The Gamuda Berhad (“Company”) Audit Committee (“the Committee”) is responsible for making recommendations to the Board regarding the appointment and removal of the external auditor. In making those recommendations, the Committee is authorised to conduct periodic reviews of the external auditor.
Selection and Appointment
The Board has delegated to the Committee the responsibility for the appointment, remuneration and removal of external auditor.
Pursuant to Section 271 (1) of the Companies Act 2016, the Company shall at each annual general meeting appoint or re-appoint the external auditors of the Company, and the external auditors so appointed shall, hold office until the conclusion of the next annual general meeting of the Company.
Should the Committee determine a need for a change of external auditors, the Committee will follow the following procedures for selection and appointment of new external auditors:-
- the Committee to identify the audit firms who meet the criteria for appointment and to request for their proposals of engagement for consideration;
- the Committee will assess the proposals received and shortlist the suitable audit firms;
- the Committee will meet and/or interview the shortlisted candidates;
- the Committee may seek the assistance of the Finance Director to perform items (a) to (d) above;
- the Committee will recommend the appropriate audit firm to the Board for appointment as external auditors; and
- the Board will if deemed appropriate, endorse the recommendation and seek shareholders’ approval for the appointment of the new external auditors and/or resignation/removal of the existing external auditors at the general meeting.
Objectivity and Independence of External Auditor
The independence of external auditor is essential to the provision of an objective opinion on the truth and fairness of the financial statements of the Company.
Pursuant to Recommendation 8.3 of Principle B of the Malaysian Code on Corporate Governance, the Audit Committee is also mandated to ensure continuing objectivity, suitability and independence of the external auditor.
The external auditor is precluded from providing any services that may impair their independence or conflict with their role as external auditor.
The Committee shall obtain a written assurance from the external auditor confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.
The external auditor can be engaged to perform non-audit services that are not, and are not perceived to be, in conflict with the role of the external auditor. This excludes audit related work in compliance with statutory requirements.
The prohibition of non-audit services is based on three (3) basic principles as follows:-
- external auditor cannot function in the role of Management;
- external auditor cannot audit their own work; and
- external auditor cannot serve in an advocacy role of the Company and its subsidiaries (“the Group”).
The external auditor shall observe and comply with the By-Laws of the Malaysian Institute of Accountants in relation to the provision of non-audit services, which include the following:-
- accounting and book keeping services;
- valuation services;
- taxation services;
- internal audit services;
- IT systems services;
- litigation support services;
- recruitment services; and
- corporate finance services.
All engagements of the external auditor to provide non-audit services are subject to the approval/endorsement of the Committee.
Management shall obtain confirmation from the external auditor that the independence of the external auditor will not be impaired by the provision of non-audit services.
Rotation of Engagement Partner
The Company recognises that there exists a threat to the auditor’s independence where the same audit partner conducts consecutive audits of the Company.
To mitigate this risk, it is important for regular audit partner rotation to occur.
The By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“MIA By-Laws”) sets out the maximum number of years Key Audit Partners* can serve in the same role, as well as the number of “cooling-off” years.
The Committee shall ensure that the firm of External Auditors meets or exceeds the requirements of the MIA By-Laws relating to the rotation of Key Audit Partners*.
Appointment of Former Key Audit Partner* as a Member of Audit Committee
It is the Group’s policy that requires a former Key Audit Partner* to observe a cooling-off period before being appointed as a member of the Committee. The cooling-off period shall be consistent with the best practices and guidance recommended under the Malaysian Code on Corporate Governance and the requirements of the MIA By-laws, whichever is longer.
The external auditor must provide an annual declaration addressed to the Committee confirming: –
- the nature of any non-audit services provided to the Company; and
- that the auditor has maintained its independence in accordance with relevant legislation and professional accounting standards.
The Committee shall carry out annual assessment on the performance, suitability and independence of the external auditor based on the following four (4) key areas: –
- quality of service;
- sufficiency of resources;
- communication and interaction; and
- independence, objectivity and professional skepticism.
The Committee may also request the Group Chief Financial Officer and/or Head of Internal Audit to perform the annual assessment of the external auditors.
Review of the policy
The Committee will review the Policy periodically to ensure that it continues to remain relevant and appropriate.