PRG Holdings Berhad Annual Report 2019

ANNUAL REPORT 2019 59 REPORT OF THE AUDIT AND RISK MANAGEMENT COMMITTEE cont’d INTERNAL AUDIT FUNCTION The internal audit function for the Manufacturing Division is performed in-house and for the Corporate, Property Development & Construction and Healthcare Divisions, is outsourced to an independent consulting firm, GRC Consulting Services Sdn. Bhd. to provide assurance on the effectiveness as well as the adequacy and integrity of the system of internal control of the Group. FHL and its subsidiaries in the Manufacturing Division (“FHL Group”) has an in-house internal audit department that carries out regular reviews of the operations and system of internal control by examining and evaluating business processes to determine the adequacy and efficiency of financial and operating controls, and highlighting significant risks and non- compliance impacting the FHL Group to the audit committee. The internal audit report tabled to the audit committee of FHL would be subsequently presented to the Audit and Risk Management Committee of the Company for notation. For the year under review, internal audit reviews were performed to evaluate and identify any weaknesses of the internal controls affecting the Group, the adequacy of the existing system of internal control and recommend measures to Management to improve and rectify any weaknesses. The internal audit reviews have been carried out based on compliance and risk-based audit approaches and the findings were presented to the Audit and Risk Management Committee on quarterly basis. During the FY2019, the Internal Auditors carried out the following activities: (a) Prepared the annual audit plan for the Corporate, Property Development & Construction Divisions, Healthcare Division and Agriculture Division for review and approval by the Audit and Risk Management Committee. (b) Performed compliance and risk-based audits and tabled its findings and recommendations to the Audit and Risk Management Committee. (c) Reviewed the following processes and/or identified key risk areas of the Group’s operations: i) Corporate, Property Development & Construction Divisions and Healthcare Division - Audit on compliance to MCCG documentations; i.e. Charters, Terms of References) - Audit on compliance to organisation policies (“SOPs”), contracts, laws and regulations - Risk-based audit on the identified key risk areas of the Property Development Division including: (i) Limited Financial Resources for New Land Bank & Projects (ii) Changes in Government Policies and Regulatory (iii) Reputation and Branding/Market Recognition (iv) Project Management Risk (v) Authority Approvals (vi) Operation Cash flow & liquidity risk (vii) IT system not well protected (viii) Insufficient manpower & lack of resources (ix) Joint venture partner risk (x) Enforcement of SOPs/Non-Compliance with Corporate Governance or statutory requirements - Risk-based audit on the identified key risk areas of the Construction Division including: (i) Economy uncertainty, competitive market and slowdown in residential property market (ii) Cash flow and liquidity risk (iii) Changes in government policies and regulatory requirements (iv) Project management risk for Picasso and Batu Gajah projects (v) Asset management risk – Lost & stolen machineries/equipment