Audit Committee Report

   
COMPOSITION
   
Faizal Sham Bin Abu Mansor
(appointed on 6 December 2023)
(Chairman/Independent Non-Executive Director)

Datuk Seri Long See Wool
(Member/Independent Non-Executive Director)

Datuk Loo Took Gee
(Member/Independent Non-Executive Director)

Faiz Bin Ishak
(resigned on 30 November 2023)
(Chairman/Independent Non-Executive Director)
   
TERMS OF REFERENCE

Primary Purposes
   
The Committee shall:-
 
1. Provide assistance to the Board of Directors (“Board”) in fulfilling its fiduciary responsibilities relating to the corporate accounting and practices for YTL Power International Berhad and its subsidiaries (“Group”).
2. Assist to improve the Company and the Group’s business efficiency, the quality of the accounting function, the system of internal controls and the audit function to strengthen the confidence of the public in the Company’s and the Group’s reported results.
3. Maintain through regularly scheduled meetings, a direct line of communication between the Board and the external auditors as well as internal auditors.
4. Establish policies and procedures to assess the suitability, objectivity and independence of the external auditors.
5. Ensure that the internal audit function is effective and able to function independently.
6. Strengthen the role of the Independent Directors by giving them a greater depth of knowledge as to the operations of the Company and of the Group through their participation in the Committee.
7. Act upon the Board’s request to investigate and report on any issues or concerns in regard to the management of the Company and the Group.
8. Review the effectiveness of the policies and procedures for whistle-blowing and anti-corruption.
9. Instil discipline and control to reduce incidence of fraud.
   
Composition
   
1. The Committee shall be appointed by the Board from amongst their number and shall comprise no fewer than three (3) members, all of whom must be non-executive directors, with a majority of them being Independent Directors.
2. All members of the Audit Committee should be financially literate. At least one member of the Audit Committee:-
  (a) must be a member of the Malaysian Institute of Accountants; or
  (b) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years’ working experience and –
    (i) he must have passed the examinations specified in Part I of the First Schedule of the Accountants Act 1967; or
    (ii) 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
  (c) fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad (“Bursa Securities”).
3. The Board must ensure that no alternate Director is appointed as a member of the Audit Committee.
4. The members of the Committee shall elect a Chairman from amongst their number who shall be an Independent Director. The Chairman of the Committee shall not be the Chairman of the Board.
5. In the event of any vacancy in the Committee resulting in the non-compliance of sub-paragraph 15.09(1) of the Bursa Securities Main Market Listing Requirements (“Main LR”), the Company must fill the vacancy within three (3) months.
   
Authority
 
The Committee shall in accordance with the procedure determined by the Board and at the cost of the Company:-
   
1. have authority to investigate any matter 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 the Group;
4. have authority to review and approve the appointment, renewal of appointment, replacement or removal of the Head of Internal Audit who reports directly to the Committee;
5. have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity;
6. be able to obtain independent professional or other advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary;
7. be able to convene meetings with the internal auditors without the presence of other directors and employees of the Company, whenever deemed necessary; and
8. to meet with the external auditors at least twice a year without the presence of the other directors and employees of the Company.
   
Functions And Duties
   
The Committee shall, amongst others, discharge the following functions:-
   
1. Financial Reporting
  (a) Review the quarterly financial results and annual financial statements prior to its recommendation to the Board for approval, focusing particularly on:-
• changes in or implementation of major accounting policies and practices;
• significant matters highlighted including financial reporting issues, significant judgments made by management, significant and unusual events or transactions, and how these matters are addressed;
• the accuracy and adequacy of the disclosure of information essential to a fair and full presentation of the financial affairs of the Company and the Group;
• compliance with applicable approved accounting standards, other regulatory and legal requirements; and
• the going concern assumption.
   
2. External Audit
  (a) Review the audit plan, scope of audit and audit report with the external auditors;
  (b) Review with the external auditors their evaluation of the system of internal controls, during the course of their audit, including any significant suggestions for improvements and management’s response;
  (c) Review the assistance given by the employees of the Company to the external auditors;
  (d) Recommend the nomination of a person or persons as external auditors and the audit fee;
  (e) Review any letter of resignation from the external auditors of the Company;
  (f) Review whether there is reason (supported by grounds) to believe that the Company’s external auditors are not suitable for re-appointment;
  (g) Review any significant audit findings, reservations, difficulties encountered or material weaknesses reported by the external auditors.
   
