Maybank

Audit Committee Report

A. Composition And Terms Of Reference

Composition

  1. The Committee shall be appointed by the Board of Directors from amongst its non-executive directors and shall consist of at least (3) three members. The Chairman and the majority of the Audit Committee members must be independent directors and at least one (1) member of the committee must be:
    • a member of the Malaysian Institute of Accountants (MIA); or
    • if he is not a member of the MIA, he must have at least three (3) years working experience; and
      • he must have passed the examinations specified in Part I of the First Schedule of the Accountants Act, 1967; or
      • he must be a member of one (1) of the associations of accountants specified in Part II of the First Schedule of the Accountants Act, 1967.
  2. Where the Chairman is unable to attend the meeting, the members shall elect a person among themselves as Chairman.
  3. Review of membership is undertaken once every three (3) years. This review pertains to the terms of office and performance of the members.

Meetings

  1. Meetings shall be held at least once a month or at a frequency to be decided by the Committee and the Committee may invite any person to be in attendance to assist in its deliberations. At least once a year, the Committee shall meet with the external auditor without the presence of Management.
  2. The Committee will regulate its own procedure particularly with regard to the calling of meetings, the notice to be given of such meetings, the voting and proceedings of such meetings, the keeping of minutes, the custody, production and inspection of such minutes.
  3. Upon the request of the external auditor, a meeting is to be convened to consider any matter that the auditor believes should be brought to the attention of the directors and shareholders.
The Audit Committee Members of Maybank from left to right: Tan Sri Datuk Dr. Hadenan A. Jalil (Chairman), Dato' Johan Ariffin (Member), Mr. Cheah Teik Seng (Member) and Mr. Erry Riyana Hardjapamekas (Member).

Quorum

The quorum shall be two (2), both of whom are to be independent directors.

Secretary

The General Counsel & Company Secretary, En. Mohd Nazlan bin Mohd Ghazali is the Secretary to the ACB.

Authority

The Committee is authorised by the Board to:

  1. Investigate any activity or matter within its terms of reference.
  2. Promptly report to Bursa Malaysia Securities Berhad (“Bursa Securities”) matters which have not been resolved satisfactorily, thus, resulting in a breach of the Bursa Securities Listing Requirements.
  3. Obtain external independent professional advice, legal or otherwise deemed necessary.
  4. Maintain direct communication channels with external auditors, person(s) carrying out the internal audit function or activity, and with senior management of the Bank and its subsidiaries.
  5. Convene meetings with internal and external auditors, without the attendance of the management, whenever deemed necessary.

In discharging the above functions, the ACB has also been empowered by the Board to have:

B. Duties & Responsibilities

The primary duties and responsibilities of the ACB with regards to the Maybank Group's Internal Audit function, external auditors, financial reporting, related party transactions, annual reporting and investigation are as follows:

  1. Internal Audit
    • Review the adequacy of the internal audit scope and plan, functions and resources of the internal audit function, Internal Audit Charter and that it has the necessary authority to carry out its work.
    • Review the internal audit reports and to ensure that appropriate and prompt remedial action is taken by Management on lapses in controls or procedures that are identified by internal audit.
    • Approve the appointment or termination of the Chief Audit Executive and Heads of Department of Internal Audit.
    • Assess the performance of the internal audit staff; determine/approve the remuneration and annual increment of the internal audit staff.
    • Take cognisance of resignation of internal audit staff and the reason for resigning.
  2. External Audit
    • Review the appointment and performance of external auditors, the audit fee and any question of resignation or dismissal and to make recommendations to the Board.
    • Assess the qualification, expertise, resources and effectiveness of the external auditors.
    • Monitor the effectiveness of the external auditors' performance and their independence and objectivity.
    • Review the external auditors' audit scope and plan, including any changes to the planned scope of the audit plan.
    • Review major audit findings raised by the external auditors and Management's responses, including the status of previous audit recommendations.
    • Review the assistance given by the Group's officers to the external auditors and any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information.
    • Approve non audit services provided by the external auditors.
  3. Financial Reporting

    Review the quarterly and year-end financial statements focusing on:-

    • Any changes in accounting policy and practices.
    • Significant and unusual events
    • Compliance with applicable Financial Reporting Standards and other legal and regulatory requirements.
  4. Related Party Transactions
    Review any related party transactions and conflict of interest situations that may arise within the Bank or Maybank Group including transactions, procedures or courses of conducts that may raise questions of Management's integrity.
  5. Annual Report
    Report the Audit Committee's activities for the financial year.
  6. Investigation
    Instruct the conduct of investigation into any activity or matter within its terms of reference.
  7. Other Matters
    Act on other matters as the Committee considers appropriate or as authorised by the Board of Directors.

