AUDIT COMMITTEE TERMS OF REFERENCE

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OBJECTIVES

The principal objective of the Audit Committee (“the Committee”) is to assist the Board of Directors “the Board” in discharging its statutory duties and responsibilities relating to accounting and reporting practices of Engtex Group Berhad (“the Company”) and its subsidiaries (“the Group). In addition, the Committee shall: - 
   a) oversee and appraise the quality of the audits conducted by both the Company’s internal and external auditors;  
  b) maintain open lines of communication between the Board of Directors, the internal auditors and the external auditors for the exchange of views and information, as well as to confirm their respective authority and responsibilities; and
   c) determine the adequacy of the Group’s administrative, operating and accounting controls.

 

COMPOSITION

The Committee shall be appointed by the Board from among their members which fulfils the following requirements:
 
  a)  The Committee must composed of no fewer than three members;
  b) All the Audit Committee members must be Non-Executive Directors, with a majority of them being independent directors; and
  c) At least one member of the Committee
   

i) 

must be a member of the Malaysian Institute of Accountants; or
    ii)  if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years’ working experience and:-
     
  • he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act, 1967; or
  • he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act, 1967; or
     iii)   fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad (“Bursa Securities”).

 

The members of the Committee shall elect a chairman from among their members who shall be an independent director. In the event of any vacancy in the Committee resulting in the non-compliance of item (a) to (c) above, the vacancy must be filled within 3 months of that event.

 

The Board must review the terms of office and performance of the Committee and each of its members at least once in every three years to determine whether such Committee and its members have carried out their duties in accordance with their terms of reference.
 

  

 
FUNCTIONS
The functions of the Committee are as follows: -
  a)  The Committee shall review, appraise and report to the Board on:
   
  • the discussion with the external auditors, prior to the commencement of audit, the audit plan which states the nature and scope of the audit and to ensure co-ordination of audit where more than one audit firm is involved;
  • the review with the external auditors, his evaluation of the system of internal controls, his management letter and management’s response;
  • the discussion of problems and reservations arising from the external audits, the audit report and any matters the external auditors may wish to discuss;
  • the assistance given by the employees of the Group to the external and internal auditors; and
  • any related party transaction and conflict of interest situation that may arise within the Group or Company, including any transaction, procedure or course of conduct that raises questions of management integrity.
  b) To review where appropriate whether there is a reason to believe that the Group’s external auditors is not suitable for re-appointment.
  c)  To consider any question of resignation or dismissal of the external auditors.
  d) To review quarterly reporting and year end financial statements of the Group before submission to the Board, focusing particularly on: -
   
  •  changes in or implementation of major accounting policy;
  • significant adjustments arising from the audit
  • the going concern assumption; and
  • compliance with accounting standards and other legal requirements.
  e) To review the following in respect of internal audit function: -
   
  • Adequacy of the scope, functions, competency and resources of the Internal Audit Department and that it has the necessary authority to carry out its work;
  • Internal audit programmes;
  • The major findings of internal audit investigations and management’s responses, and ensure that appropriate actions are taken on the recommendations of the Internal Audit Department;
  • Appraisal or assessments of the performance of the senior staff of the Internal Audit Department;
  • Approval of any appointment or termination of senior staff member of the Internal Audit Department; and
  • Resignations of senior internal audit staff members and providing the resigning staff member an opportunity to submit his/her reason for resignation.
  f) To consider the major findings of internal investigations and management’s response.
  g) To recommend the nomination and appointment of external auditors as well as the audit fee.
  h) To promptly report any matters resulting in the breach of the Bursa Securities Listing Requirements to the Board. Where the Committee is of the opinion that such matter reported by it to the Board has not been satisfactorily resolved, the Committee shall promptly report such matter to Bursa Securities.
  i) Any other function that may be mutually agreed upon by the Committee and the Board, which would be beneficial to the Company and ensure the effective discharge of the Committee’s duties and responsibilities.

 

AUTHORITY

The Committee is authorised by the Board:
  a)  to investigate any matter within its terms of reference;
  b)  to have the resources which are required to perform its duties;
  c) to have full and unrestricted access to any information it seeks as relevant to its activities from any employees of the Group;
  d) to have direct communication channels with the external auditors and the Company’s Internal Audit Department.
  e) to seek and accept independent professional advice and to secure the attendance of outsiders with relevant experience and expertise as it considers necessary; and
  f) to be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

 

MEETINGS

The quorum for the meeting is two members of the Committee, the majority of members present must be Independent Non-Executive Directors. The Company Secretary, the Chief Financial Officer and the Head of the Internal Audit Department are normally invited to attend all the meetings. Representatives of the external auditors are also invited from time to time to brief the Committee on related audit matters. Other directors, officers and employees of the Group may be invited to attend certain sections of the meetings as determined by the Committee.

 

The Committee shall meet at least 4 times a year and such additional meetings as the Chairman shall decide in order to fulfil its duties. In addition, the Chairman may call a meeting of the Committee if a request is made by any Committee member, the internal auditors or the external auditors.

 

The Company Secretary or other appropriate senior officers shall act as secretary of the Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it, supported by explanatory documentation to all committee members prior to each meeting. The Company Secretary shall also be responsible for keeping the minutes of meetings of the Committee, and circulating them to committee members and to the other members of the Board of Directors. Minutes of the meetings must be signed by the Chairman of the meetings and kept at the registered office of the Company.