3. Internal Audit
  (a) Review the adequacy of the scope, competency and resources of the internal audit function and that it has the necessary authority and resources to carry out its work;
  (b) Review the internal audit plan, processes, the results of the internal audit assessments, investigation undertaken and whether or not appropriate action is taken on the recommendations;
  (c) Review any significant audit findings, reservations, difficulties encountered or material weaknesses reported by the internal auditors.
   
4. Related Party Transactions
  (a) Review any related party transaction and conflict of interest situation that arose, persist or may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity, and the measures taken to resolve, eliminate or mitigate such conflicts.
   
5. Employees Share Option Scheme (“ESOS”)
  (a) Verify allocation of share options to the eligible employees pursuant to the criteria set out in the By-Laws of the ESOS in accordance to the Main LR.
   
6. Other Matters
  (a) Carry out any other function that may be mutually agreed upon by the Committee and the Board which would be beneficial to the Company/Group and ensure the effective discharge of the Committee’s duties and responsibilities;
  (b) Promptly report to Bursa Securities on any matter reported by it to the Board which has not been satisfactorily resolved resulting in a breach of the Main LR.
   
Meetings
   
1. To form a quorum in respect of a meeting of the Committee, the majority of members present must be Independent Directors.
2. The Committee shall meet at least five (5) times a year, although additional meetings may be called at any time at the discretion of the Chairman of the Committee. An agenda shall be sent to all members of the Committee and any other persons who may be required/invited to attend. All meetings to review the quarterly financial results and annual financial statements, shall be held prior to such quarterly financial results and annual financial statements being presented to the Board for approval.
3. Notwithstanding item 2 above, upon the request of any member of the Committee, the external auditors or the internal auditors, the Chairman of the Committee shall convene a meeting of the Committee to consider any matter which should be brought to the attention of the Directors or shareholders.
4. The external auditors have the right to appear and be heard at any meeting of the Committee and shall appear before the Committee when required to do so by the Committee.
5. The Committee may invite any Board member or any member of the management within the Company/Group whom the Committee thinks fit to attend its meetings to assist in resolving and clarifying matters raised in audit reports.
6. The internal auditors shall be in attendance at meetings of the Committee to present and discuss the audit reports of findings and the recommendations relating thereto and to follow up on decisions made at these meetings.
7. The Committee may establish any regulations from time to time to govern its administration.
   
Minutes
   
1. The Secretary shall cause minutes to be duly entered in the books provided for the purpose of all resolutions and proceedings of all meetings of the Committee. Such minutes shall be signed by the Chairman of the meeting 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 thereon stated.
2. Minutes of each meeting shall also be distributed to the members of the Committee prior to each meeting.
3. Detailed minutes of the Committee’s meetings will be made available to all Board members. A summary of significant matters and resolutions will be reported to the Board by the Committee.
4. The books containing the minutes of proceedings of any meeting of the Committee shall be kept by the Company at the registered office of the Company and shall be opened to the inspection of any member of the Committee or the Board.
   
Secretary
   
The Secretary to the Committee shall be the Company Secretary.
   
   
NUMBER OF MEETINGS HELD AND DETAILS OF ATTENDANCE

During the financial year, a total of 6 Audit Committee Meetings were held and the details of attendance are as follows:-
  Attendance
Faizal Sham Bin Abu Mansor 3/3
Datuk Seri Long See Wool 6/6
Datuk Loo Took Gee 6/6
Faiz Bin Ishak 3/3
   
   
SUMMARY OF WORK CARRIED OUT DURING FINANCIAL YEAR

The Audit Committee carried out the following work for the financial year ended 30 June 2024 in the discharge of its functions and duties:-
   
1. Financial Reporting
  (a) Reviewed the unaudited quarterly financial results and annual financial statements (“Financial Reports”) prior to its recommendation to the Board of Directors for approval;
  (b) In respect of the Financial Reports, the following matters were reviewed and discussed with management, with clarifications and/or additional information provided wherever required:-

• Appropriate accounting policies had been adopted and applied consistently, and other statutory and regulatory requirements had been complied with;
• The Company has adequate resources to continue in operation for the foreseeable future and that there are no material uncertainties that could lead to significant doubt as to the Group’s ability to continue as a going concern;
• Significant judgements made by management in respect of matters such as impairment assessment on goodwill, investment, property, plant and equipment and trade receivables, capitalisation policy of infrastructure assets in property, plant and equipment and post-employment benefit obligations and the underlying assumptions and/or estimates used were reasonable and appropriate in accordance with the requirements of the Malaysian Financial Reporting Standards (“MFRS”);
• Adequate processes and controls were in place for effective and efficient financial reporting and disclosures under the MFRS and Bursa Malaysia Securities Berhad Main Market Listing Requirements (“Listing Requirements”);
• The Financial Reports were fairly presented in conformity with the relevant accounting standards in all material aspects.
 
2. External Audit

  (a) Reviewed with the external auditors, PricewaterhouseCoopers PLT (“PwC”):-

• the audit plan for the financial year ended 30 June 2024 outlining, amongst others, significant developments that affects the Group’s business, their scope of work, areas of audit emphasis, multi-location audit, and development in laws and regulations affecting financial reporting and the roles and responsibilities of directors/audit committee members and auditors, as well as their latest transparency report;
• their status report, and final report on the audit of the financial statements for financial year ended 30 June 2024 setting out their comments and conclusions on the significant audit and accounting matters highlighted, including management’s judgements, estimates and/or assessments made, and adequacy of disclosures in the financial statements. The review also covered the report on the Information Technology (“IT”) General Controls review conducted on YTL Communications Sdn Bhd and an update on the prior financial year’s findings, and internal control matters highlighted by the external auditors that arose during the course of their audit;

  (b) Reviewed the audit fees proposed by PwC together with management and recommended the fees agreed with PwC to the Board of Directors for approval;
 
  (c) Had discussions with PwC without the presence of management twice on 19 August 2024 and 25 September 2024, to apprise on matters in regard to the audit and financial statements;
   
  (d) Reviewed the profiles of the audit engagement team from PwC, specialised audit support (taxation, advisory, and IT risk assurance) to assess their qualifications, expertise, resources, and independence, as well as the effectiveness of the audit process;
   
  (e) Reviewed on a regular basis, the nature and extent of the non-audit services provided by PwC and its affiliates and was satisfied with the suitability, performance, independence and objectivity of PwC. Endorsed and concurred with PwC’s conclusion that the provision of non-assurance services by PwC and its affiliates were permissible and did not impair their independence with respect to the Company and the Group;
   
  (f) Obtained written assurance from PwC that they have complied with the independence requirements and that their objectivity has not been compromised in accordance with regulatory and professional requirements;
   
  (g) Assessed performance of PwC for the financial year ended 30 June 2024 and recommended to the Board of Directors for re-appointment at the forthcoming annual general meeting.
   
3. Internal Audit
   
  (a) Reviewed with the internal auditors the internal audit reports (including follow-up review reports), the audit findings and recommendations, management’s responses and/or actions taken thereto and ensured that material findings were satisfactorily addressed by management. Also took note of the salient findings set out in the internal audit reports reviewed by the audit and risk committee and audit committee of Wessex Water Limited group and YTL PowerSeraya Pte. Limited respectively;
   
  (b) Reviewed and adopted the internal audit risk analysis report for 2023. Internal audit would leverage on the Group’s risk analysis to focus on the business processes and relevant areas that address the key risks identified. Risk management and internal control report of the significant associated corporation, P.T. Jawa Power was also submitted to the Audit Committee;
   
  (c) Reviewed the Anti-Bribery and Corruption Risk Assessment reports to effectively managing the risks identified within the Group;
   
  (d) Reviewed and adopted the risk-based internal audit plan for financial year ending 30 June 2025 to ensure sufficient scope and coverage of activities of the Company and the Group;
   
  (e) Reviewed internal audit resourcing, with focus on ensuring that the function has sufficient resources together with the right caliber of personnel to perform effectively and that the head of internal audit has adequate authority to discharge his functions objectively and independently;
   
  (f) Reviewed the Internal Audit Charter to enhance and upgrade the internal audit activities to be consistent with the mandatory elements of the Institute of Internal Auditors International Professional Practices Framework, including its Standards Core Principles for the Professional Practice of Internal Auditing, Definition of Internal Auditing and Code of Ethics, prior to its recommendation to the Board of Directors for approval.
   
