Frontken Berhad Annual Report 2020

Annual Report 2020 42 FRONTKEN CORPORATION BERHAD 200401012517 (651020-T) INTERNAL AUDIT FUNCTION – ITS COMPOSITION AND SCOPE OF COVERAGE (CONT’D) 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 2020, the following areas were selected for internal audit with AGTC’s Board’s concurrence: Business areas covered Transactions/activities covered by internal audit, addressing the key business risks therein Property, plant and equipment management Acquisition, custody, repairs and maintenance, disposal, physical sighting, and insurance of assets. Production management Inventory and production costing Quality control, product composition labelling and scrap management Sales and receipts management Logistics management, order management, invoicing, discounts, returns, collections, credit control and receivables management Purchases and payments management Requisition, procurement, acceptance and inspection, payment and suppliermanagement Information technology management System development and program modification, application controls, input/output integrity Research and development management Blueprint control, R&D operations, custody of documentation and prototype manufacturing and product testing Computerised information processing system Segregation of functions, system development & programme management, programme and data access controls, file and equipment security, maintenance of hardware and software, system recovery and information flow security inspection Finance management Authorisation, custody and usage of Company seal Labour and wage management Labour management, adequacy of trainings and functionary substitute system The internal audit plan and a summary of the findings of the in-house internal auditor were sharedwith the Audit Committee of the Company for information and comments, if any. For the financial year ended 31 December 2020, the Audit Committee of the Company as well as Board of AGTC reviewed the work of the internal audit functions, outsourced and in-house, as the casemay be, their observations and recommendations in order to obtain assurance on the adequacy and operating effectiveness of the Group’s risk management and internal control system. The total cost incurred by the Group for the internal audit functions (both in-house and outsourced) for the financial year under review amounted to approximately RM243,000 (2019: RM214,000). Statement On Risk Management and Internal Control (cont’d)