MSM Malaysia Holdings Berhad Annual Report 2020

AUDIT, GOVERNANCE AND RISK COMMITTEE REPORT • Reviewed the significant matters highlighted by the external auditors in the financial statements and significant judgment made by Management. • Reviewed matters related to loan facilities of MSM Malaysia Holdings Berhad (“MSM”) before recommending to the Board for approval. • Reviewed the Group’s Consolidated Cashflow Projections. • Reviewed the status of construction of the Johor Refinery and position on the financial covenants. • Reviewed the proposed rental arrangement between MSM Perlis Sdn Bhd and FGV Integrated Farming Holdings Sdn Bhd. • Reviewed the closure of MSM Perlis Sdn Bhd’s factory operation. Assessing the Risks and Control Environment • Evaluated the reports on the assessment of the risks and control environment based on the external auditor’s quarterly financial statement reviews and statutory financial audits at each Committee meeting. • Reviewed all internal audit reports issued by the Group Internal Audit which detailed the observations from all the internal audits undertaken. • Received assurances from the GCEO and CFO that the risk management and internal control system of the Group for the financial year 2020 have been operating adequately and effectively, in all material respects. • Monitored the implementation of corrective actions taken by Management. Management provided justification and improvement for the key matters highlighted by internal and external auditors. • Provided relevant guidance for the improvement of the risks and internal control of the Group, in particular in the areas of inventory management which was the key focus area of the Group during the financial year. This included improvements in the monitoring and systems. Internal Audit Process • Reviewed and approved MSM Group Annual Internal Audit Plan for the year 2021 by assessing the priority ranking of the audit universe to provide sufficient audit coverage. • Assessed the adequacy of resources of the internal audit function to execute the MSM Group Annual Internal Audit Plan after taking into consideration the number of planned assignments and competencies required. • Presented and reviewed quarterly reports summarising the following at every quarterly meeting during the financial year 2020: • The observations from the internal audit reports issued during the quarter. The Committee gave direction to the Management on key matters requiring the Management’s special and immediate attention. The Committee has reported to the Board on these key significant matters. • The progress of implementation of the recommendations from internal audit reports issued. • The progress of implementation of the MSM Group Annual Internal Audit Plan. • Considered outcome of any special reviews and investigations, including those arising from Management and recommendation raised by the Committee’s Chairman and members and Management’s response and follow-up actions thereto, and reported key matters to the Board. • Assessed the performance of the Chief Internal Auditor basing on the delivery of the internal audit function. This include assessment whether the internal audit function has the required expertise and professionalism in discharge its duties. Reviewing the External Audit Process • Held two (2) private discussion sessions with the external auditor, Messrs PricewaterhouseCoopers PLT (“PwC”) without Management on 13 February 2020 and 11 August 2020. In these sessions, the matters discussed include the following: (i) The performance of the finance function. (ii) The impact of transfer of MSM Perlis’s refinery operation to Johor and closure of the MSM Perlis’s Refinery. MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 94 CHAIRMAN’S STATEMENT DELIVERING VALUE MSM OVERVIEW MANAGEMENT DISCUSSION & ANALYSIS GROUP FINANCIAL REPORT