Terms of Reference of Audit Committee - K-one | One-Stop Technology Solutions Provider

Terms of Reference of Audit and Risk Management Committee

In line with the best practice of Corporate Governance, the Audit and Risk Management Committee is governed by the following terms of reference:-

1. Composition

The Board of Directors (the “Board”) established the Audit Committee on 3 February 2005 which was restructured as the Audit and Risk Management Committee in 2018.

The Audit and Risk Management Committee shall be appointed by the Board from amongst its Directors on the recommendation of the Nomination Committee and in consultation with the Chairman of the Audit and Risk Management Committee (“Audit and Risk Management Committee Chairman”).

The Audit and Risk Management Committee shall comprise of at least three (3) members. All the Audit and Risk Management Committee members must be Non-Executive Directors, with a majority of them being Independent Directors. No Alternate Director shall be appointed as a member of the Audit and Risk Management Committee.

The Audit and Risk Management Committee Chairman, who shall be elected by the Audit and Risk Management Committee, shall be an Independent Director.

All the Audit and Risk Management Committee members should be financially literate and at least one (1) member of the Audit and Risk Management Committee:

1. Must be a member of the Malaysian Institute of Accountants (“MIA”); or
2. If he/she is not a member of MIA:
  1. He/she must have at least three (3) years’ working experience; and:
    1. He/she must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or
    2. He/she must be a member of one (1) of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act, 1967; or
  2. He/she must have a degree/masters/doctorate in accounting or finance and at least three (3) years’ post qualification experience in accounting or finance; or
  3. He/she must have at least seven (7) years’ experience as a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation; or
  4. He/she fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.

The Nomination Committee must review the terms of office and performance of the Audit and Risk Management Committee and each of its members every year to determine whether the said Audit and Risk Management Committee and its members have carried out their duties in accordance with their terms of reference.

In the event of any vacancy with the result that the number of members is reduced to below three (3), the vacancy shall be filled within three (3) months. Therefore, any member of the Audit and Risk Management Committee who wishes to retire or resign shall provide sufficient written notice to the Company so that a replacement may be appointed before he/she leaves.

The Chairman of the Board should not be a member of the Audit and Risk Management Committee.

2. Attendance and Frequency of Meeting

1. The Audit and Risk Management Committee shall meet at least four (4) times in each financial year although additional meetings may be called at any time at the discretion of the Audit and Risk Management Committee Chairman.
2. The quorum for a meeting shall be two (2) members of the Audit and Risk Management Committee.
3. The majority of members present at the meeting shall be Independent Directors. The Head of Finance, the Head of Internal Audit and a representative of the External Auditors shall normally attend the meetings. Other Board members may attend such meetings upon the invitation of the Audit and Risk Management Committee. The Audit and Risk Management Committee may choose to meet with the External Auditors without the presence of any Executive Board member if it sees fit and necessary.

3. Procedures of Meetings

1. The Audit and Risk Management Committee Chairman shall preside at all meetings. In his absence, the Audit and Risk Management Committee members present shall elect among themselves an Independent Director to be the Chairman of the meeting.
2. The Audit and Risk Management Committee may call for a meeting as and when required with reasonable notice as the Audit and Risk Management Committee deem fit.
3. The Company Secretary shall be the Secretary of the Audit and Risk Management Committee and shall be responsible, in conjunction with the Audit and Risk Management Committee Chairman, for drawing up the agenda and circulating it to the members prior to each meeting.
4. All decisions are determined by a majority of votes. In case of equality of votes, the Audit and Risk Management Committee Chairman shall have a casting vote.
5. A resolution in writing signed by a majority of the Audit and Risk Management Committee members and constituting a quorum shall be effective as a resolution passed at a meeting of the Audit and Risk Management Committee.

4. Minutes of Meetings

1. The Company Secretary shall be responsible for keeping the minutes of meetings of the Audit and Risk Management Committee and circulating them to the Audit and Risk Management Committee members. The Audit and Risk Management Committee members may inspect the minutes of the Audit and Risk Management Committee at the Registered Office or such other place as may be determined by the Audit and Risk Management Committee.