4. Related Party Transactions
   
  (a) Reviewed, on a quarterly basis, the recurrent related party transactions of a revenue or trading nature (“RRPTs”) entered into by the Company and/or its subsidiaries with related parties to ensure that the Group’s internal policies and procedures governing RRPTs are adhered to, the terms of the shareholder mandate are not contravened, and disclosure requirements of the Listing Requirements are observed;
   
  (b) Reviewed the circular to shareholders in relation to the renewal of shareholder mandate for existing RRPTs and new shareholder mandate for additional RRPT, prior to its recommendation to the Board of Directors for approval.
   
5. Annual Report
   
  Reviewed the Audit Committee Report, and Statement on Risk Management and Internal Control before recommending these to the Board of Directors for approval for inclusion in 2024 Annual Report.
   
6. Amendments to Terms of Reference (“TOR”)
   
  Reviewed the proposed amendments to its TOR to reflect revised Paragraph 15.12(1)(h) of the Listing Requirements pertaining to the expanded scope of work or function of the audit committee in the review of conflict of interest situations, prior to its recommendation to the Board of Directors for approval.
   
7. Conflict of Interest (“COI”)
   
  (a) Reviewed and adopted a COI Policy, together with the ‘COI Declaration Form’ for the purpose of identifying, evaluating, disclosure/reporting, monitoring, maintenance and management of COI situations.
   
  (b) Reviewed the disclosure of actual or potential COI, including interest in any competing business, submitted by the Directors and key senior management of the Company and the Group via the ‘COI Declaration Form’ to the Secretary, who then escalated the same to the Audit Committee for assessment, conflict management and/or mitigation. There were four potential COI identified arising from declarants’ interest in competing businesses in water and sewerage, and solar energy businesses. Such potential COI will be monitored by the Audit Committee and necessary action taken as required. The Board was informed of these.
   
   
INTERNAL AUDIT FUNCTION

The Group’s internal audit function is carried by the internal audit department within the YTL Corporation Berhad Group (“YTLIA”), which provides assurance on the efficiency and effectiveness of the internal control systems implemented by management, and reports functionally to the Audit Committee of the Company.

Every YTLIA team member has confirmed that they are free from conflict of interest or any relationship that could impair their objectivity and independence as internal auditors.

The Audit Committee reviews annually the adequacy of the scope, function, competency and resources of YTLIA to ensure that it is able to fully discharge its responsibilities. Details of the resources and qualifications of the head of YTLIA are set out in the Corporate Governance Report.

During the year, the YTLIA evaluated the adequacy and effectiveness of key controls in responding to risks within the organisation’s governance, operations and information systems regarding:-
   
• reliability and integrity of financial and operational information;
• effectiveness and efficiency of operations;
• safeguarding of assets; and
• compliance with relevant laws, regulations and contractual obligations.
   
The work of the internal audit function during the year under review include the following:-
   
1. Developed the annual internal audit plan and proposed the plan to the Audit Committee.
   
2. Conducted scheduled and special internal audit engagements, focusing primarily on the adequacy and effectiveness of internal controls and recommended improvements where necessary.
   
3. Conducted follow-up reviews to assess if appropriate action has been taken to address issues highlighted in previous audit reports.
   
4. Presented significant audit findings and areas for improvements to the Audit Committee for consideration on the recommended corrective measures together with the management’s response.
   
5. Conducted RRPT reviews to assess accuracy and completeness of reporting for presentation to the Audit Committee, and ensure compliance with the Listing Requirements.
   
6. Conducted discussions with management in identifying significant concerns and risk areas perceived by management for inclusion in the internal audit plan.
   
7. Conducted discussions with management to identify, analyse, assess and prioritise the internal and external corruption risks, for the purpose of establishing appropriate processes, systems and controls to mitigate the specific corruption risks exposure.
   
Costs amounting to RM2,149,061 were incurred in relation to the internal audit function for the financial year ended 30 June 2024.