Audit Committee - TOR

HeveaBoard Berhad (275512-A)
AUDIT COMMITTEE - TERMS OF REFERENCE

The Terms of Reference are as follows:

1. OBJECTIVE

The primary objectives of the Audit Committee are to:-

a) Oversee the financial statements of the Group and the Company to ensure they present a true and fair view of the state of affairs of the Group and the Company and that they are prepared in accordance with applicable financial reporting standards and provisions of the Companies Act;

b) Review and assess the soundness and compliance of the internal control processes and risk management practices within the Group and the Company; 

c) Evaluate the internal and external audit process; and

d) Ensure the Group and the Company are in compliance with the Main Market Listing Requirements (“Listing Requirements”), accounting standards and other statutory requirements as amended from time to time.


2. COMPOSITION

2.1 The Audit Committee shall be appointed from amongst the Board and shall:-

 comprise no fewer than three (3) members; 
 comprise solely non-executive directors; and 
 all of them must be independent directors.

• At least one (1) member must be a member of the Malaysian Institute of Accountants or alternatively a person who must have at least 3 years’ working experience and has passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967, or is a member of one of the associations of accountants specified in Part II of the said Schedule, or alternatively a person who has fulfill such other requirements as prescribed or approved by Bursa Securities.

• The Audit Committee should possess a wide range of necessary skills to discharge its duties. All members should be financially literate and are able to understand matters under the purview of the Audit Committee including the financial reporting process.

• No alternate Director shall be appointed as a member of the Committee.

• A member shall automatically cease to be a member of the Audit Committee if he resigns or retires from the Board, or if he is removed or is disqualified from being a director under any provisions of the laws, rules and regulations of the relevant authorities.

• In the event of any vacancy resulting in non-compliance of the minimum of three (3) members requirement, the Board shall upon the recommendation of the Nomination Committee, appoint such number of Directors to fill up such vacancy within three (3) months of the event.

• A former key audit partner who was part of the engagement team who made key decisions or judgments on significant matters with respect of the audit of the financial statements of the Group and the Company, to observe a cooling-off period of at least two (2) years before being appointed as a member of the Audit Committee.

2.2 Chairman

The Chairman of the Audit Committee shall be elected from amongst the committee members. The Chairman must be an Independent Director and shall also not be the Chairman of the Board.

2.3 Secretary

The Company Secretary of the Company shall be the Secretary of the Audit Committee.


3. DUTIES AND RESPONSIBILITIES

Audit Committee should assume four (4) fundamental responsibilities:

i. Overseeing financial reporting

a.      Review of quarterly financial results

Review the unaudited quarterly financial results prior to submission to the Board, focusing particularly on:-

o significant financial reporting issues and judgements;
o the appropriateness of accounting policies, key judgements and fairness of management estimates and going concern assumptions;
o the material financial areas in which significant judgements have been made;
o changes in or implementation of major accounting policy and practices;
o compliance with financial reporting standards and governance requirements;
o other significant and unusual events; and
o the clarity of disclosures.

b.     Annual Financial Statements

(a) To review with the External Auditors on:-

o the Audit Plan, its scope and nature;
o the Audit Review Memorandum
o the Audit Report;
o the results of their evaluation of the accounting policies and system of internal accounting controls within the Group; and
o the assistance given by the officers of the Company to the External Auditors, including any difficulties or disputes with Management encountered during the audit.

(b) To review with Management on:-

o the Audit Report and management letters issued by the External Auditors and the implementation of audit recommendations;
o the interim financial information; and
o the assistance given by the officers of the Company to the External Auditors.

ii. Assessing the risks and control environment

a) Review the adequacy of the Group and the Company’s risk management framework and assess the resources and knowledge of the Management and employees involved in the risk management process;

b) Review the effectiveness of internal control systems deployed by the Management to address those risks;

c) Review and recommend corrective measures undertaken to remedy failings and/or weaknesses;

d) Review and further monitor principal risks that may affect the Group and the Company directly or indirectly and if deemed necessary, recommend additional course of action to mitigate such risks;

e) Review the actual and potential impact of any failing or weakness, particularly those related to financial performance or conditions affecting the Group;

f) Communicate to, and monitor risk assessment results for the Board; and

g) To provide assurance to the Board on the effectiveness of the system of internal control and risk management practices of the Group and the Company.

