Sasbadi Annual Report 2019

PAGE 46 SASBADI HOLDINGS BERHAD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (continued) 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 2019 as approved by the Audit Committee, covering the following subsidiaries and functional areas/sections: i. Sasbadi Sdn Bhd, Orbit Buku Sdn Bhd, Sasbadi Online Sdn Bhd and Malaysian Book Promotions Sdn Bhd • Inventory Management, in respect of warehouse / store management, physical stock handling, receiving and delivery monitoring processes and procedures, stocks return handling, physical stock count procedures, stocks variance justification and verification control procedures, inventory system updating and recording and stocks valuation processes and procedures • Procurement, in respect of purchasing processes and procedures, supplier evaluation and control, outsourcing processes and procedures and outsourcing evaluation and control ii. Sasbadi Sdn Bhd • Sales and Marketing, in respect of new market identification processes and procedures, distributor / agent appointment processes and procedures, pricing control processes and procedures, order processing, selling and distribution expenses allocation processes and procedures, credit and accounts receivable management, customer retention management, performance monitoring and reporting and implementation process of business development strategy • Finance and Accounts, in respect of billing and revenue recognition processes and procedures, collection and receivables processes and procedures, payment processes and procedures, debit note and credit note, cash flow management, capital asset management, development costs capitalisation and amortisation and inter-company billing 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 2019 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.