Frontken Berhad Annual Report 2019

34 Frontken Corporation Berhad (651020-T) ANNUAL REPORT 2019 Statement On Risk Management And Internal Control (cont’d) INTERNAL AUDIT FUNCTION – ITS STRUCTURE AND SCOPE OF COVERAGE (cont’d) Outsourced internal audit coverage – Group (save for Taiwan operations) (cont’d) The internal audit plan for the financial year was prepared based largely on the Group’s financial information and the relative risks of the business units to the achievement of the Group’s business objectives. The outsourced internal audit function adopted a risk-based and process life cycle approach in identifying auditable entities within the Group as well as the auditable areas. This approach deployed aligns with the International Professional Practices Framework of the Institute of Internal Auditors Inc. (“IIA”), which encompasses, inter-alia, the Definition of Internal Auditing, Code of Ethics, Core Principles and International Standards for the Professional Practice of Internal Auditing, and the IIA Risk Based Internal Auditing Guidance. For the financial year ended 31 December 2019, the following two (2) business units in Malaysia, together with the identified processes, were selected for internal audit with the Audit Committee’s concurrence: Name of business unit Processes covered by internal audit, addressing the key business risks therein Frontken Malaysia Sdn Bhd (Kulim Plant) • Sales to receipts (including customer credit management) • Procure to pay (including vendor management) • Health, Safety and Environment Frontken (Johor) Sdn Bhd • Sales to receipt (including debt monitoring) • Procure to pay (including vendor management) • Health, Safety and Environment Detailed internal audit tests were carried out by the internal audit function to assess the adequacy and operating effectiveness of the business units’ system of internal controls in achieving corporate objectives. Transactions and activities were selected for testing on a sample basis. Observations on systems weakness and areas for improvement, including recommended mitigating measures to address the concerns raised, were highlighted in internal audit reports presented to the Audit Committee during the financial year under review. In-house internal audit coverage (only Taiwan operations) The in-house internal auditor, Miss Kelly Huang, who is an accounting graduate, has a working experience of not less than 20 years covering internal audit, external audit and finance function. Independent of the activities she audits, the in-house internal auditor is tasked to assess the adequacy and operating effectiveness of the system of internal control of AGTC, the Company’s subsidiary helming the Taiwan operation. In carrying out her work, she adopted the internal audit guidelines from the Regulations Governing Establishment of Internal Control Systems by Public Companies issued by Taiwan Financial Supervisory Commission. The in-house internal auditor conducted an assessment of AGTC’s system of internal control during the financial year under review, focusing on selected significant areas as approved by the Board of AGTC and reported her observations, including Management’s response and action plans thereto, directly to the Board of AGTC. The in-house internal auditor also conducted a follow-up on the status of implementation of action plans by Management on the recommendations highlighted in previous reports. The Board of AGTC took note of the issues raised and questions were posed to Management on the timeliness of measures to address the concerns as reported. The in-house internal audit plan for the financial year under review was prepared based largely on AGTC’s financial information and the relative risks to the achievement of AGTC’s business objectives. The in-house internal auditor adopted a process life cycle approach in identifying the auditable areas in AGTC. For the financial year ended 31 December 2019, the following areas were selected for internal audit with AGTC’s Board’s concurrence: