Audit Committee Report

Investor Relations

COMPOSITION

Datuk Mark Victor Rozario
(Chairman/Independent Non-Executive Director)

Dato’ Ahmad Fuaad Bin Mohd Dahalan
(redesignated as Non-Independent Non-Executive Director on 30 November 2023)
(Member/Non-Independent Non-Executive Director)

Dato’ Zainal Abidin Bin Ahmad
(Member/Independent Non-Executive Director)

TERMS OF REFERENCE

Primary Purposes

The Committee shall:-

1.	Provide assistance to the Board of Directors (“Board”) of the Company, the manager (“Manager”) of YTL Hospitality REIT in fulfilling its fiduciary responsibilities relating to the corporate accounting and practices for YTL Hospitality REIT and the Manager (where applicable).
2.	Assist to improve YTL Hospitality REIT and the Manager’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 YTL Hospitality REIT’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 YTL Hospitality REIT and of the Manager 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 YTL Hospitality REIT and the Manager.
8.	Review the effectiveness of the policies and procedures for whistle-blowing and anti-corruption.
9.	Instill discipline and control to reduce incidence of fraud.

Composition

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.

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”).

The Board must ensure that no alternate Director is appointed as a member of the Audit Committee.

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.

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 Manager 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 YTL Hospitality REIT and/or the Manager:-

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 YTL Hospitality REIT or group and the Manager;
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 Manager, 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 Manager.

Functions And Duties

The Committee shall, amongst others, discharge the following functions:-

Financial Reporting

(a)

Review the quarterly financial results and annual financial statements of YTL Hospitality REIT 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 YTL Hospitality REIT;
●	compliance with applicable approved accounting standards, other regulatory and legal requirements; and
●	the going concern assumption.

External Audit

(a)	Review the audit plan of YTL Hospitality REIT, scope of audit and audit report with the external auditors;
(b)	Review with the external auditors their evaluation of the system of internal controls of YTL Hospitality REIT and/or the Manager, 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 Manager 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;
(f)	Review whether there is reason (supported by grounds) to believe that the 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.

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.

Related Party Transactions

(a)

Review any related party transaction and conflict of interest sitaution that arose, persist or may arise within the Manager/YTL Hospitality REIT 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.

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 YTL Hospitality REIT/the Manager 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 four (4) 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 Manager 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 Manager at the registered office of the Manager 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

The Audit Committee shall meet at quarterly intervals or such other intervals as the Audit Committee shall decide. During the financial year, a total of 6 Audit Committee meetings were held and the details of attendance are as follows:

	Attendance
Datuk Mark Victor Rozario	6/6
Dato’ Ahmad Fuaad Bin Mohd Dahalan	6/6
Dato’ Zainal Abidin Bin Ahmad	6/6

SUMMARY OF WORK CARRIED OUT FOR THE 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:

Financial Reporting

(a)

Reviewed the unaudited quarterly financial reports and financial statements of YTL REIT (“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;
●	YTL REIT 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 valuation of investment properties, revaluation of freehold land and buildings, deferred tax liabilities, fraud risk including management override of controls, revenue recognition, impairment assessment of trade and accrued lease receivables, hedge of net investments in Australia and Japan, critical accounting policies and financial statement disclosures and the underlying assumptions and/or estimates used were reasonable 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.

External Audit

(a)

Noted that the external auditors, HLB Ler Lum Chew PLT (“HLB”), had assigned a new Audit Engagement Partner for the statutory audit of the Group for the financial year ended 30 June 2024 due to rotation, as previously planned.

(b)

Reviewed with the external auditors, HLB:

●	their 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 adequateness of disclosures in the financial statements;
●	the audit plan for the financial year ended 30 June 2024 outlining, amongst others, their scope of work, areas of audit emphasis, multi-location audits, and development in laws and regulations affecting financial reporting and the responsibilities of directors/audit committee members and auditors.

(c)

Reviewed the audit fees proposed by HLB together with management and recommended the fees agreed by HLB to the Board of Directors for approval.

