Terms of Reference for Audit Risk Management Committee (ARMC)
The Board’s Audit Risk Management Committee (“ARMC” or “the Committee”) is established as a Committee of the Board pursuant to Article 121 (a) of the Company’s Constitution and integrates the functions of a risk management committee required by Malaysian Code on Corporate Governance.
1. The ARMC shall be appointed by the Board of Directors and shall be comprised of a minimum of three (3) Directors subject to a maximum of five (5) Directors or such number as may be determined by the Board of Directors from time to time.
2. All ARMC members must be Non Executive Directors, with a majority of them being Independent Directors as defined in Bursa Malaysia Securities Berhad’s Listing Requirements.
3. The members of the ARMC shall elect a Chairman from among themselves who shall be an Independent Director and shall not be the Chairman of the Board; and
4. No former key audit partner shall be appointed as a member of the ARMC before observing a cooling-off period of at least two (2) years before being appointed as a member of the ARMC. For the purpose of the foregoing, a former key audit partner means the engagement partner, the individual who is responsible for the engagement of quality control review and other audit partners, if any, on the engagement team who make key decisions and/or judgments on significant matters with respect to the audit of the financial statements on which the auditor will express an opinion.
5. At least one (1) member of the ARMC:-
i) must be a member of the Malaysian Institute of Accountants (‘MIA’), or
ii) if he is not a member of the MIA, he must have at least 3 years’ working experience and:-
(a) he must have passed the examinations specified in Part I of the First Schedule of the Accountants Act, 1967; or
(b) he must be a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act, 1967; or
iii) fulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.
6. No Alternate Director shall be appointed as a member of the ARMC.
7. If a member of the ARMC retires, resigns, dies or for any reason ceases to be a member resulting in the non-compliance of paragraph 1 and 4 above, the Board shall within three (3) months of these events, fill the vacancy.
8. The company secretary or such other person as the ARMC may determine shall be the Secretary of the ARMC.
It is the policy of Company to establish an ARMC to provide assistance to the Board in relation to fulfillment of the Board’s statutory as well as fiduciary responsibilities and ensure that the internal and external audit functions of the Group are being carried out adequately and effectively.
III. DUTIES AND FUNCTIONS
The ARMC shall review, report and make recommendations to the Board on the following matters:-
1. The appointment of the external auditors, the audit fee and any questions of re-appointment, resignation or dismissal and in particular to assess the suitability and independence of the external auditors on an annual basis.
2. To review with the external auditors:-
the audit plan and the audit reports;
their evaluation of the system of internal controls;
their audit report;
their management letter and management’s response;
the assistance given by the Company's employees to the external auditors; and
to discuss problems and reservations arising from the interim and final audit, and any matter the auditors may wish to discuss (in the absence of management where necessary).
3. To review:-
changes in or implementation of major accounting policies and practices;
significant matters highlighted including financial reporting issues, significant judgements made by management, significant and unusual events or transactions and how these matters are addressed;
the going concern assumption; and
compliance with applicable financial and accounting reporting standards and other legal requirements.
4. Establishment of an internal audit function which is independent of the activities it audits and in relation thereto:-
ensure that the head of the internal audit function reports directly to the ARMC;
review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work;
review the internal audit plan, processes, the results of the internal audit assessment or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;
review any appraisal or assessment of the performance of members of the internal audit function and the Continuing Professional Education attended by them;
approve any appointment or termination of senior staff members of the internal audit function and remuneration or fee of internal audit function;
inform itself of changes in personnel of the internal audit staff members and make available the opportunity for resigning staff members to submit his reasons for resigning; and
conduct regular reviews and appraisals of the effectiveness of the governance, risk management and internal controls processes within the company to ensure internal audit are carried out in accordance with recognized framework.
5. To propose best practices on disclosure in financial results and annual reports of the Company in line with the principles and spirit set out in the Malaysian Code of Corporate Governance, other applicable laws, rules, directives and guidelines.
