PRG Holdings Berhad Annual Report 2020

KEY ELEMENTS OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM (continued) Internal Audit Function (continued) During the financial year under review, the following functions’ processes and/or identified key risk areas of the Group’s operations were reviewed by the Internal Auditors: Manufacturing Division (Malaysia & Vietnam): • Production & quality control including compliance with Environmental & Safety & Health Regulations • Human resource • Purchasing • Inventory • Finance and Information Technology • Inventory costing (covering raw materials, work-in-progress, semi - finished goods & finished goods) • Sales & credit control • Annual stock check • Related party transaction (including recurrent related party transactions) Manufacturing Division (China): • risk assessment - the preliminary assessment of risks posed by different areas including Sales and credit, Purchasing Production, Inventory, Finance and IT, and Human resource. • process review - base on the result of the preliminary risk assessment, development of audit plan to focus on the higher risk areas, review the effectiveness of systems and procedures in place throughout the audit period, including the adequacy of internal controls. Corporate, Property Development & Construction and Agriculture Divisions: - Audit on compliance with organisation policies and Standard Operating Procedures (“SOPs”) for the following Divisions/ Units: (i) Finance & Accounts (ii) Human Resource & Admin (iii) Strategic or Risk Management in terms of • Compliance to Laws & Regulations: Section 17A, Malaysian Anti-Corruption Commission (Amendment) (“MACC”) Act 2009 • Establishment & compliance to new Standard Operating Procedure (“SOPs”) due to Pandemic Risk - Risk-based audit on the identified key risk areas of the Property Development Division including: (i) Operation cash flow & liquidity risk - U5 Embayu (ii) IT system not well protected (iii) Insufficient manpower & lack of resources (iv) Joint venture partner risk (v) 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) Subcontractor and Supplier Risk - Melaka Project (ii) Material Trading Risk - unstable material price (iii) Credit Risk (iv) Change in Interest Rate (v) Enforcement of SOPs - Risk-based audit on the identified key risk areas of the Agriculture Division including: (i) Strategic Risk (ii) Operation Risk (iii) Compliance with government policies and regulations (iv) Cash flow and liquidity risk PRG HOLDINGS BERHAD Statement On Risk Management and Internal Control cont’d 50