Executive Director and MIA member) Kwok Kian Hai (Independent Non-Executive Director) TERMS OF REFERENCE The Audit Committee ( Committee ) was established in 1993 to serve as a Committee of the Board of Directors ( Board ). In performing their duties and discharging their responsibilities, the Committee is guided by the terms of reference set out below: Composition of the Committee The Committee must be composed of not fewer than 3 members; All the Committee members must be non-executive directors, with a majority of the members being independent directors; All the Committee members should be fi nancially literate; At least one member of the Committee: (i) must be a member of the Malaysian Institute of Accountants; or (ii) if not a member of the Malaysian Institute of Accountants, the member must have at least 3 years working experience and: (a) must have passed the examinations specifi ed in Part I of the First Schedule of the Accountants Act 1967; or (b) must be a member of one of the associations of accountants specifi ed in Part II of the First Schedule of the Accountants Act 1967; or (iii) must have at least 3 years post-qualifi cation experience in accounting or fi nance with either one of the following qualifi cations: (a) a degree/masters/doctorate in accounting or fi nance; or (b) a member of any professional accountancy organisation which has been admitted as a full member of the International Federation of Accountants; or (iv) must have at least 7 years experience as a chief fi nancial offi cer of a corporation or be primarily responsible for the management of the fi nancial affairs of a corporation; or (v) fulfi ls such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad ( Bursa Malaysia ).
53 No alternate director shall be appointed as a member of the Committee; The Chairman, who shall be elected by the members of the Committee, must be an independent non-executive director. In the absence of the Chairman, the members present shall elect a Chairman from amongst them to chair the meeting. Review of the Committee The term of offi ce and performance of each member of the Committee shall be reviewed by the Board at least once every 3 years. Duties and Responsibilities The duties of the Committee shall include the following: Provide assistance to the Board in fulfi lling its fi duciary responsibilities relating to corporate accounting and reporting practices for Kuala Lumpur Kepong Berhad (the Company ) and all its subsidiaries (the Group ). Maintain through regularly scheduled meetings, a direct line of communication between the Board and the External Auditors and Internal Auditors. Propose, monitor and ensure an adequate system of risk management for Management to safeguard the Group s assets and operations. Act upon the Board s request to investigate and report on any issues or concerns with regard to the Management of the Group. To report promptly to Bursa Malaysia on any matter reported by it to the Board which has not been satisfactorily resolved resulting in a breach of Bursa Malaysia Main Market Listing Requirements. Authority The Committee is authorised by the Board to investigate any matter within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee. The Committee shall have full and unrestricted access to all information and documents pertaining to the Group as well as direct communication to the internal and external auditors and senior management of the Group. The Committee is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary. The Committee is authorised to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees, whenever deemed necessary. Financial Procedures and Financial Reporting Review of the quarterly results and year-end fi nancial statements of the Company and the Group to ensure compliance with appropriate accounting policies, accounting standards and disclosure requirements before submitting them for the Board s approval. In connection therewith, the Group Financial Controller attends all the audit committee meetings.
54 Related Party Transactions To monitor any related party transactions that may arise within the Company or the Group. External Audit Review the audit plan of the external auditors. Review the external auditors report and to evaluate their fi ndings and recommendations for actions to be taken. Consider the nomination, appointment and the re-appointment of external auditors, their fees and any questions on resignation and dismissal. Internal Audit Review and approve the annual internal audit plan. Review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work. Review the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function. Review any appraisal or assessment of the performance of the Internal Audit Division ( IAD ) to ensure that they have the standing to exercise independence and professionalism in discharging their duties. Approve any appointment or termination of senior staff members of the internal audit function. Take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. Meetings The Committee shall meet at least four times annually and additional meetings may be called at any time at the Chairman s discretion. The quorum for each meeting shall be two (2) members of the Audit Committee. An agenda shall be sent to all members of the Committee and any persons that may be invited to attend. The External and Internal Auditors and other members of senior management will be invited to attend these meetings upon invitation by the Chairman of the Committee. The Company Secretary shall be the Secretary of the Committee. However, the Committee shall meet with the external auditors without executive board members present at least twice a year. During the fi nancial year, the Committee convened fi ve meetings. A record of the attendance at these meetings is as follows: Number of Meetings Attended Dato Yeoh Eng Khoon 5/5 Datuk Abdul Rahman bin Mohd. Ramli 4/5 Kwok Kian Hai 5/5 The Committee also met with the external auditors without executive board members present, twice in the fi nancial year under review.
55 Internal Audit Function The Committee is assisted by the IAD in discharging its duties and responsibilities. The Group has an adequate resourced IAD which reports directly to the Committee and is independent of the activities they audit. There is also in place an audit charter that defi nes the organisation status, functions and responsibilities of the IAD. The IAD conducts regular and systematic reviews of the key controls and processes in the operating units and assess compliance with the established policies and procedures. This provides reasonable assurance that such systems would continue to operate satisfactorily and effectively in the Company and the Group. In addition, the IAD also conducts investigations and special reviews at the request of Management. On a quarterly basis, the IAD submits the audit reports on their activities to the Committee for its review and deliberation. The Head of the IAD attends the Committee meetings to present the internal audit fi ndings and makes appropriate recommendations on any areas of concern within the Company and the Group for the Committee s deliberation. In 2011/2012, a total of 148 audits and reviews were carried out spanning the Group s operations. The total cost incurred for the internal audit function for the fi nancial year ended 30 September 2012 was RM3.31 million. SUMMARY OF ACTIVITIES FOR THE FINANCIAL YEAR In line with the terms of reference of the Committee, the following activities were carried out by the Committee during the fi nancial year ended 30 September 2012 in the discharge of its functions and duties: Reviewed the quarterly fi nancial statements and Annual Report of the Group before presentation for the Board s approval, focusing particularly on: - changes in or implementation of major accounting policy; - signifi cant and unusual events; - the going concern assumption; and - compliance with accounting standards and other legal requirements. Reviewed the related party transactions that had arisen within the Company or the Group and the disclosure of such transactions in the annual report. Reviewed with the External Auditors their audit plan and scope of work prior to commencement of audit. Discussed and reviewed the Group s fi nancial year-end statements with the External Auditors including issues and fi ndings noted in the course of the audit of the Group s Financial Statements. Reviewed and discussed with the External Auditors their evaluation of the system on internal control of the Group including meeting the External Auditors without the presence of Management. Considered the appointment of External Auditors and their request for increase in audit fees. Reviewed and deliberated on reports of audits conducted by the IAD. The Committee also appraised the adequacy of actions and remedial measures taken by the Management in resolving the audit issues reported and recommended further improvement measures. Reviewed and assessed the risk management activities of the Company and the Group. Reviewed the Audit Committee Report, Statement on Internal Control and Statement on Corporate Governance before submitting for the Board s approval and inclusion in the Company s Annual Report.
56 TRAINING ATTENDED BY THE COMMITTEE For the year under review, the Committee attended the following conferences and seminars: Organiser Conference and Seminar Bursa Malaysia Role of the Audit Committee in Assuring Audit Quality Malaysian Alliance of Corporate Directors Singapore Institute of Directors Conference 2012 Corporate Governance in the New Normal Malaysian Institute of Accountants Common Offences Committed by Directors under the Companies Act 1965 Comply or else? Indonesian Palm Oil Association (GAPKI) Indonesian Price Outlook 2012