6. In relation to risk management, the functions of ARMC shall include :-
a) Review, assess, formulate and recommend risk management strategies, framework, policies, processes, tolerance and risk appetite limits to the Board;
b) Monitoring of Group risk exposures to ensure implementation and compliance with approved risk policies and processes of the Group, and to ensure that significant risks identified are being responded to appropriately;
c) Review status of management action in mitigating significant risks identified;
d) Review and assess the adequacy and effectiveness of the risk management structure, approved risk policies, processes, and support system and to recommend such changes as may be deemed necessary to the Board;
e) Review and assess the risks associated with all proposed strategic transactions of the Group and report the same to the Board for its deliberation of the transaction; and
f) To coordinate on the activities of the internal audit function of the Group in relation to the review of risk management activities and to ensure significant business risks are adequately managed by the Group;
7. In relation to sustainability management, the functions of ARMC shall include to :-
a. Oversee the implementation by Risk & Sustainability Management Committee (“RSMC”) of sustainability strategy approved by the Board and to report the review results and recommendations to the Board for decision;
b. Review the process and results of sustainability matters identification, assessment and management conducted by RSMC and to report the review results and recommendations to the Board for decision;
c. Conduct periodic review of the material sustainability matters of the Group (at least on an annual basis) and determine the adequacy of the response and the current standing of the material sustainability matters and reporting the review results and recommendations to the Board for decision;
d. Review the need to conduct full sustainability review by RSMC and recommend to the Board for decision;
e. Conduct periodical review of the adequacy and effectiveness of the Group’s sustainability governance structure and process to identify, assess and manage sustainability matters and reporting the review results and recommendations to the Board for decision;
f. Oversee the overall management of stakeholder engagement;
g. Oversee the identification of the material sustainability matters’ indicator and establishment of the target and the review of sustainability disclosures as required by laws and/or rules, and recommending it for the Board's approval; and
h. Direct the internal and external assurance function of the Group in relation to sustainability management and ensuring the adequacy of the resources and competency of the assurance functions.
The ARMC is authorised by the Board to :-
1. investigate any matter or activity within its terms of reference;
2. have the resources which are required to perform its duties;
3. have full and unrestricted access to any information pertaining to the Company and Group;
4. have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any);
5. obtain independent professional or other advice when needed and to secure the attendance of third parties with relevant experience and expertise if it considers this necessary; and
6. convene meetings with the external auditors, the internal auditors or both, excluding the attendance of the other directors and employees of the Company, whenever deemed necessary.
V. PROCEDURE OF ARMC
1. The ARMC may meet together for the despatch of business, adjourn and subject to Article 121 otherwise regulate their meetings as they think fit, provided that the ARMC shall meet at least four (4) times in a calendar year.
2. Any member of the ARMC may at any time and the Secretary shall on such request summon a meeting of the Committee.
3. At least seven (7) days’ notice of a meeting of the ARMC shall be given to all ARMC Members in writing at his last known address or other address given by him for the purpose. The ARMC Members may meet on shorter notice and waive notice of any meetings as they deem necessary subject to the consent and agreement of all ARMC Members.
The quorum necessary for the transaction of business shall be two (2) comprised of a majority of Independent Directors.
4. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in the case of an equality of votes, the chairman of the meeting shall not have a casting vote.
5. The external auditors may request a meeting if they consider that one is necessary and the Chairman upon such request will convene a meeting for the purpose.
The external auditors shall have the right to appear and be heard at any meetings of the ARMC.
The ARMC shall meet with the external auditors at least twice a year and as and when deemed necessary without the presence of any executive Board member or management.
6. The Chief Financial Officer Designate / Head of Finance, the Head of Internal Audit shall normally attend meetings or be excluded at the discretion of the Chairman. The Chairman shall, where he deems appropriate, invite any other Board members, employees, third party professionals and/or any person(s) with the relevant experience and expertise to attend any meetings of the ARMC.
7. The ARMC shall cause minutes to be duly entered into books provided for the purposes:-
i) of the names of all ARMC members and other participants at each meeting of the ARMC;
ii) of all resolutions and proceedings of ARMC meetings; and
iii) of all orders, recommendations and reports made by the ARMC.
Such minutes shall be signed by the Chairman of the ARMC at which the proceedings were held or by the Chairman of the next succeeding meeting, and if so signed, shall be conclusive evidence without any further proof of the facts therein stated.
8. The books containing the Minutes of proceedings of the ARMC shall be kept by the Company at the Registered Office of the Company subject to the provisions of the Companies Act, 2016, relating to keeping of Minutes of the Board of Directors and any Committee of the Board of Directors.
The Nomination and Remuneration Committee of the Company must review the term of office and performance of the ARMC and each of its members annually to determine whether the ARMC and members have carried out their duties in accordance with their terms of reference.