C. A Ctivities Of The Audit Comite During The Year

During the year under review, the Audit Committee in the discharge of its duties and functions carried out the following activities:

Attendance of meetings

A total of fourteen (14) meetings were held during the year ended 31 December 2012. The details of attendance of each of the member at the Committee meetings held during the year are as follows:

  Composition and name of
committee member
No. of
meetings
attended
during the
period under
review
1 Tan Sri Datuk Dr Hadenan A. Jalil
(Chairman)
- Appointed on 15/7/2009
- Independent Non-Executive Director
14/14
2 En Cheah Teik Seng (member)
- Appointed on 26/8/2009
- Independent Non-Executive Director
14/14
3 Dato' Johan Ariffin (member)
- Appointed on 26/8/2009
- Independent Non-Executive Director
14/14
4 Mr. Erry Riyana Hardjapamekas (member)
- Appointed on 25/6/2012
- Independent Non-Executive Director
7/7
5 Dato' Sreesanthan Eliathamby (member)
– Appointed on 27/10/2010
– Non-Independent Non-Executive Director
(retired w.e.f 29/3/12)
3/3

The Audit Committee consists of four (4) Independent Non- Executive Directors. One of the members (En Cheah Teik Seng) is a Fellow of the Institute of Chartered Accountants in England and Wales. This meets the requirement of the Bursa Securities Listing Requirements which requires at least one qualified accountant as a member of the Audit Committee.

The Audit Committee meets on a scheduled basis. The Group Chief Financial Officer (GCFO) and the Chief Audit Executive (CAE) are invited to attend the meetings. The External Auditors are also invited to discuss their management letters, Audit Planning Memorandum and other matters deemed relevant.

In addition to the scheduled meetings, the members of the Audit Committee also had two (2) sessions with the External Auditors without the presence of the Management as required.

The Audit Committee also meets to discuss and review the quarterly unaudited financial results and the annual audited financial statements of the Bank and the Maybank Group. The President & Chief Executive Officer (PCEO) and the Group Chief Financial Officer (GCFO) are invited to attend these meetings, together with the External Auditors.

Internal Audit (IA)

Financial Reporting

External Audit

Employee Share Scheme (ESS)

Directors' Training

E. Internal Audit Function

The Group has a well established in-house Internal Audit (IA) to assist the Board of Directors to oversee that Management has in place a sound risk management, internal control and governance system. The total costs incurred for maintaining the IA function for 2012 was approximately RM42.0 million, comprising mainly salaries, travelling and accommodation expenses and subsistence allowances for audit assignments.

The internal audit function is guided by its Audit Charter and reports functionally to the ACB of the Bank and administratively to the President & Chief Executive Officer, and is independent of the activities or operations of other operating units. The principal responsibility of IA is to undertake regular and systematic reviews to evaluate the effectiveness of risk management frameworks and the internal control systems to provide reasonable assurance that such frameworks and systems continue to operate efficiently and effectively. In order for IA to perform its functions effectively, the auditors are continuously sent for training to equip themselves with requisite product knowledge and skills especially in the areas of Shariah, Treasury, Investment Banking, and Insurance & Takaful. The scope of coverage of IA encompasses all units and operations of the Bank, including the subsidiaries. The selection of the units to be audited from the audit universe leading to the formulation of the audit plan is premised on a risk-based approach, and it is the responsibility of the IA to provide the ACB with an independent and objective report on the state of affairs of the risk management, internal control and governance processes.

The internal audit function for Maybank operations and its subsidiary companies in Malaysia and Papua New Guinea is organised on a Group basis within Maybank. Technical support in the areas of credit risk, treasury and market risk, information technology systems, asset management and developmental initiatives are provided, where required to ensure consistency of standards and applications. When approving the Annual Audit Plan, the ACB reviews Maybank IA's human resource requirements to ensure that the function is adequately and appropriately resourced. The internal audit functions for the respective subsidiary companies in the Philippines, Indonesia, Singapore, Thailand and Cambodia are organised and supported by the respective resident internal audit teams with direct accountability to the respective Board Audit Committees of these subsidiary companies.

The audit reports which provide the results of the audit conducted in terms of the risk management of the unit, operating effectiveness of internal controls, compliance with internal and regulatory requirements and overall management of the unit are submitted to the respective ACB for their review. Key control issues, significant risks and recommendations are highlighted, along with Management's responses and action plans for improvement and/or rectification, where applicable. This enables the ACB to execute its oversight function by forming an opinion on the adequacy of measures undertaken by Management.

The International Professional Practices Framework (IPPF) issued by The Institute of Internal Auditors (IIA), the Practice Advisories issued by the IIA, the Guidelines on Internal Audit Functions, Bank Negara Malaysia's Guidelines on Internal Audit Function of Licensed Institutions and Guidelines on Management of IT Environment are used where relevant as authoritative guides for internal auditing procedures.

During the period under review, the following activities were carried out by IA: