MISC BERHAD 178 INTEGRATED ANNUAL REPORT 2023 179 www.miscgroup.com GOVERNANCE SECTION 12 Board Audit Committee Report Board Audit Committee Report MISC as a Group has been able to consistently achieve high percentage of closure for the audit findings through close monitoring thereof. The status of the audit corrective actions are reported to the BAC on a quarterly basis. In FY2023, a 89% closure rate was recorded, with the balance of 11% not due for implementation as at the end of 2023. GIA conducted quarterly reviews on the internal control process and reporting of RPTs and RRPTs to provide assurance to the BAC that its implementation conforms to the requirements of Bursa Securities. GIA also facilitated Project Independent Review (PIR) on a major project currently under execution. This is in conjunction with audits conducted by the counterparty or client as well as the regulatory authorities. The objectives of the PIR are as follows: • Providing an independent review of the status of the project in meeting its time, cost and quality of work; • Review project activities during the execution phase to verify compliance and readiness to meet the contractual, statutory and regulatory requirements, international and industrial standards as well as project specific procedures during execution phase; • Identifying significant gaps and providing recommendations to overcome any inadequacies; and • Highlighting good practices to be adopted for future projects. All internal audit activities for the financial year under review were performed by 25 internal auditors as of 31 December 2023 from diverse backgrounds, disciplines and operational experiences such as accounting and finance, business administration, human resource, engineering, information technology and logistics. In maintaining independence and objectivity, GIA ensures that the internal auditors are free from any relationship or conflict of interest when performing their duties. All auditors have declared their independence through the annual conflict of interest declaration. GIA continues its commitment to equip the internal auditors with adequate knowledge and proficiencies to discharge their duties and responsibilities by providing sufficient and relevant functional trainings. The total cost incurred in discharging the internal audit functions during FY2023 was RM9.5 million. STATEMENT ON INTERNAL AUDIT FUNCTION (CONT’D) RELATED PARTY TRANSACTIONS (RPT) AND RECURRENT RPT (RRPT) MISC has put in place internal controls, guidelines and procedures to ensure that RPTs and RRPTs are entered into on normal commercial terms and on terms which are not more favourable than those generally available to third parties dealing on arms’ length basis and are not detrimental to the minority shareholders of the Company. During the year under review, the BAC has reviewed the internal guidelines pertaining to the governance of RPTs and RRPTs as outlined above and is of the view that the said guidelines are sufficient to ensure that the RPTs and RRPTs are fair, reasonable and in the best interest of the Group. The BAC was satisfied that the Group has put in place adequate procedures and processes to monitor, track and identify RPTs and RRPTs in a timely and orderly manner to ensure that the RPTs and RRPTs were, at all times, carried out on normal commercial terms and consistent with the Group’s practices and were not to the detriment of the minority shareholders. The procedures and processes will be reviewed from time to time based on recommendations from the internal audit team of the Company. In ensuring adequate procedures and processes are in place, the BAC is responsible to ensure the following: a) That a framework and appropriate procedures are in place for the purposes of identifying, monitoring, evaluating, reporting and approving RPTs and RRPTs; b) That a review of any RPTs or RRPTs and conflict of interests that may arise within the Group is conducted; and c) That the established procedures are adequate in order to ensure that the RPTs and RRPTs are entered into in the best interest of the Company, on fair and reasonable commercial terms and not detrimental to the interest of minority shareholders. Due to integrated nature of MISC’s business operations with the PETRONAS Group, the Company has been granted exemption from complying with the requirement of Paragraphs 10.08 and 10.09 of the MMLR including having to seek shareholders’ approval in relation to the supply, sale, purchase, provision and usage of certain goods, services and facilities which form part of the PETRONAS Group integrated operations. The exemption is of particular significance to ensure MISC does not experience any disruption to its operations.
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