OBJECTIVE
The
objective of this policies and procedures is to ensure that the Group has
external audit independence in line with best practice to ensure reliable and
credible financial reporting.
The
Audit Committee of the Company is responsible to assess, review and monitor the
performance, suitability and independence of the external auditors. The
Policies and Procedures to Assess the Suitability and Independence of External
Auditors (“Policy”) provides the Audit Committee with guidelines to assess and
review the performance of the external auditors for the purpose to ensure the
suitability and independence of the external auditors.
PROVISION
OF COMPANIES ACT, 2016
In
accordance with Section 271 of the Companies Act, 2016, an auditor of a public
company shall be appointed for each financial year and should only be appointed
by the Board or Members of the Company.
The
Board shall appoint an auditor—
a) at
any time before the first annual general meeting of the company and the auditor
will hold office until the conclusion of the first annual general meeting for
the appointment; or
b) to
fill casual vacancy in the office of the auditor and the auditor will hold
office until the conclusion of the next annual general meeting for the
appointment.
The
members shall appoint an auditor by ordinary resolution—
a) at
the annual general meeting;
b) if
the company should have appointed an auditor at an annual general meeting but
failed to do so; or
c) if
the Board fails to appoint an auditor as mentioned above.
SELECTION
CRITERIA
The Audit Committee
will evaluate potential external auditors on a number of criteria including,
but not limited to:
a) The
auditor being registered as an auditor under the Companies Act, 2016;
b) The
auditor being registered with the Audit Oversight Board for public companies
under the Securities Commission Act, 1993;
c) The
independence of the external audit firm from the Company and ability to
maintain independence throughout the engagement;
d) There
being no conflict of interest situations that could affect the independence of
the external auditors;
e) Internal
governance processes such arrangements that are proposed to enable partner
rotation and succession planning;
f) Reputation,
professional competency, experience, resources and integrity of key personnel;
g) The
audit approach and methodology; and
h) Cost
effectiveness.
SELECTION AND APPOINTMENT
PROCEDURES
In
the event that the Audit Committee decides a new external auditors is required:
a) The
Audit Committee will construct a shortlist of candidates that meet their
selection criteria and ascertain their willingness to act;
b) Interested
candidates will be required to submit a proposal addressing the Audit
Committee’s criteria as well as a statement that they are independent;
c) The
Audit Committee will interview candidates in order to further assess their
suitability;
d) Once
the assessment process has been completed, the Audit Committee informs the
Board of the process adopted in undertaking the review, the external auditor
recommended by the Committee and the reasons for that recommendation; and
e) Upon
the Board of Directors endorsed the recommendation, to seek shareholders’
approval for the appointment of the new external auditors and
resignation/removal of the existing external auditors at the general meeting.
ASSESSMENT OF EXTERNAL
AUDITORS
The Audit Committee
will review the performance of the external auditors on an annual basis after
completion of the year end audit. In evaluating the effectiveness of external
audit, the Audit Committee will assess the effectiveness of external auditors based
on a number of criteria including but not restricted to:-
a) the
overall comprehensive of the external audit plan;
b) the
timeliness and quality of communications promised under the plan and delivered
during the audit;
c) the
competency of external audit staff; and
d) the
adequacy of resources to achieve the scope as outlined in the plan.
The Audit Committee
will seek feedback from management during the assessment process.
EXTERNAL AUDITORS
INDEPENDENCE
The Audit Committee
will review the independence of the external auditors annually at the time the
external auditors present its annual audit plan. The Audit Committee will
review and assess the independence of the external auditors, including but not
limited to any relationships with the Group or any other person or entity that
may impair or compromise, or appear to impair or compromise, the external
auditors’ independence. The Audit Committee will request the external auditors
to provide a written assurance confirming that they are, and have been,
independent throughout the conduct of the audit engagement in accordance with
the terms of all relevant professional and regulatory requirements.
PROVISION OF NON-ASSURANCE
SERVICES OF EXTERNAL AUDITORS
The external auditors
can be engaged to perform non-assurance engagement that are not, and are not
perceived to be, in conflict with the role of the external auditors. This
excludes audit related work in compliance with statutory requirements.
The three (3) basic
principles on the prohibition of non-assurance engagement are as follows:
a) Not
to function as Management;
b) Not
to audit their own work; and
c) Not
to serve in an advocacy role of the Company and its subsidiaries.
The external auditors
shall observe and comply with the By-Laws of the Malaysian Institute of
Accountants in relation to the provision of non- assurance engagement.
All engagements of the external
auditors or its affiliates to provide non-assurance services are subject to the
approval by the Audit Committee and with expectation on the Management to
obtain confirmation from the external auditors on their independence which
shall not be impaired by the provision of non-assurance engagement except for pre-approved
non-assurance services as set out in Appendix A of the Policy.
ROTATION OF AUDIT
PARTNER
The audit partner
responsible for the external audit of the Company and its subsidiaries is
subject to rotation at least every seven (7) years.
The former key audit
partner has to observe a cooling-off period of at least three (3) years before
being appointed as a member of the Audit Committee.
ANNUAL AUDIT PLANNING
The external auditors
shall present an annual audit planning memorandum for review and discussion
with the Audit Committee. The external auditors shall also provide a management
letter to the Audit Committee upon completion of the annual audit.
REVIEW OF THE POLICIES AND PROCEDURES
These
policies and procedures will be periodically reviewed in accordance with the
needs.
Appendix A
PAOS HOLDINGS BERHAD AND ITS SUBSIDIARIES
LIST OF PRE-APPROVED NON-ASSURANCE
SERVICES
Tax related services
— Preparing
corporate tax returns for submission to the tax authorities.
— Providing
training on deferred tax (without using current year’s figures in the
examples).
— Dealing with the Tax
Authority
· Assisting
with tax authority requests for additional information, analysis and/or
explanations in relation to a tax return.
· Assisting
with a tax examination by the tax authority.
· Review
of tax assessment notices / audit findings
letters/ bill of demand issued by the tax authority.
· Filing
of administrative remedies against tax assessment notices/ audit findings
letters/ bill of demand issued by the tax authority.
— Transfer
pricing
· Assisting
to assess the impact of transfer pricing policies on overall tax position.
· Analysing
and document transactions between related parties. Preparing global and local
documentation.
· Translating
transfer pricing policies into transaction level prices, reconcile transfer
pricing and customs requirements and automate transfer pricing calculations.
— Tax
due diligence (buy-side and vendor initiated)
· Typically
covering group structure and tax history, compliance/tax audit status, tax
risks identified, effective tax rate analysis, review of tax accruals, tax
implications of the proposed transaction, etc.
— Prepare
indirect tax returns for submission to the tax authorities.
— International
Executive Services
· Assist
on development of tax efficient compensation and reward packages for
international assignees.
· Assist
on employment compensation and benefit programs for international assignees.
· Assist
on the tax implications of global employment companies.
· Preparing
and filing of international assignee tax returns.
· Immigration
services including:
o Preparing
and making visa and work permit applications.
o Advising on
related immigration requirements.
o Serving
as a liaison between the applicant and immigration departments.
— Conduct general
training with audit client personnel, audit committee and others on tax related
matters.
Other
non-assurance services
— Agreed-upon
procedures engagement to comply with regulatory reporting matters in accordance
International Standard on Related Services 4410 (Revised) Compilation
Engagements.
— Compilation
engagement to compile financial statements in accordance International Standard
on Related Services 4400 (Revised) Agreed-Upon Procedures Engagements.
— Reporting accountant
engagements in relation to corporate exercises.
— Provision of accounting
advice and assistance:
· Review
and provide comments on client-prepared technical accounting and reporting
memos.
· Conduct
general training with audit client personnel, audit committee and others on new
accounting standards or existing accounting standards.
· Perform
gap analysis of client’s accounting policies and disclosures against leading
practices or other resources.
· Read
and comment on client’s documentation of accounting policies and accounting
manuals.
· Participate
in discussions with client personnel on application of accounting standards to
actual or proposed transactions and provide observations and recommendations.
· Advise
on industry and corporate governance requirements.
— Assessment
– Gap analysis for internal use
· Perform
gap analysis or maturity assessment of the current state of a process, system,
organizational structure, policy, controls over financial reporting etc.
against leading practices or other resources (such as accounting or regulatory
standard). Provide advice, observations and recommendations.
— Document
current state
· Assist
in documenting the current state and/or changes made to processes, systems,
organizational structure, policies, or internal control over financial
reporting, after they have been implemented, on non-recurring basis.
— Design
plans
· Provide
generic roadmap or implementation plan of a process or system based on leading
practice experience that is not client-specific.
— Project
Management – Advice
· Provide
general advice on developing project plans, including general advice on project
management.
· Provide
industry standard or best practice project plans.
· Provide
feedback to project management office structure/organization.
— Transaction
services – Buy side
· Pre
close due diligence.
· Post
close due diligence.
— Commercial
due diligence (buy side)
· Analysis
of target’s projections/business plan by reference to historical evidence.
· Report
market and commercial issues which may affect the target and transaction.
— Market
research and benchmarking
— Operational
due diligence
— Sell
side assist, including:
· Pre-sale
due diligence.
· Establish
and coordinate data room activities (limited to administrative tasks, does not
include data room set up).
— Separation
services including separation advice, separation program planning and
execution.
— Assistance
on Sales and Purchase Agreement and completion accounts:
· Provide
commentary (in conjunction with client’s lawyers) on draft transaction
agreements).
· Providing
advice and recommendations on the preparation of the completion accounts.
(This service does not
include completion due diligence on completion accounts)
— Integration
due diligence, in connection with:
· Pre-acquisition
synergy and integration planning, post-acquisition integration planning, and
operations advice, provided such work is unrelated to the client’s financial
statements, accounting records and risk management controls.