Term of Reference of Audit Committee

The Board of Directors of MNRB Holdings Berhad has established an Audit Committee drawn from amongst its members. The Terms of Reference of the Audit Committee are as follows:-

  1. OBJECTIVES
    1. To provide additional assurance to the Board by rendering objective and independent review of financial, operational as well as administrative controls and procedures.
    2. To assist the Board in establishing and maintaining internal controls for areas of risks as well as safeguarding of assets.
    3. To assess and supervise the quality of audits conducted by the Internal and External Auditors.
  2. MEMBERSHIP
    1. COMPOSITION
      1. The Audit Committee shall be appointed by the Board and shall comprise at least three (3) members of whom a majority shall be independent directors.
      2. If for any reason the number of members at any point in time is reduced to below three, the Board shall fill the vacancies within three months.
      3. The Board, on recommendation of the Nomination Committee, shall elect a Chairman from among the members, who shall be an independent director.
    2. QUALIFICATION
      1. At least one member of the Audit Committee:-
        1. must be a member of the Malaysian Institute of Accountants; or
        2. if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years’ working experience and:
          1. he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or
          2. he must be a member of one of the associations of accountants specified in Part 11 of the 1st Schedule of the Accountants Act 1967.
    3. INDEPENDENCE OF MEMBERS
      1. No member of the Audit Committee shall be employed in an executive position in the MNRB Group or its related corporations or otherwise have a relationship which in the opinion of the Board will interfere with the exercise of independent judgment in carrying out the functions of the Audit Committee.
      2. Members of the Audit Committee shall not be directly responsible for, or part of any committee involved in, the management functions of the MNRB Group.
    4. TERM OF OFFICE
      1. Term of office shall be reviewed no less than once every year by the Nomination Committee for subsequent approval by the Board.
  3. AUTHORITY
    1. The Audit Committee shall have the authority to investigate any matter within its Terms of Reference and shall have unlimited access to all information and documents relevant to its activities, to both the Internal and External Auditors, as well as to all employees of the Company.
    2. The Audit Committee shall be kept regularly updated on audit matters and be notified immediately of any fraud and significant irregularities or internal control deficiencies discovered by Management or the Internal Audit department. Any fraud or irregularities discovered by Management shall be referred to the Internal Audit Department for investigation.
    3. The Audit Committee shall have access to copies of audit reports (including interim financial audits) on a timely basis and shall be kept regularly informed of corrective actions arising from internal and external audit findings.
    4. The Audit Committee shall have adequate resources to perform its duties and discharge its responsibilities.
    5. The Audit Committee shall also have the authority to obtain independent legal or other professional advice, as it considers necessary.
  4. FUNCTIONS, DUTIES AND RESPONSIBILITIES
    1. INTERNAL AUDIT
      1. GOVERNANCE
        1. The Audit Committee shall:-
          i.ensure that the internal audit department is distinct and has the appropriate status within the overall organisational structure for the Internal Auditor to effectively accomplish their audit objectives;
          ii.ensure the effective organisation of the internal audit function, with due regard to the professionalism, capacity and competence of the internal audit personnel;
          iii.review and approve the audit plan, audit charter and budget; and
          iv.ensure that reporting relationships of the internal audit staff do not impede the exercise of independent judgement by the Internal Auditors. In particular, internal audit reports should not be subject to the clearance of the Group CEO/ Chief Executive Officer or any executive director.
        2. The Audit Committee shall also review the scope of internal audit procedures, in particular:-
          i.any restrictions placed on access by the Internal Auditors to any of the Company’s records, assets, personnel or processes which are relevant to the conduct of audits;
          ii.appropriateness of the risk assessment methodology employed pursuant to BNM/RH/GL/013-4: Guidelines on Internal Audit Function of Licensed Institutions to determine the frequency and scope of audits, having regard to the nature, size and complexity of the Company’s operations;
          iii.compliance with internal auditing standards; and
          iv.coordination between Internal and External Auditors.
        3. Audit Committee members shall ensure that they are adequately informed of, and understand, the risks and implications of internal audit findings and recommendations. The Audit Committee shall pay particular attention to internal audit assessments of:-
          i.compliance with company policies, relevant laws and regulatory requirements;
          ii.effectiveness of internal controls in critical areas of operations (e.g. accounting, underwriting, claims, investment, derivatives and information technology management); and
          iii.Management’s responsiveness to, and corrective actions taken in respect of, internal audit findings and recommendations.
        4. The Audit Committee shall ensure that all findings and recommendations are resolved effectively and in a timely manner.
        5. The Audit Committee shall note any significant disagreements between the Internal Auditor and Management irrespective of whether they have been resolved in order to identify any impact that this may have on the audit process of findings.
      2. RESOURCES AND STAFFING
        1. The Audit Committee shall ensure on an ongoing basis that the internal audit department has adequate and competent resources, with regard to the size and complexity of the Company’s operations. In this respect, the Audit Committee shall:-
          i.approve the appointment, remuneration, performance evaluation, removal and redeployment of the Group Chief Internal Auditor (GCIA) and senior officers of the internal audit department; and
          ii.be informed of any resignation of the internal audit staff and reasons therefore, and provide resigning staff with an opportunity to submit reasons for their resignations.
        2. The Audit Committee shall ensure that the internal audit staff receives necessary training to perform audit work. In this respect, there should be a programme of continuing education and training to enable the Internal Auditors to keep abreast of business trends and latest developments at both the institution and industry levels, as well as to enhance technical skills required to effectively support the audit function.
    2. EXTERNAL AUDIT
      1. APPOINTMENT OF EXTERNAL AUDITORS
        1. The Audit Committee is responsible to recommend to the Board the appointment of the External Auditors, having particular regard to the External Auditors’ objectivity, performance and independence.
        2. The Audit Committee shall:-
          i.review and assess various relationships between the External Auditors and the Company or any other entity that may impair or appear to impair the External Auditors’ judgement or independence in respect of the Company. This may include affiliations resulting from the Company’s employment of former employees of the External Auditors in senior positions within the Company;
          ii.review and assess fees paid to the External Auditors, considering:-
          • the economic importance of the Company (in terms of total fees paid) to the External Auditors;
          • fees paid for non-audit services as a proportion of total fees; and
          • whether an effective, comprehensive and complete audit could be reasonably conducted for the audit fee paid.
          The fees paid should not impair or appear to impair the External Auditors’ judgement or independence in respect to the Company; and
          iii.investigate reasons for any request made by Management to dismiss the External Auditors, or any resignation by the External Auditors. The results of the investigation should be disclosed to the full Board together with the Audit Committee’s recommendation on proposed actions to be taken. The decisions of the Board in relation to the recommendations made by the Audit Committee should be documented in the Board minutes, with a copy of the relevant minutes extended to Pengarah, Jabatan Penyeliaan Insurans & Takaful, Bank Negara Malaysia (BNM) within two weeks of the Board’s decision.
      2. PROVISION OF NON-AUDIT SERVICES BY THE EXTERNAL AUDITORS
        1. Any provision of non-audit services by the Company’s External Auditors should be approved by the Audit Committee before the commencement of the service, or whenever there is a significant change in the level of services provided.
        2. In considering the provision of non-audit services by the External Auditors, the Audit Committee should have regard to restrictions on outsourcing to External Auditors set out in BNM/RH/GL/003-4: Guidelines on Outsourcing for Insurers.
        3. The Audit Committee’s decisions with respect to the provision of non-audit services should be documented in a statement which outlines whether or not it believes the level of provision of non-audit services by the External Auditors is compatible with maintaining auditor independence (together with supporting reasons).
      3. AUDIT PLAN, FINDINGS AND RECOMMENDATIONS
        1. The Audit Committee shall review with the External Auditors, the:-
          i.audit plan prior to the commencement of the annual audit;
          ii.audit reports, including obligatory reports to BNM on matters covered under Section 72 of the Financial Services Act;
          iii.any significant disagreements between the External Auditors and Management irrespective of whether they have been resolved; and
          iv.any other findings, issues or reservation faced by the External Auditors arising from the interim and financial audits.
        2. The Audit Committee shall review and monitor Management’s responsiveness to, and action taken on, external auditors’ findings and recommendations. In this regard, the Audit Committee should ensure that all findings and recommendations are resolved effectively in a timely manner.
        3. In order to allow External Auditors to express concerns, problems and reservations arising from financial audits effectively, the Audit Committee should meet at least annually with the External Auditors without the presence of Management.
    3. OTHER RESPONSIBILITIES
      1. The Audit Committee shall also:-
        i.ensure, before the approval by the board of directors, that the Company’s quarterly results and year-end financial statements are prepared in a timely and accurate manner for regulatory, management and general reporting purposes. In this respect, the Committee’s review will focus on:-
        • changes in or implementation of major accounting policy changes;
        • significant matters highlighted including financial reporting issues, significant judgments made by management, significant and unusual events or transactions, and how these matters are addressed; and
        • compliance with accounting standards and other legal requirements.
        ii.ensure that the Company complies with Section 66 of the Financial Services Act which requires an institution to publish its financial statements from time to time subject to any standards as may be specified by BNM;
        iii.review:-
        • corporate governance disclosures made in the Directors’ Report pursuant to the requirement in BNM/RH/GL/003-2: Prudential Framework of Corporate Governance for Insurers and be satisfied that any departure from the Framework principles and the circumstances justifying such departure are sufficiently explained; and
        • all representation letters signed by Management, and be satisfied that the information provided is complete and appropriate;
        iv.review any related-party transactions and conflicts of interest situations that may arise within the Company including any transaction, procedure or conduct that raises questions of management integrity;
        v.review the allocation of options pursuant to the Company’s Employees’ Share Option Scheme; and
        vi.ensure that supervisory issues raised by BNM are resolved in a timely manner.
      2. The Audit Committee shall also be responsible for any other functions as may be determined by the Board and reflected in its Terms of Reference.
    4. REPORTING TO BNM
      1. The Audit Committee shall submit to BNM, a summary of material concerns/weaknesses in the internal control environment of the Company noted during the year and the corresponding measures taken to address these weaknesses. This should be submitted together with the annual report on the Audit Committees and its activities which is submitted to BNM pursuant to principle 18 of BNM/RH/GL/003-2.
  5. MEETINGS
    1. The Audit Committee shall hold at least four (4) regular meetings per year to effectively fulfill its duties.
    2. In addition, the Chairman of the Audit Committee shall call for a meeting of the Audit Committee if requested to do so by any committee member, Management, Internal and External Auditors.
    3. The Chairman may invite any person to be in attendance to assist it in its deliberations.
    4. A quorum shall consist of at least two-thirds of the members with independent directors forming the majority.
    5. The Company Secretary shall act as Secretary of the Audit Committee and shall be responsible for drawing up the agenda with the concurrence of the Chairman and circulating it, supported by explanatory documentation, to Audit Committee members within a reasonable timeframe prior to each meeting.
    6. The Secretary should also be responsible for keeping the minutes of meetings of the Audit Committee, their timely circulation to Audit Committee members and other members of the Board, and following up on outstanding matters in relation to the meetings.
    7. The Chairman of the Audit Committee shall provide written reports to the Board on the deliberations of the Audit Committee on a regular basis. In addition, the Chairman should also present a summary of all significant matters (highlighting risks and implications) and resolutions made by the Audit Committee at Board meetings.

    Dated: 31 May 2016