Directors' Responsibilities Statement on Financial ... - Bursa Malaysia

<strong>Statement</strong> on Internal Control
Introduction
Pursuant to paragraph 15.27(b) of the Kuala Lumpur Stock Exchange
(“KLSE”) Listing Requirements, the Board of Directors (“the Board”)
of Nylex (Malaysia) Berhad (“the Company”) is pleased to provide the
following statement on the state of internal control of the Company and
its subsidiaries (“the Group”), which has been prepared in accordance
with the “<strong>Statement</strong> on Internal Control: Guidance for Directors of
Public Listed Companies” issued by the Institute of Internal Auditors
Malaysia and as adopted by the KLSE.
The Board’s <strong>Responsibilities</strong>
The Board acknowledges its responsibility for maintaining a sound
system of internal controls, and for reviewing its adequacy and integrity
throughout the Group in order to safeguard the Group’s assets and
shareholders’ investments. The Group recognises that the review of
the effectiveness of the system of internal control is a continuous
process designed to manage rather than eliminate the risk of failure to
achieve the Group’s business objectives. In pursuing these objectives,
internal controls can only provide reasonable and not absolute
assurance against material misstatement, fraud or losses. It is possible
that internal control may be circumvented or overridden. Furthermore,
because of changing circumstances and conditions, the effectiveness
of an internal control system may vary over time. The rationale of the
system of internal controls is to enable the Group to achieve its
corporate objectives within an acceptable risk profile and cost and
cannot be expected to eliminate all risks.
Key elements of Internal Control
Key elements of internal control that the Board has established in
reviewing the adequacy and integrity of the system of internal controls
are as follows:
Organisation structure and responsibility levels
The Group has placed competent and responsible personnel to
oversee the Group’s operating functions. The Group has a well defined
management structure with clear lines of accountability and
documented delegation of authority that sets out the decisions that
need to be taken and the appropriate authority levels for major tenders,
major capital expenditure projects, acquisition and disposal of
business and other significant transactions that require Board
approval.
Investment decisions are delegated to Executive Management in
accordance with authority limits. Comprehensive appraisal and
monitoring procedures are applied to all major investment decisions.
26 Nylex Annual Report 2003
Control procedures and activities
The Board recognises the importance of ensuring consistent
operations throughout the Group. The Group Policies Manual (“GPM”)
that sets out the policies, procedures and practices is currently being
revised to reflect the current operations and structure of the Group and
is to be adopted by all subsidiaries within the Group. The GPM sets out
the policies and procedures for day-to-day operations and acts as
guidance to employees on the necessary tasks to be taken in a given
set of circumstances. The GPM will allow tasks to be performed with
minimal supervision, as well as specify the relevant authority limits to be
complied with by each level of management within the Group.
The Group undertakes a comprehensive business planning and
budgeting process each year to establish plans and targets against
which performance is monitored on an ongoing basis. During the
business planning process, the Group’s business objectives, strengths,
weaknesses, opportunities, threats and key business risks are
identified and action plans are formulated thereon. The business
objectives and action plans are reviewed regularly in monthly
management meeting throughout the year. In addition, the Group
commits utmost importance on safeguarding the Group’s assets
through assessment of insurance policies annually. The Board also
reviewed the risk-based internal audit plan developed by the internal
auditors and monitored the efforts taken by management to address
the risks and controls issues within the Group as highlighted by the
internal auditors. The Group continues its efforts to further enhance its
current risk management practices.
Reporting and review
There is a monthly management reporting mechanism in monitoring
and reviewing the financial results and forecasts for all subsidiaries
within the Group, including monitoring and reporting thereon, of
performance against the operating plans and annual budgets. Monthly
business meetings among senior management are held to discuss
operating and financial issues.
The Group’s financial system records business transactions to produce
monthly management accounts that allow management to focus on
key areas of concern. The quarterly financial reporting of the Group will
only be announced after being reviewed by the Audit Committee and
approved by the Board.