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Axiata Group Berhad | Annual Report 2016
GOVERNANCE
092
ACCOUNTABILITY AND AUDIT
Financial Reporting
The Board is committed to ensuring that a clear, balanced and meaningful
assessment of the Group’s financial performance and prospects through
the audited financial statements and quarterly announcement of results
are provided to shareholders and regulatory bodies. In this respect,
the Board through the BAC oversees the process and the integrity and
quality of the financial reporting, annually and quarterly. The BAC, in
this respect, assists the Board by reviewing the financial statements and
quarterly announcements of results to ensure completeness, accuracy and
adequacy in the presence of external auditors and internal auditors before
recommending the same for the Board’s approval.
The Directors’ Responsibility Statement for the audited financial statements
of the Company and the Group is set out on page 115 of this Annual
Report. The details of the Company’s and Group’s financial statements for
FY16 can be found on page 116 to 256 of the Annual Report.
Related Party Transactions
The Company has an internal compliance framework to ensure it meets
its obligations under the Main LR including obligations relating to related
party transactions. Processes and procedures are in place, to ensure that
Recurrent Related Party Transactions (RRPT) are undertaken on an arms’
length basis, are on terms not more favourable to related parties than
to the public and not to the detriment of minority shareholders. This is
achieved after taking into account the pricing and contract rates, terms
and conditions, level of service and expertise required, and the quality of
products and services provided, as compared to prevailing market prices
and rates, industry norms and standards, as well as general practices,
adopted by service providers of similar capacities and capabilities
generally available in the open market. The annual internal audit plan
incorporates a review of all RRPTs entered into or to be entered into under
the shareholders’ mandate procured at the AGM, to ensure that all the
relevant approvals for RRPTs have been obtained.
RRPT transactions are recorded and the same presented to the BAC on a
quarterly basis. This includes the urilisation of the RRPT mandate and/ or
where applicable, new RRPT transactions for the BAC’s review and
endorsement.
At its 24th AGM, Axiata obtained a general mandate for the Group to enter
into RRPT with Telekom Malaysia Berhad Group (TM Group) for transactions
predominantly related to telecommunications and/or related services.
The procurement of mandate for the Group to enter into RRPT with TM
Group was obtained as these transactions in aggregate may result with
the Company having to obtain shareholders’ approval prior to the Group
entering into the transactions. As these transactions may be constrained
by time-sensitivity and confidentiality, it would be impractical for the
Company to seek shareholders’ approval on a case-by-case basis. The
procurement of the mandate will also substantially reduce the expenses
associated with convening of general meetings and improve administrative
efficiency.
Based on the actual amount utilized from the date of the above AGM
until March 2017, none of the actual aggregate value of transaction has
exceeded 10% or more of the estimated amount under the mandate. The
amount of RRPT entered into during the FY16, pursuant to RRPT mandate,
is disclosed on page 110.
Internal Control and Risk Management
As highlighted earlier, the Board has the overall responsibility and
accountability for the Group’s internal control system and in maintaining and
reviewing internal control system. The BAC assists the Board in evaluating
the adequacy of risk management and internal control framework and
through the Axiata Group Risk Management Committee (RMC) comprising
SLT and chaired by the Chairman of the BAC, has put in place a systematic
risk management framework and process to identify, evaluate and monitor
principal risks and implement appropriate internal control processes to
manage these risks across the Group. The RMC is mainly responsible for
managing the overall Axiata Enterprise Risk Management (ERM) process
and recommends quarterly ERM reports to the BAC for its onward
submission to the Board. The RMC ensures continuous review of the key
risks of the Group, and monitors the implementation of the mitigation plans
on a quarterly basis.
A high-level risks register is maintained which is reviewed and updated
annually. This comprises risks specific to the divisional activities of the
business, as well as more Group-wide risks such as long-term business
strategy, regulatory, substitution risks and technology. Focus areas of
these risks are deliberated by the Board as they are raised by the Chairman
of the BAC at Board meetings.
The Group has established the ERM Framework as a standardised approach
to rigorously identify, assess, report and monitor risks facing the Group.
The framework, benchmarked against ISO31000:2009 is adopted across
the Group. Based on the ERM framework, a risk reporting structure has
been established to ensure prompt communication to the BAC and the
Board.
Although many risks remain outside the Company’s direct control, a range
of activities are in place to mitigate the key risks identified as set out in the
Statement on Risk Management and Internal Control. A significant number
of risks faced relate to wider operational and commercial affairs of the
Company and the Group including those in relation to competition and
regulatory developments.
An overview of the state of internal control within the Group, which
includes the risk and internal control framework and key internal control
structures, are set out in the Statement on Risk Management and Internal
Control on page 96 to 104 of this Annual Report.
Relationship with Auditors
The BAC manages the relationship with its external auditors on behalf of
the Board. The BAC considers the reappointment, remuneration and terms
of engagement of the external auditors annually. The review procedures
covers the independence and service level of the External Auditors, which
amongst others, include reviewing the External Auditors’ performance and
quality of work, ability to meet deadlines, timeliness of service deliverables,
non-audit services provided and the Engagement Partner’s and the
Partner’s rotation.
STATEMENT ON CORPORATE GOVERNANCE