Frontken Corporation Berhad 200401012517 (651020-T) • ANNUAL REPORT 2023 64 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT’D) INTERNAL AUDIT FUNCTION – ITS COMPOSITION AND SCOPE OF COVERAGE (CONT’D) Outsourced internal audit coverage – Group (save for Taiwan operations) (cont’d) For the financial year ended 31 December 2023, Sterling has carried out internal audit reviews of two (2) business units, namely, Frontken Philippines Inc. with the scope of the audit covering Procurement and Sourcing, Engineering Services and Project Management, Billing Process, and Safety, Health, and Environment functions and Frontken Malaysia Sdn Bhd, covering Finance & Accounts functions which include the following: • Billing processes and procedures • Collection processes and procedures • Credit application and evaluation processes and procedures • Cash flow management • Banking facilities management • Limits of authority • Staff claims processes and procedures • Debit notes and credit notes • Intercompany billing • Capital asset management • Revenue recognition process • Trade debtors and trade creditors aging • Costing preparation and computation • Compliance with transfer pricing documentation requirements • Procedures for the related party transactions / recurrent related party transactions Sterling also carried out two (2) follow-up status reviews for the financial year to update the Audit Committee on the status of management actions for previously reported audit findings. 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 the 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 has 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.
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