TERMS OF REFERENCE OF
THE AUDIT AND RISK MANAGEMENT COMMITTEEE

1. OBJECTIVE

The primary objective of the Audit and Risk Management Committee (“Committee”) is to establish a documented, formal and transparent procedure to assist the Board in fulfilling its fiduciary responsibilities relating to corporate accounting, financial reporting practices, risk management and internal control frameworks / policies, the audit process and the process of monitoring compliance with laws and regulations of CUCKOO International (MAL) Berhad (“the Company”) and its subsidiaries (“Group”).

2. COMPOSITION

The members of the Committee shall be appointed by the Board from amongst themselves and shall fulfil the following requirements:

the Committee shall comprise of at least three members;
the Committee shall comprise solely of independent directors;
the Chairman of the Committee must be an independent director, to be elected among the members of the Committee;
the Chairman of the Committee shall not be the Chairman of the Board;
the Board shall ensure that at all the times at least one 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 years’ working experience and:

passed the examinations specified in Part I of the First Schedule of the Accountants Act 1967; or
must be a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act 1967; or

fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.

no alternate director shall be appointed as a member of the Committee;
if the proposed member of the Committee is a former key audit partner* of the Group, he/she shall observe a cooling off period of at least three years before being appointed as a member of the Committee.
*The former key audit partners mean the engagement partners, other audit partners or the individuals responsible for the engagement of quality control review, and other partners including partners from the affiliate firm (providing advisory services, tax consulting, etc), if any, on the engagement team who make key decisions or judgments on significant matters with respect to the audit of the financial statements on which the auditor will express an opinion.
have appropriate level of knowledge, possess a wide range of necessary skills, exposure and commitment to be able to discharge their responsibilities, have a strong understanding of financial reporting process and other matters under the purview of the Committee complemented with a wide range of diverse perspective to strengthen the quality of deliberation; and
be financially literate and are able to understand matters under the purview of the Committee including the financial reporting process, transactions and other financial information.

The Chairman of the Committee is responsible for ensuring the overall effectiveness and independence of the Committee and should ensure among others that:

the Committee is fully informed about significant matters related to the Group’s audit and its financial statements and addresses these matters;
the Committee appropriately communicates its insights, views and concerns about relevant transactions and events to internal and external auditors;
the Committee’s concerns on matters that may have an effect on the financial or audit of the Group are communicated to the external auditor; and
there is co-ordination between internal and external auditors.

The term of office and performance of the Committee and each of its members shall be reviewed by the Board annually to determine whether the members have carried out their duties in accordance with the terms of reference.

If a member of the Committee resigns or for any other reason ceases to be a member with the result that the number of members is reduced to below three, the Board shall, within three months from the date of that event, appoint such number of new members as may be required to make up the minimum number of three members.

All members of the Committee should undertake continuous professional development to keep themselves abreast of relevant developments in accounting and auditing standards, practices and rules.

3. AUTHORITY

The Committee is authorised by the Board to investigate any matter within this Terms of Reference. It shall have full and unrestricted access to any information pertaining to the Group and shall have the resources it requires to perform its duties. All employees of the Group are required to comply with the requests made by the Committee.
The Committee is authorised by the Board to obtain external legal or independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary, the expenses of which will be borne by the Company.
The Committee shall have direct communication channels with both the external auditors and person(s) carrying out the internal audit function or activity of the Group and also to engage the management of the Group (“Management”) on a continuous basis, such as the Chairman of the Board, the Directors and the Chief Financial Officer (“CFO”) in order to be kept informed of matters affecting the Group.
The Committee shall be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Group, whenever deemed necessary, in order to enable the Committee and the external auditors or the internal auditors or both, to discuss problems and reservations and any other matter the external auditors or internal auditors may wish to bring up to the attention of the Committee.
The internal auditors report directly to the Committee and shall have direct access to the Chairman of the Committee on all matters of control and audit.All proposals by the Management regarding the appointment, transfer and removal of senior staff members of the internal audit of the Group shall require prior approval of the Committee.The Committee is also authorised by the Board to obtain information on any resignation of internal audit staff members and provide the staff member an opportunity to submit his reasons for resigning.

4. DUTIES AND RESPONSIBILITIES

In fulfilling its primary objectives, the Committee shall undertake, amongst others, the following duties and responsibilities:

Financial Reporting
To review the quarterly and annual financial statements of the Group prepared by the Management, where necessary, together with the external auditor, focusing particularly on:
1. any significant changes to accounting policies and practices;
2. significant matters highlighted including financial reporting issues, significant judgments made by Management, significant and unusual events or transactions, and how these matters are addressed;
3. significant adjustments arising from the audit;
4. compliance with accounting standards and other legal requirements; and
5. going concern assumption.
Risk Management and Internal Control
1. To conduct periodic reviews on the effectiveness of the internal control system and risk management framework adopted within the Group and to be satisfied that the methodology employed allows identification, analysis, assessment, monitoring and communication of risks in a regular and timely manner that will allow the Group to mitigate losses and maximise opportunities;
2. To oversee and recommend the risk management strategies and policies and risk tolerance levels for the Board’s approval;
3. To conduct an annual review and periodic testing of the risk management framework. This includes reviewing key risk registers and risk dashboard of the Group to ensure compliance and relevance in light of any changes in internal business processes, business strategies, environmental, social and governance (“ESG”) or any related to sustainability issues;
4. To perform risk identification and assessment regarding major asset/business acquisition or divestment, or business diversification or business consolidation. The assessment results need to be reported to the Board for strategic decision making;
5. To assess processes and procedures to ensure compliance with all laws, rules and regulations, directives and guidelines established by the relevant regulatory bodies;
6. To ensure that the system of internal control is soundly conceived and in place, effectively administered and regularly monitored;
7. To cause reviews to be made of the extent of compliance with established internal policies, standards, plans and procedures;
8. To obtain assurance that proper plans for control have been developed prior to the commencement of major areas of change within the Group;
9. To provide risk management awareness and education to all levels of the Group;
10. To recommend to the Board steps to improve the system of internal control derived from the findings of the internal and external auditors and from the consultations of the Committee itself; and
11. To report to the Board of Directors any suspected frauds or irregularities, serious internal control deficiencies or suspected infringement of laws, rules and regulations which come to its attention and are of sufficient importance to warrant the attention of the Board.
Internal Audit
1. To review the effectiveness of internal audit function, including the ability, competency and qualification of the internal audit team and/or outsourced internal auditors (if any) to perform its duties;
2. To review the adequacy of the scope, functions, competency, resources and budget, and that it has the necessary authority and independence from management to carry out its work;
3. To review and approve the internal audit plan and the internal audit report and, where necessary, ensure that appropriate actions are taken on the recommendations made by the internal audit function;
4. To receive and review on a regular basis the reports, findings and recommendations of the internal audit team and/or outsourced internal auditors and to ensure that appropriate actions have been taken to implement the audit recommendations;
5. To ensure the internal audit team and/or outsourced internal auditors has full, free and unrestricted access to all activities, records, property and personnel necessary to perform its duties;
6. To review any matters concerning the employment or appointment (and re-appointment) of the in-house and/or the outsourced internal auditors (as the case may be) and the reasons for resignation or termination of either party; and
7. To request and review any special audit which the Committee deems necessary.
External Audit
1. To review the external auditors’ audit plan, nature and scope of the audit plan, audit report, evaluation of internal controls and co-ordination of the external auditors;
2. To review the annual performance assessment, including the suitability and independence of the external auditors and make recommendations to the Board, on the appointment or re-appointment of the external auditors;
3. In assessing or determining the suitability and independence of the external auditors, the Committee shall take into consideration of the following:
4. To review any matters arising concerning the appointment and re-appointment, audit fee and any questions of resignation or dismissal of the external auditors;
5. To review the external auditor’s audit report, and management letter and Management’s response to the management letter;
6. To be advised of significant use of the external auditors in performing non-audit services within the Group, considering both the types of services rendered and the fees, such that their position as auditors are not deemed to be compromised;
7. To review the external auditors’ findings arising from audits, particularly any comments and responses in audit recommendations as well as the assistance given by the employees of the Group in order to be satisfied that appropriate action is being taken; and
8. To review with the external auditors for the Statement on Risk Management and Internal Control of the Group for inclusion in the Annual Report.
Related Party Transactions/Conflict of Interest Situations
1. To review any related party transactions and conflict of interest situations that arose, persist or may arise within the Group including any transaction, procedure or course of conduct that raises questions of Management integrity and the measures taken to resolve, eliminate or mitigate such conflicts; and
2. To ensure that the Group has adequate procedures and processes in place to monitor and track related party transactions and to review these processes.
Committee Reports
To prepare the annual Committee report to the Board for inclusion in the Annual Report and to review the Board’s statements on compliance with the Malaysian Code on Corporate Governance (“MCCG”) for inclusion in the Annual Report.
Sustainability Reports
1. Overseeing the management of principal business risks and significant / material economics, environmental and social risks and opportunities;
2. Ensuring resources and processes are in place to enable the organization to achieve its sustainability commitments and targets; and
3. Reviewing disclosures statements relating to management of suitability matters of the Group in the Annual Reports.
Other Matters
1. To verify the allocation of options pursuant to the Share Issuance Scheme or the allocation of shares pursuant to any incentive plan for employees of the Group at the end of each financial years as being in compliance with the criteria which is disclosed to the employees and make a statement in the Annual Report that such allocation has been verified;
2. To exercise its powers and carry out its responsibilities as may be required from time to time under the Anti-Bribery and Corruption Policy and Whistleblowing Policy of the Group; and
3. To carry out any other function that may be mutually agreed upon by the Committee and the Board, which would be beneficial to the Group and ensure the effectiveness discharge of the Committee’s duties and responsibilities.

5. MEETINGS OF THE COMMITTEE

The Committee shall meet at least four times in a financial year. Additional meetings may be called at any time by the Chairman of the Committee at his/her discretion. Other than in circumstances which the Chairman of the Committee considers inappropriate, the Directors, CFO, the representatives of the internal auditors and external auditors will attend any meeting of the Committee to make known their views on any matter under consideration by the Committee or which in their opinion, should be brought to the attention of the Committee. Other Board members, employees and external professional advisers shall attend any particular meetings upon invitation by the Committee. Where necessary, the Committee shall meet with the external auditors without the presence of any other Directors and members of the Management.

The Chairman of the Committee shall have a casting vote, in the event of equality of votes.

In the event the elected Chairman is not able to attend and/or absent for a meeting, a member of the Committee shall be nominated as Chairman for the meeting. The nominated Chairman shall be an Independent Non-Executive Director.

Subject to the notice and quorum requirements as provided in the Terms of Reference, meetings of the Committee may be held and conducted through the telephone or any communication equipment which allows all persons entitled to receive notice and participate in the meeting.A person so participating shall be deemed to be present in person at the meeting venue duly convened and held and shall be entitled to vote and be counted in a quorum accordingly.

6. QUORUM

The quorum for a meeting of the Committee shall consist of two members, majority of members’ present must be Independent Directors.

7. NOTICE OF COMMITTEE MEETINGS

Unless otherwise agreed, notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed, shall be forwarded and make available to each member of the Committee, any other person required to attend and all other non-executive directors, no later than five days before the date of the meeting. Notice of the meeting shall be served either personally or by email, post or courier to the address provided by the required attendees. Supporting papers shall be sent to Committee members and to other attendees as appropriate, at the same time.

8. SECRETARY AND MINUTES

The Company Secretary or his nominee or such other persons authorised by the Board shall act as the Secretary of the Committee. The Company Secretary shall record, prepare and circulate the minutes of the meetings of the Committee in a timely manner and ensure that the minutes are properly kept and produced for inspection if required.

9. CIRCULAR RESOLUTION

A resolution in writing, signed or approved by letter, telegram, telex, telefax or electronic means by a majority of the Committee members for the time being entitled to receive notice of a meeting of the Committee, shall be as valid and effectual as if it had been passed at a meeting of the Committee duly convened and held. Any such resolution may consist of several documents in like form, each signed by one or more of the members of the Committee and shall be forwarded or otherwise delivered to the Company Secretary without delay and shall be recorded by the Company Secretary in the minutes book.

10. PUBLISHED AT THE WEBSITE

The written terms of reference of the Committee dealing with its authority and scope of duties and such other information is made available on the Company’s website.

11. REVIEW OF THE TERMS OF REFERENCE

The Board shall review and assess the relevance of this Terms of Reference on a periodic basis or at a more frequent intervals as circumstances dictate to ensure that it remains consistent with the Committee’s objectives and responsibilities and aligned with the MCCG, Main Market Listing Requirements of Bursa Malaysia Securities Berhad or any other regulatory requirements. The changes to this Term of Reference shall be subject to the approval of the Board.

Endorsed by the Board on: 14 August 2024

TERMS OF REFERENCE OF THE AUDIT AND RISK MANAGEMENT COMMITTEEE

Login

TERMS OF REFERENCE OF
THE AUDIT AND RISK MANAGEMENT COMMITTEEE