(d)

Had discussions with HLB without the presence of management twice on 20 May 2024 and 1 August 2024, to apprise on matters in regard to the audit and financial statements. No issues were raised by HLB.

(e)

Reviewed the profiles of the audit engagement team which enables the Audit Committee to assess their qualifications, expertise, resources, and independence, as well as the effectiveness of the audit process. The Audit Committee also reviewed on a regular basis, the nature and extent of the non-audit services provided by HLB and was satisfied with the suitability, performance, independence and objectivity of HLB.

(f)

Obtained written assurance from HLB that they have complied with the independence requirements and that their objectivity has not been compromised in accordance with regulatory and professional requirements.

(g)

Confirmed verbally by management, the internal auditors and all Audit Committee members that they had no knowledge of any actual, suspected or alleged fraud and non-compliance or suspected non-compliance with laws or regulations affecting the Group in response to an enquiry by the external auditors.

(h)

Assessed the performance of HLB for the financial year ended 30 June 2024 and recommended to the Board of Directors that HLB continue as the external auditors of YTL REIT.

(i)

Received the Condensed Transparency Report prepared by HLB, which contains the audit partner workload, auditors independence, professionals capacity and competency, and investment in audit quality.

Internal Audit

(a)	Reviewed with the internal auditors the internal audit report, the audit findings and recommendations, management’s responses and/or actions taken thereto, and ensured that material findings were satisfactorily addressed by management.
(b)	Reviewed and adopted the internal audit plan for financial year ending 30 June 2025 to ensure sufficient scope and coverage of activities of YTL REIT and the Group.
(c)	Reviewed internal audit resourcing, with focus on ensuring that the function has sufficient resources together with the right calibre of personnel to perform effectively, and that the head of internal audit has adequate authority to discharge his functions objectively and independently.
(d)	Reviewed the anti-bribery and corruption (“ABC”) risk assessment report to effectively managing the ABC risks identified within YTL REIT and the Group.
(e)	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.

Related Party Transactions (“RPT”)

(a)

Reviewed, on a quarterly basis, the recurrent related party transactions of a revenue and trading nature (“RRPTs”) entered into by YTL REIT and/or its subsidiaries with related parties to ensure that the Group’s internal policies and procedures governing RRPTs are adhered to, and disclosure requirements of the Listing Requirements are observed.

(b)

Reviewed the following RPTs and/or RRPTs entered into by YTL REIT and/or its subsidiaries with related parties to ensure the transactions were in the best interests of YTL REIT and its unitholders; were fair, reasonable and on normal commercial terms; and were not detrimental to the interests of the minority unitholders of YTL REIT, prior to its recommendation to the Board of Directors for approval:

●	Acquisition of Hotel Stripes Kuala Lumpur, Autograph Collection (“Hotel Stripes”) from Hotel 25 Sdn Bhd (“Hotel 25”) and lease of Hotel Stripes to Hotel 25.
●	Renovation of Ipoh Hotel (formerly known as Syeun Hotel).

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.

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.

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 its subsidiaries via the ‘COI Declaration Form’ to the Secretary, who then escalated the same to the Audit Committee for assessment, conflict management and/or mitigation. No COI were disclosed based on the declaration forms received and this was subsequently reported to the Board.

INTERNAL AUDIT FUNCTION

The Group’s internal audit function is carried out 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.

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 the qualifications of the head of YTLIA are set out in the Corporate Governance Overview Statement.

During the financial year, the YTLIA evaluated the adequacy and effectiveness of key controls in responding to risks within YTL REIT’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 for 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 internal audit engagements, focusing primarily on the 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.	Conducted RRPTs reviews to assess accuracy and completeness of reporting for presentation to the Audit Committee, and ensure compliance with the Listing Requirements.
5.	Conducted discussions with management in identifying significant concerns and risk areas perceived by management for inclusion in the internal audit plan.

Costs amounting to RM17,099 were incurred in relation to the internal audit function for the financial year ended 30 June 2024.