Sasbadi Annual Report 2017

52 SASBADI HOLDINGS BERHAD (1022660-T) I BER AD (10 2 60-T) STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Internal audit ➣ Reviewed, discussed and approved the appointment of a new professional service firm to provide outsourced internal audit function to the Group after taking into consideration, among others, the experience and clientele base of the firm, before recommending for the Board’s endorsement. ➣ Reviewed, discussed and approved the outsourced internal auditors’ audit plan (covering the scope of work, subsidiaries being audited, estimated number of man days, audit schedule and reporting timeline) and fees for 2017 before recommending for the Board’s endorsement. ➣ Reviewed and deliberated on the outsourced internal auditors’ reports as detailed in the Internal Audit Function section below. The Audit Committee took note that, overall, the internal control environment for the functional areas/ sections covered by the outsourced internal auditors for FYE 31 August 2017 is considered “average” where controls are generally in place with some actions for improvement required. Risk management ➣ Reviewed and approved the amendments to the Group’s Risk Management Handbook – the amendments included, among others, (i) expanding the composition of the Risk Management Team (“RMT”) to include the Heads of Production and Warehouse, (ii) the RMT to also report to the Audit Committee other than to the Executive Management Team (which comprises all the Executive Directors), and (iii) any amendments, additions and deletions of the terms in the Risk Management Handbook would be subject to the approval of the Audit Committee. ➣ Reviewed the updated Registry of Risks and Risk Matrix prepared by the RMT, taking note of the changes in the rating of some of the risk factors. INTERNAL AUDIT FUNCTION The outsourced internal auditors, who are independent of the activities and operations of the Group, are appointed to review the adequacy of the internal control system of the Group. The outsourced internal auditors report directly to the Audit Committee. A summary of the work carried out by the outsourced internal auditors in FYE 31 August 2017 is as follows: ➣ Prepared and presented an internal audit plan for 2017 to the Audit Committee. The focus of the internal audit plan for 2017, as approved by the Audit Committee, was on United Publishing House (M) Sdn Bhd (“UPH”), which was acquired by the Company in August 2016. ➣ Undertook the internal control assessment on UPH in accordance with the internal audit plan for 2017, covering the following functional areas/sections: • Finance and Accounts, in respect of billing and collection process and procedures, payment process and procedures, debit notes and credit notes, cash flow management, capital asset management, staff claims process and procedures, inter-company billing, and recurrent related party transactions (if any); • Inventory management, in respect of warehouse/store management, physical stock handling, packing process and procedures, backorders monitoring process and procedures, stock return handling, physical stock count procedures, stock variance justification and verification control procedures, and inventory system updating and recording; and • Procurement, in respect of purchasing process and procedures, outsourcing process and procedures, and outsourcing evaluation and control. ➣ Presented the reports on internal control assessment setting out their findings and recommendations, and Management’s responses and actions, to the Audit Committee for deliberation. The fees incurred by the Group in relation to outsourced internal audit function for FYE 31 August 2017 were RM36,000. UDIT COMMITTEE REPORT