KOSMO-AnnuaReport2006 (1.9MB).pdf - Bursa Malaysia

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KOSMO TECHNOLOGY INDUSTRIAL BERHAD 27 AUDIT COMMITTEE REPORT (CONT’D) STATEMENT ON ESOS The Audit Committee has verified that during the financial year ended 31 December 2006, the allocation of share options pursuant to the ESOS to eligible Directors and employees has been made in accordance with the criteria of allocation of share options set out in the By-Laws and guidelines governing the ESOS. The breakdown of option shares offered to the Non-Executive Directors pursuant to the ESOS in respect of the financial year ended 31 December 2006 are as below:- Amount of options Amount of options Name of Director offered exercised Dato’ Dr. Nik Abd. Rashid @ Nik Idris Bin Ismail 200,000 0 Dato’ Mukhriz Mahathir 200,000 0 Ravindran a/l Sivasubramaniam 200,000 0
28 ANNUAL REPORT 2006 STATEMENT ON INTERNAL CONTROL INTRODUCTION The Board of Directors is pleased to outline the following statement on the state of internal control of the Company and its subsidiaries (“the Group”) for the financial year ended 31 December 2006. The system of internal control is based on an ongoing process designed to identify the principal risks of the Group’s policies, goals and objectives and to evaluate the nature and extent of those risks and manage them efficiently and effectively. This statement was prepared in accordance with paragraph 15.27 (b) of the Listing Requirements of Bursa Securities, and the Statement of Internal Control: Guidance for Directors of Public Listed Companies issued by the Institute of Internal Auditors Malaysia and adopted by Bursa Securities. THE BOARD’S RESPONSIBILITY The Board acknowledges its overall responsibility for the Group’s system of internal control and risk management which includes the establishment of an appropriate control environment and framework as well as reviewing its adequacy and integrity. The Board recognises the need to have a formal ongoing process for identifying, evaluating and managing the significant risks faced by the Group.The Board also recognises that a good control system will assist the achievement of corporate objectives. However, in view of the limitations inherent in any system of internal control, the system is designed to manage rather than to eliminate the risk of failure to achieve corporate objectives. It can only be relied on to provide reasonable and not absolute assurance against material misstatement of management or financial information against any financial losses or fraud. The concept of reasonable assurance also recognises that the cost of control procedures should not exceed the expected benefits. The Company is committed to maintain a sound internal control system to safeguard the Company’s assets and shareholders’ investments. The Board is pleased to outline below, the nature and scope of the Company’s internal control during the year. The responsibility for reviewing the adequacy and integrity of the internal control system has been delegated to the Audit Committee and this committee obtains the assurance of the adequacy and integrity of the internal control system, through independent reviews conducted by the internal audit function, external auditors and Management. In order to achieve a sound internal system, the Board provides a control environment and a framework that is conducive to these objectives. POLICIES AND PROCEDURES The Group is progressively developing and enhancing its group operating policies and procedures to address the changing environment of its business operations and practices, and has developed flow charts to ensure that their reporting and compliance objectives are met,and that all personnel receive a clear message regarding their role in the internal control system. The key processes carried out to review the adequacy and integrity of the internal control system include conducting regular Management meetings between the Group Managing Director, the Group Executive Director and the Chief Financial Officer and all the Senior Management of all the subsidiary companies, to deliberate on operational matters and issues and gauge the effectiveness of strategies implemented. KEY ELEMENTS OF INTERNAL CONTROL PROCESSES The Board recognises that continual effectiveness, adequacy and integrity of the internal control system are important elements to enable good corporate governance. A well-defined Group organisation structure with proper lines of responsibilities are properly delegated to the Board committees, the Group’s Management and operating units of the Group. The key responsibilities are properly segregated in order that no employee has total control of any transaction. Clearly documented Standard Operating Procedures Manuals outline the policies and procedures for day to day operations. An annual budget is prepared to facilitate monitoring of the Group’s financial performance and the review of actual monthly performance against the budget. An appropriate accounting and reporting system to ensure proper and correct recording of financial data and key business indicator for management review and action. The internal audit function, which reports directly to the Audit Committee, conducts reviews on the system of internal control and the effectiveness of the process management in place to identify, manage and report risks. Weaknesses are properly communicated to management and staff to ensure prompt corrective actions are taken.
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92 ANNUAL REPORT 2006 NOTICE OF THE
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Company Secretary Kosmo Technology
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KOSMO-AnnuaReport2006 (1.9MB).pdf - Bursa Malaysia

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