5. Authority

The Audit and Risk Management Committee shall:-

1. Have the 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.
4. Have direct communication channels with the External Auditors and person(s) carrying out the internal audit function or activity.
5. Be able to obtain independent, professional or other advice.
6. 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.

6. Functions

The Audit and Risk Management Committee provides by way of regular meetings, a line of communication relating to the Group’s management of internal controls, risk management, accounting policies and financial reporting between the Board and the Group’s Internal and External Auditors.

The functions of the Audit and Risk Management Committee shall include the following:-

1. Reviewing with the External Auditors on the following and report the same to the Board:
  1. audit plan, its scope and nature;
  2. audit report;
  3. results of their evaluation of accounting policies and system of internal controls within the Group;
  4. management letter and management’s response; and
  5. major audit findings arising from interim and final external audits, audit report and assistance given by the Group’s officers to the External Auditors.
2. Performing the following in relation to the internal audit function:-
  1. review adequacy of scope, functions, competency and resources and setting of performance standards of the internal audit function;
  2. review internal audit, processes, results of internal audit or investigation undertaken and whether or not appropriate action has been taken on the recommendations of the internal audit function;
  3. review major findings of internal audit investigations and management’s response and ensure that appropriate actions are taken on the recommendations of the internal audit function;
  4. review any appraisal or assessment of the performance of members of the internal audit function; and
  5. review and approve any appointment or termination of senior staff members of the internal audit function and take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning.
3. Reviewing with Management, External Auditors and Internal Auditors of the Company’s general policies and procedures to reasonably assure the adequacy of internal accounting and ﬁnancial reporting controls.
4. Reviewing risk management development under the internal audit function.
5. Reviewing with Management:
  1. the audit reports and the implementation of audit recommendation; and
  2. interim financial information.
6. Reviewing related party transactions (if any) entered into by the Company or the Group to be undertaken on an arm’s length basis and normal commercial terms and on terms not more favourable to the related parties than those generally available to the public and to ensure that the Directors report such transactions annually to shareholders via the Annual Report and to review conflict of interest situations that arose, persist or may arise within the Company or the 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.
7. Reviewing quarterly results and annual financial statements prior to approval by the Board, focusing on:-
  1. changes in or implementation of major accounting policies;
  2. significant and unusual events;
  3. the going concern assumption; and
  4. compliance with accounting standards and other legal requirements.
8. Reviewing and reporting to the Board any letter of resignation from the External Auditors of the Group as well as whether there is any reason (supported by grounds) to believe that the Group’s External Auditors are not suitable for re-appointment.
9. Reviewing with Management the adequacy of its bribery and corruption risk management, including the results of audit, risk assessment and control measures.
10. Making recommendations concerning the appointment of External Auditors and their remuneration to the Board.
11. Verifying the allocation of options for compliance with the criteria pursuant to the Employees’ Share Option Scheme of the Company.
12. Promptly reporting to Bursa Malaysia Securities Berhad on any matter reported by the Audit and Risk Management Committee to the Board which has not been satisfactorily resolved resulting in a breach of the Listing Requirements.

7. Reporting Responsibilities

The Audit and Risk Management Committee Chairman shall formally report to the Board on its proceedings after each meeting on all matters within its duties and responsibilities as well as how it has discharged its responsibilities. This report shall include:-

1. the significant issues that it considered in relation to the financial statements and how these were addressed;
2. its assessment of the effectiveness of the external audit process and its recommendation on the appointment or reappointment of the External Auditor; and
3. any other issues on which the Board has requested the Audit and Risk Management Committee’s opinion.

The Audit and Risk Management Committee shall prepare a yearly report to the Board that provides a summary of the activities of the Audit and Risk Management Committee for inclusion in the Company’s annual report.

These terms of reference were reviewed and approved by the Audit and Risk Management Committee and the Board on 27 November 2023.