AUDIT COMMITTEE REPORT
COMPOSITION
Dato' Tan Guan Cheong
(resigned on 30 May 2023)
(Chairman/Independent Non-Executive Director)
Datuk Mark Victor Rozario
(appointed on 18 May 2023 and redesignated as Chairman on
30 May 2023)
(Chairman/Independent Non-Executive Director)
Dato' Ahmad Fuaad Bin Mohd Dahalan
(Member/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
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 |
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(c) | fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad ("Bursa Securities"). |
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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 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:-
1. | 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;
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● | 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. |
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2. | 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. |
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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. |
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4. | 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. |
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5. | 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. |
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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 4 Audit Committee meetings were held and the
details of attendance are as follows:-
| Attendance |
Dato' Tan Guan Cheong | 4 |
Dato' Ahmad Fuaad Bin Mohd Dahalan | 4 |
Dato' Zainal Abidin Bin Ahmad | 4 |
Datuk Mark Victor Rozario | 1 |
SUMMARY OF WORK CARRIED OUT DURING FINANCIAL YEAR
The Audit Committee carried out the following work during the
financial year ended 30 June 2023 in the discharge of its functions
and duties:
1. | Overseeing Financial Reporting
(a) | Reviewed the following quarterly financial results and
annual financial statements of YTL REIT ("Financial
Reports") prior to their recommendation to the Board of
Directors for approval:
● | Quarterly financial results for the fourth quarter of
financial year ended 30 June 2022, and the annual
audited financial statements for the financial year
ended 30 June 2022 at the Audit Committee meeting
held on 1 August 2022; |
● | The quarterly results of the first, second and third
quarters of the financial year ended 30 June 2023
at the Audit Committee meetings held on 23 November
2022, 22 February 2023 and 24 May 2023, respectively. |
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(b) | At the Audit Committee meetings, the Finance Manager
presented the Financial Reports wherein the following
matters were reviewed and confirmed, with clarification
and/or additional information provided wherever required
by the Chief Executive Officer primarily in charge of the
financial management of YTL REIT:
● | 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;
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● | Significant judgements made by management in
respect of matters such as valuation of investment
properties, revaluation of freehold land and buildings,
valuation uncertainty, 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");
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● | 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");
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● | The Financial Reports were fairly presented in
conformity with the relevant accounting standards
in all material aspects.
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2. |
External Audit
(a) | Reviewed with the external auditors, HLB Ler Lum Chew
PLT ("HLB"):
● | their final report on the audit of the financial
statements for financial year ended 30 June 2022
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
2023 outlining, amongst others, their scope of work,
areas of audit emphasis, multi-location audit, and
development in laws and regulations affecting financial
reporting and the responsibilities of directors/audit
committee members and auditors. |
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(b) | Reviewed the audit fees proposed by HLB together with
management and recommended the negotiated fees
agreed by HLB to the Board of Directors for approval.
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(c) | Had discussions with HLB twice during the financial year,
namely on 1 August 2022 and 24 May 2023, without
the presence of management, to apprise on matters in
regard to the audit and financial statements. No issues
were raised by HLB.
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(d) | Reviewed the profiles of the audit engagement team
which enabled the Audit Committee to assess their
qualification, expertise, resources, and independence, as
well as the effectiveness of the audit process. HLB also
provided written confirmation of their independence in
all of the reports presented to the Audit Committee. 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.
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(e) | Assessed the performance of HLB for the financial year
ended 30 June 2022 and recommended to the Board of
Directors for HLB to continue as the external auditors
of YTL REIT.
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3. | 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.
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(b) | Reviewed and adopted the risk-based internal audit plan
for financial year ending 30 June 2024 to ensure sufficient
scope and coverage of activities of YTL REIT and the
Group.
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(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.
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4. | Related Party Transactions ("RPT") and Recurrent RPT
of a Revenue or Trading Nature ("RRPT")
(a) | Reviewed, on a quarterly basis, the RRPT entered into
by YTL REIT and/or its subsidiaries with related parties
to ensure that the Group's internal policies and procedures
governing RRPT are adhered to, and disclosure
requirements of the Listing Requirements are observed.
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(b) | Received updates on the directorships and shareholdings
held by the Directors of the Company and persons
connected with them via the general notices given under
and in accordance with Section 221 of the Companies
Act, 2016 tabled at board meetings. These disclosures
enabled an assessment of the potential or actual conflicts
of interest which may arise in relation to RPT or RRPT.
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(c) | Reviewed the following RPT and/or RRPT 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:
● | Rental revisions and refurbishments for AC Hotel
Kuala Lumpur Titiwangsa, AC Hotel Penang Bukit
Jambul and AC Hotel Kuantan City Centre ("AC Hotels")
in consideration of YTL REIT agreeing to pay for the
costs of the refurbishment works of the AC Hotels. |
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5. | Annual Report
(a) | 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 2022 Annual Report.
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INTERNAL AUDIT FUNCTION
The objective of the Internal Audit ("IA") is to help management
evaluate the effectiveness and efficiency of the internal control
systems. The IA is part of YTL REIT and the Group’s governance
system, and according to the Malaysian Code on Corporate
Governance, the IA is in charge of supervising internal control
activities. IA's goal is to focus mainly on risk-based audits related
to operations and compliance that are aligned with the risks of YTL
REIT and the Group to ensure that the relevant controls addressing
those risks are reviewed.
During the financial year, the IA Department 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 during the year under
review include:
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 recurrent related party transactions 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 RM22,465 were incurred in relation to the
internal audit function for the financial year ended 30 June 2023.