Main Report Audit committee is an operating committee of a company’s board of directors that is in charge of overseeing financial reporting, review

and ensures the process of evaluate risk, control and governance which including operational and financial controls, business ethics and the compliance are properly arranged and monitored. Committee members must be made up of independent outside directors, which include at least one person who qualifies as a financial expert.

In DRB-HICOM, the audit committee must be formed of not less than 3 members and the majority must be Independent Non-Executive Directors. Other than that, the chairman of the audit committee must be appointed by the Board from among the Independent NonExecutive Directors and at least one of the members must be a member of the Malaysian Institute of Accountants (MIA) or must have at least 3 years of working experience in accounting firm.

According to the annual report of DRB-HICOM, the audit committee has authority such as: 1. To investigate any activity which relate to the audit committee’s duties and its terms of reference and shall have full access permission to gather any information or documents relate to the audit committee’s activities 2. To gather any independent legal or other professional advice as necessary 3. To communicate with the external auditors, internal auditors and all employees of the Group without any restriction 4. To gather sufficient resources to perform its duties as set out in its terms of reference 5. To make recommendations for any improvements in operating performance and management control which arise from the internal and external audit recommendations

The audit committee also checked the Statement on Internal Control and Statement on Corporate Governance before the statement compile in the company’s Annual Report. audit committee must also focus on any significant audit adjustments. processes or investigation undertaken and whether the action taken is appropriate or not on the recommendations of the GIAD. going concern assumptions.In the DRB-HICOM’s annual report. audit committee must:  Check the sufficiency of the scope. Besides that. the audit committee reviewed the unaudited quarterly and annual financial results of the Group for the related financial year which also includes the announcements regarding to the release of financial results to Bursa Malaysia before the approval from the Board. Financial Reporting The audit committee must review the annual and quarterly financial results of the Group focusing on. the audit committee assessed overall adequacy and effectiveness of the internal controls systems through the review on work done by internal and external auditors and discussions with the management. . In DRB-HICOM. In DRB-HICOM. changes in accounting policies and practices and compliance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and Bursa Malaysia Main Market Listing Requirements. the audit committee’s duties and responsibilities have been expanded to matters specified in the Malaysian Code on Corporate Governance as follows: A. significant and unusual events. going concern assumptions and compliance to the financial reporting standards and other regulatory requirements. functions. financial disclosures. Risk Management and Internal Control The audit committee must ensure that management has implemented an adequate system of risk management and internal control to protect shareholders’ interest and the Company’s assets. B. Internal Audit For internal audit function. among others. competency and resources of the Group Internal Audit Division (GIAD) and to evaluate whether the group has the required authority to conduct its responsibilities pertaining to the annual audit plan  Check the internal audit program and results of the internal audit program. C.

going concern assumption. Check any appraisal or evaluation of the performance of the Head of the GIAD as well as give permission for the appointment or termination of senior staff members of the GIAD  Discuss any problems from the audits without the presence of Management with the Head of GIAD separately In DRB-HICOM. External Audit In respect of the external auditors’ functions. functions. significant adjustments and unusual events arise from the audit. In every audit committee meeting. the nature and scope of audit Review the audit plan with the external auditors. evaluation on the systems of internal accounting controls and audit report done by the external auditors and the assistance provided to the external auditors by the company’s officers   Examine the external auditor’s Management Letter and Management’s response Check the quarterly and year-end annual financial statement before the submission to the Board and announcements to the Bursa Malaysia Securities Berhad. training and development of staff within GIAD D. resignation or termination of external auditors and their audit fees Discuss with the external auditors before the commencement of audit. other statutory and legal requirements . the audit committee checked the internal audit reports prepared by the GIAD which disclosed GIAD’s activities as follows:  Status of audit activities as compared to the approved Annual Audit Plan  Results of scheduled. follow-up. that should focus on any changes in accounting policies and practices. investigative and special audits  Adequacy of Management responsiveness to the audit findings and recommendations  Status of Internal Audit’s Quality Assurance and Improvement Program  Adequacy of audit resources. and the compliance with applicable approved accounting standards. the audit committee will checked and approved the GIAD’s Annual Internal Audit Plan and assure that the principal risks. main entities were identified properly in the plan. audit committee must:    Check and think over the appointment.

the audit committee examined the Audit Plan with the external auditors which include the matters such as the terms of engagement. audit committees have other responsibilities such as:  To give any instructions to the external and internal auditors if there are any areas require their additional attention including any major events or findings of internal investigations and Management’s response   To examine any related party’s transactions that may occur within the Company or Group To verify any allocation of share options to the authorized employees according to the criteria set out in Employees’ Share option Scheme (ESOS) As for DRB-HICOM. the audit committees had a meeting with the external auditors to discuss the results of audit of the annual audited financial statements and the Report to the Audit Committee prepared by the external auditors and the responses received by the management. Furthermore. . the audit committees examined the Group’s procedures which related to the recording of the related party transactions and the propriety of proposed related party transactions to assure compliance to the Bursa Malaysia Main Market Listing Requirements (MMLR).In DRB-HICOM. the audit committee members attended relevant education programs. recommended the proposed audit fees for approval and the review of the Directors’ Statement on Internal Control for the financial year. E. Other Responsibilities Other than the duties and responsibilities mentioned above. Despite that. training and visited the subsidiaries within the Group to acquire a better perception in the related business and operation. audit scope.

Positive and Negative Aspect The existence of audit committee can help the directors in their duties such as the safeguarding of the assets. . a management report which list out the internal audit’s purpose. A relationship between audit committee and internal auditor can help audit committee in achieving its responsibilities to the board of directors. the Head of Group Internal Audit Division (GIAD) will report to the audit committee in a periodically basis which consist of activities performed and major control issues noted by the internal auditors. An audit committee can give rise to the following positive aspects:  Improve financial practices and reporting An audit committee will call a meeting with the company’s chief executive and financial officers regularly in order to examine. shareholders and other related parties. In order to assure the internal auditors perform their responsibilities.  Influence appropriate action against fraud An audit committee will take the role in prevention and detection of fraud in the organization and give support to the organization to create an effective ethics and compliance program. inspect and direct any activities and results which related to the maintenance of internal controls and preparation of financial reports. In DRB-HICOM.Audit Committee and Internal Auditor The relationship between audit committee and internal auditor are very important in every company because the influence of audit committee to internal auditor can affect the internal auditor’s duties in achieving their goals which are same with audit committee’s too. adequate systems and controls being established and the annual financial statements and documents are prepared properly. authority and responsibility and the head of internal auditing must inform notify audit committee the result of audits. The audit committee should always review the management and auditors’ works to assure that the organization has implement valid fraud identification programs to prevent the fraud from happen. the audit committee should approve and periodically examine the Internal Audit Charter.

if the DRB-HICOM’s audit committee do not play their roles in lower the management’s power.  Enhance the external audit function An audit committee should monitor the external auditor’s services and activities to ensure that the independence is maintained between the external auditor and the related parties in the organization. this can encourage the management misuse their power in controlling the internal auditor. Other than that. an audit committee can meet with the external auditors in order to get independent observations about the management’s efforts in maintaining strong internal controls. Enhance the internal audit function The audit committee can have a better understanding about the organizations performance when an audit reports were provided by the internal audit team and to ensure that the organizations financial. if the audit committee only report their terms of reference in the audit committee report and nothing relate to their activities were reported. From the statements above. For an example.  Auditor independence Even though the role of audit committee can improve audit independence but in some situations it can decrease too. . these shows that audit committee provides many positive results to the board of directors’ needs but an audit committee may give negative aspects too.  Auditor selection A potential effect of audit committee relate to the auditor selection is that they will show a bias in favor of large audit firms because the relationship of audit committee’s members and large audit firms may influence the selection against smaller firms and will feel that large firms can provide higher audit quality. adequate financial reporting and proper business practices. this can cause some misunderstanding on their work. practices and internal controls compliance to the standards. Besides that.

if the purpose of forming the audit committee in DRB-HICOM is to comply with the requirement of the standards and ignore the objective of the requirement. every audit process required to follow the standards being allowed. Audit process Audit process is very important in order to give a proper audit opinion to the organization’s financial report and the existence of audit committee may affect the audit opinion. For an example. and all process have their own requirements. In short. this will show the lack of corporate governance in the organization. .