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THONG GUAN INDUSTRIES BERHAD

13

The Directors have selected and applied consistently suitable accounting policies and made reasonable and prudent judgments and estimates in preparing the financial statements.

A general responsibility of the Directors is to take such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Internal Controls

The Statement on Internal Control furnished in this Annual Report provides an overview of the state of internal controls within the Group.

Relationship with the Auditors

The Board has established formal and transparent arrangements for maintaining appropriate relationships with the Group’s Auditors,both internal and external.Key features underlying the relationship of the Audit Committee with the external auditors are included in the Audit Committee’s terms of reference as detailed in the Audit Committee Report in this Annual Report.

Compliance Statement

Save as disclosed below, the Company has complied with the Best Practices as set out in Part 2 of the Code throughout the year:

The Board has not identified a Senior Independent Non-Executive Director to whom concerns may be conveyed as it is of the view that it is sufficient for the Chairman appointed at each Board meeting to encourage participation by all Directors during meetings;

The Company does not have a formal training programme for its new Directors since it is the Board’s policy to recruit only individuals of sufficient calibre and experience to carry out the necessary duties of a Director. Newly appointed Directors are normally brought to visit the operating sites of the Group to acquire an understanding of the Group’s operations. Nevertheless, the Board will review the necessity for a formal orientation programme for its new Directors from time to time;

The Board has not developed formal schedule of matters specifically reserved to the Board for decision been drawn up.This is because the Board is of the view that the following set-up, currently in place in the Group, is adequate to assist the Directors in their respective roles:

  • -

    the Managing Director, assisted by Executive Directors, is responsible for the day-to-day operations of the Group and represents Management to the Board; and

  • -

    the issues that require Board’s decision are essentially major investments/divestments, strategic direction of the Group and those that generally lead to corporate announcements, like corporate exercises and quarterly financial reporting.

The Board does not have any agreed procedure for Directors, whether as a full Board or in their individual capacity, in furtherance of their duties to take independent professional advice at the Company’s expense. Any need for professional advice normally comes under the purview of the Board and will be decided upon on a consensual basis.

The revised Code requires the Audit Committee to comprise fully non-executive directors, majority of whom are independent. Presently the Audit Committee is made up of three non-executive directors and the Managing Director. Nonetheless, the Managing Director resigned from the Audit Committee on 1 May 2008;

The Audit Committee did not meet with the external auditors without the presence of executive board members in financial year ended 2007 to discuss problems and reservations arising from the interim and final audits, and any matter the auditor may wish to discuss; and

  • The appointment of a professional firm of consultants as the outsourced internal audit function had been discontinued and there was no structured risk management and/ or internal audit car ried out during the financial year ended 2007. In the absence of this, the Board relies on other element of internal control initiated by Management and monitors the results of the operations on timely basis to evaluate the results of the Group’s operations. Nonetheless, the Group Financial Controller had circulated a copy of Risk Assessment Report which summarises the top 5 business risks of the Group to the Audit Committee.

Other Information Material Contract

Since the end of the previous year report, there were no material contract that involved Group and its directors and major shareholders.

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