iii. Evaluating the internal and external audit process

● External Audit

a) To discuss with the External Auditors, prior to the commencement of audit, the audit plan which states the nature and scope of audit.

b) To review major audit findings arising from the interim and final external audits, the audit report and the assistance given by the Group’s officers to the External Auditors.

c) To review with the External Auditors, their evaluation of the system of internal controls, their management letter and management’s responses.

d) Performing annual review and assessment of the External Auditors’ performance, suitability, objectivity and independence and make recommendation to the Board for appointment, removal, or whether or not the External Auditors should be put forward for re-appointment at the Annual General Meeting.

e) Determine and monitor the type and level of non-audit services supplied by the External Auditors and its affiliates; and prohibit certain type of non-audit services to be rendered with guidance from the By-Laws (on Professional Ethics, Conduct and Practice) by the Malaysian Institute of Accountants (MIA).

f) Recommend the audit and non-audit fees based on the outcome of the annual assessment and quantum of audit work.

g) To review letter of resignation tendered by the External Auditors and reason of resignation.

● Internal Audit

a) To establish an Internal Audit Function which is effective and able to function independently.

b) The Internal Audit Function provides the Board, through the Audit Committee, reasonable assurance of the Group and the Company’s internal control, risk management and governance process.

c) The Audit Committee shall oversee all internal audit functions and is authorised to commission investigations to be conducted by internal audit as it deems fit.

d) The Internal Auditor shall report directly to the Audit Committee and shall have direct access to the Chairman of the Committee.

e) The Audit Committee shall review periodically the adequacy of the audit scope to ensure it is aligned with the strategies and risks of the Group and the Company, the resources and authorities made available to the Internal Auditor, and the competency of the outsourced Internal Audit provider, to ensure the Internal Audit Function remains effective.

f) All proposals by Management regarding the appointment, transfer or dismissal of the Internal Auditor shall require the prior approval of the Audit Committee.

iv. Reviewing conflict of interest situations and related party transactions

a) To monitor related party transactions (“PRT”) entered into by the Group or the Company.

b) To review conflicts of interest (“COI”) that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity.

c) To determines whether the RPT and/or COI situation are fair, reasonable, on normal commercial terms and in the best interest of the Group and the Company.


4. AUTHORITY

The Audit Committee, whenever necessary and reasonable for the performance of its duties, shall in accordance with the procedure determined by the Board and at the Company’s expenses:-

(a) have the authority to investigate any matter within its terms of reference;

(b) have the resources which are required to perform its duties;

(c) have full and unrestricted access to any information and personnel of the Group and the Company;

(d) have direct communication channels with the External Auditors and person(s) carrying out the internal audit function or activity;

(e) have the right to convene meetings with the Internal Auditors and External Auditors, excluding the attendance of the other Directors or employees of the Group, whenever deemed necessary;

(f) have the right to obtain independent professional or other advice at the Company’s expense;

(g) promptly report to Bursa Securities where a matters reported by the Audit Committee to the Board have not been satisfactorily resolved by the Board resulting in a breach of the Listing Requirements;

(h) have the right to pass resolutions by a simple majority vote from the Audit Committee and that the Chairman shall have the casting vote;

(i) meet as and when required on a reasonable notice;

(j) shall call for a meeting upon the request of the Internal and the External Auditors; and

(k) undertake continuous professional development to keep themselves abreast of relevant developments in accounting and auditing standards, practices and rules.


5. MEETINGS

• The Audit Committee shall meet at least four (4) times in each financial year or as and when required.

• The Internal Auditors and the External Auditors may also request a meeting if they consider necessary.

• Except in the case of an emergency, reasonable notice of every meeting shall be given in writing.

• The quorum for a meeting shall be two (2) members.

• The Internal Auditors, External Auditors, other Board members, relevant management personnel or external professional/ consultants may be invited to attend the meeting.

• The participation of the Audit Committee members in the meeting can be facilitated by means of video or telephone conferencing.

• Resolutions by a simple majority vote from the Audit Committee and that the Chairman shall have the casting vote.

• Minutes of meetings shall be taken and documented.

• The Audit Committee is also allowed to carry out the resolution by way of circulation.

• The Audit Committee should report to the Board after each meeting.


This Terms of Reference has been reviewed and adopted by the Board on 30 March 2018.