KENANGA ANNUAL REPORT 2017

3.3 Internal Audit a. The AC at its meeting on 25 January 2017 had reviewed and approved the 2017 Audit Plan tabled by Group Internal Audit (“ GIA ”) after considering the adequacy of scope and comprehensiveness of the coverage of activities within Kenanga Group, as well as the adequacy of resources in the internal audit department. b. In 2017, the AC had reviewed and deliberated on a total of fifty-nine (59) internal audit reports (including twenty-one (21) special reviews) in relation to the audits carried out by GIA, together with the audit recommendations made by GIA and the Management’s responses to those recommendations. Where appropriate, the AC directed Management to rectify and improve the control and workflow procedures based on GIA’s recommendations and suggestions for improvement. The AC, at all its quarterly meetings, also reviewed the implementation status of the corrective actions arising from the audit recommendations to ensure that the key risks and control lapses were addressed in a timely manner. c. With a view of continuously enhancing the processes of the internal audit department, the AC had on 25 October 2017 reviewed and approved the updated Internal Audit Manual. d. For the purpose of evaluating the performance of the GCIA, the AC had at its meeting on 25 January 2018, reviewed and deliberated on the GCIA’s 2017 Performance Appraisal, as well as 2018 Balanced Scorecard, prior to submission of the same to the Group Nomination and Remuneration Committee for its further recommendation to the Board for approval. The AC’s recommendation was subsequently approved by the Board on 30 January 2018. 3.4 Regulatory Examinations/Inspection Report a. As stipulated in its TOR, the AC also deliberates on reports issued by the regulators arising from their examinations or inspections on entities within Kenanga Group. This is to ensure proper implementation of appropriate remedial and corrective measures in respect of the findings arising from examinations/ inspections conducted by the regulators. b. During the year, at its meeting on 25 January 2017, 20 April 2017 and 25 October 2017, the AC had deliberated on three (3) regulatory examinations/ inspection reports issued by Bursa Malaysia Berhad, BNM and the Securities Commission Malaysia respectively. In its deliberation, the AC not only discussed in detail the findings, areas for enhancement and recommendation made by the regulators, but also on the action plans identified by Management to address those findings. 3.5 Related Party Transactions During its quarterly meetings, the AC also reviewed the related party transactions entered into by the Company and/or its group of companies to ensure compliance with the MMLR. 4. INTERNAL AUDIT FUNCTION 4.1 The Company has an in-house audit function within Kenanga Group. In discharging its responsibilities, GIA, which reports functionally to the AC and administratively to the Group Managing Director, provides independent and objective assurance to the Board and Management that the policies, procedures and operations that Management has put in place for risk management, control and governance are adequate, operating effectively and efficiently, and in compliance with prescribed laws and regulations. 4.2 During the year under review, GIA carried out internal audit reviews based on its 2017 Audit Plan as approved by the AC. This Audit Plan was developed using a risk-based methodology. The audit reviews conducted by GIA included financial and operational audits, IT/technical audits and compliance audits on regulatory requirements. In addition, GIA also conducted project reviews and/or provided consulting functions covering new business products/ services and system implementation to ensure the adequacy of controls put in place prior to implementation. 4.3 GIA also conducted special reviews at the request of the AC, Management or regulators. In 2017, GIA had conducted twenty-one (21) such reviews and escalated the reports arising therefrom to the AC, as well as the relevant Boards of affected entities, for deliberation and action, wherever necessary. 4.4 All Internal Audit reports, detailing the audit findings, audit recommendations, as well as Management’s responses to those recommendations were circulated to the Group Managing Director and Heads of the respective Divisions/ Departments within Kenanga Group. Follow-up reviews were performed on the implementation status of the audit recommendations and reported to the AC accordingly. 4.5 The total costs incurred by GIA in discharging its functions and responsibilities in 2017 amounted to RM3.25 million compared to RM2.28 million incurred in 2016. The increase in cost incurred was due to the increase in GIA’s headcount to facilitate the increase in reviews arising from the expansion of Kenanga Group’s business operations and industry wide reviews requested by regulatory bodies. 4.6 As at 31 December 2017, GIA’s headcount was eighteen (18). Annual Report 2017 63 audit committee report