Sasbadi Annual Report 2017

54 SASBADI HOLDINGS BERHAD (1022660-T) I BER AD (10 2 60-T) ADDITIONAL COMPLIANCE INFORMATION ➣ Annual budgeting process whereby the annual budget prepared by management is tabled for the Audit Committee’s review before being approved by the Board; ➣ Outsourced internal audit function which reports to the Audit Committee; ➣ Employment procedures and process to facilitate the recruitment and evaluation of employees; and ➣ Insurance coverage on the Group’s assets, where necessary. INTERNAL AUDIT FUNCTION The Group has outsourced the internal audit function to a professional service firm, which is independent of the activities and operations of the Group, to review the adequacy of the internal control system of the Group. The outsourced internal auditors, which report directly to the Audit Committee, conducted internal control assessment on the Group in order to identify areas for improvement, besides compliance with internal best practices, guidelines and objectives. During the financial year under review, the outsourced internal auditors have carried out an internal control assessment based on the internal audit plan for 2017 as approved by the Audit Committee. The focus of the internal control assessment for FYE 31 August 2017 was on United Publishing House (M) Sdn Bhd, which was acquired by the Company in August 2016, 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. Upon completion of the work, the outsourced internal auditors presented their reports to the Audit Committee during the quarterly meetings whereby the outsourced internal auditors’ findings and recommendations as well as the Management’s responses and action plans were deliberated. WEAKNESSES IN INTERNAL CONTROLS WHICH RESULTED IN MATERIAL LOSSES, IF ANY During FYE 31 August 2017 and up to the date of approval for issuance of this Statement, there were no material losses incurred by the Group arising from weaknesses in its internal control system. CONCLUSION Based on the foregoing, the Board is of the view that the Group’s risk management and internal control system is adequate and effective. The Board has also received assurance from the Group Managing Director and the Group Chief Financial Officer that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the existing risk management and internal control system of the Group. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL