ANNUAL REPORT 2008 - KNM Steel Sdn Bhd

STATEMENT ON
INTERNAL CONTROL
The Board of Directors is committed to maintaining a sound system of internal controls in the Group and is pleased to
provide the following statement on internal control that outlines the nature and scope of internal control of the Group
during the year as required under Paragraph 15.27(b) of the Listing Requirements of Bursa Malaysia Securities
Berhad.
RESPONSIBILITY
The Board is ultimately responsible for the Group’s system of internal controls and reviewing its effectiveness. Such
a system is designed to manage and reduce, rather than eliminate, the risk of failure to achieve business objectives
and can provide only a reasonable and not an absolute assurance against risk. The system of internal controls covers
risk management, financial, operational and compliance controls. On-going reviews are and will continuously be
carried out to ensure the effectiveness, adequacy and integrity of the system of internal controls in safeguarding the
Group’s assets and shareholders’ investment in the Company. The Board also believes that the Group’s system of
internal controls and risk management practices are vital to good corporate governance.
RISK MANAGEMENT
The Company has developed a risk management framework and has put in place an Enterprise-Wide Risk
Management framework to identify the key risks facing the Group, the potential impact and likelihood of those risks
occurring, the control effectiveness and the action plans being taken to manage those risks to the desired level.
INTERNAL CONTROL
The key elements of the Group’s system of internal controls are as follows:-
• An organisational structure specifying lines of responsibility and delegation of authority.
• The Financial Authority Limits delineate authorization limits for securing of jobs and services, purchases of
goods and/or services and capital expenditure for each level of management within the Group to ensure proper
identification of accountabilities and segregation of duties.
• Management executive meetings are conducted regularly for performance review at certain operations
level.
• The Executive Directors and senior management visit fabrication shops and aware of the state of affairs and
progress of the projects and/or subsidiaries’ businesses.
• The Group Quality Assurance department conducts routine internal quality audits at most of the fabrication
shops and monitors to ensure their operational processes are in accordance with the ISO 9001: 2000 Quality
Systems.
• The Group Health, Safety and Environment department carries out ongoing safety activities at certain fabrication
shops.
• The Board and Audit Committee review the operational and financial performance of the Group at quarterly
Board and Audit Committee meetings.
The Head of the Group Internal Audit Department reports directly to the Audit Committee of the Group functionally
to preserve the independence of the function. The internal audit work is focused on areas of priority in accordance
with its annual audit plan as approved by the Audit Committee.
KNM GROUP BERHAD
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ANNUAL REPORT 2008