As part of the Corporate Governance Framework, the following principles apply on accountability and audit:
Principle 10: Accountability of the Board of Directors and Management
The Board seeks to provide the shareholders with a balanced and understandable assessment of GIL’s performance, position and prospects through its announcement of quarterly and full year financial results (quarterly financial results are released within 45 days after the end of each quarter while full year financial results are released within 60 days after the financial year end), dividend guidance and other material information via SGXNet and GIL’s corporate website. Annual reports are sent to all shareholders and are accessible on GIL’s website. The Manager provides the Board with information to enable the Board to make a balanced and informed assessment of Company’s performance, position and prospects. The Manager also submits a quarterly compliance checklist to the SGX-ST confirming that all the financial results announced via SGXNet comply with the requirements set out in the Listing Manual.
The Board has formal policies and procedures on reporting and review of financial information. There are also policies and procedures established to ensure compliance with legislative and regulatory requirements such as GIL’s Risk Management Policy, Whistleblowing Policy and Code of Conduct. The Board has access to monthly management accounts and is provided with such explanation and information as the Board may require from time to time.
Principle 11 : Risk Management
The Board is responsible for the governance of risk. The Board determines GIL’s level of risk tolerance and risk policies and oversees the Manager in the design, implementation and monitoring of the risk management and internal control systems.
GIL has implemented an Enterprise Risk Management (ERM) Framework for the identification of key risks within the business. This Framework defines five major classifications of risks – Strategic, Investment/Economic, Regulatory, Financial and Operational. Operational risks include possible lapses in internal controls and risks from external events such as legal risks as well as environmental risks. Investment/Economic risks are influenced by a variety of general economic and business conditions in the places where GIL has investments or where GIL’s underlying assets and economic exposures are located. Such factors may affect the share price of GIL and its ability to meet dividend expectations. While appropriate risk mitigation measures within GIL’s risk assessment framework are taken to address such inherent risk, the Board notes that, as elaborated upon below, no system of internal controls and risk management can eliminate all risks.
GIL adopts the Committee of Sponsoring Organisations of the Treadway Commission Model and the International Organization for Standardization on Risk Management (ISO 31000:2009(E)) guidelines for assessing the soundness of its financial reporting, and the efficiency and effectiveness of its risk management, internal control and compliance systems.
The ARMC assists the Board in the oversight of risk management in GIL. It reviews the effectiveness of the overall risk management system in meeting sound corporate governance principles. GIL’s risk management process is an ongoing process and requires the continuous identification, assessment, monitoring and management of significant risks. The ARMC will report any material matters, including findings and recommendations pertaining to risk management to the Board.
The Manager is responsible for reporting the status of any key risk exposures or incidents to the ARMC. The Risk Register and Risk Profiles are reviewed on a quarterly basis. Key risks at the process level will be identified via risk self-assessment exercises. Risk awareness and ownership of risk treatments are also continuously fostered across the Manager’s organisation.
The Board reviews the adequacy and effectiveness of the company’s risk management and internal control systems, including financial, operational, compliance and information technology controls on an annual basis.
GIL does not have any employees and in this externally managed model, it relies on the Manager to establish, implement and maintain a sound system of internal controls to safeguard shareholders’ investments and GIL’s assets and to report to the ARMC on the adequacy and effectiveness of these systems of internal controls and risk management on a regular basis. The ARMC reviews the effectiveness of the system of internal controls at least annually. In its letter of representation to GIL, the Manager has confirmed that it has established an adequate system of internal controls, addressing financial, operational, compliance and information technology controls of GIL.
Based on the work done and the reviews undertaken by the external auditors and the Manager’s internal auditor, the Board (with the concurrence of the ARMC) is of the opinion that there are adequate and effective risk management systems as well as internal controls in place to help to mitigate critical and significant risks relating to financial, operational, compliance and information technology matters.
The system of internal controls and risk management framework established by the Manager provide reasonable, but not absolute, assurance that GIL’s assets and investments are safeguarded. The likelihood of achieving the objectives of the Committee of Sponsoring Organisations of the Treadway Commission Model is affected by limitations inherent in all internal control and risk management systems. The Board notes that no system of internal controls and risk management can provide absolute assurance in this regard, or absolute assurance against the occurrence of material errors, poor judgment in decision-making, human error, losses, fraud or other irregularities.
Principle 12: Audit Committee
While GIL does not have a CEO/CFO, for FY2018, the Manager has provided written assurance to the Board confirming that GIL’s financial records have been properly maintained and the financial statements give a true and fair view of GIL’s operations. This certification also confirms the adequacy of GIL’s risk management, compliance and internal control systems.
Audit & Risk Management Committee
GIL has established an ARMC and has adopted a formal charter setting out its key responsibilities. All three member of the ARMC, including the Chairman of the ARMC, possess relevant accounting or related financial management expertise or experience.
The ARMC comprises the following three independent directors:
|Mr Tan Kok Wee||Chairman|
|Mr Ronald Seah Lim Siang||Member|
|Mr Tan Wee Peng Kelvin||Member|
The ARMC has the explicit authority to investigate matters within its terms of reference. It has full access to and cooperation of the Manager, full discretion to invite any director of GIL or any executive officer of the Manager to its meetings and reasonable resources to discharge its functions properly. It is empowered to:
- retain external counsel, accountants, or others to advise the ARMC or to assist in the conduct of an investigation
- seek any information it requires from external parties
- meet with the officers of the Group, external auditors, or external counsel, as necessary
The ARMC assists the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal controls, the audit process, the compliance monitoring process and risk management.
The following is a non-exhaustive list of the specific responsibilities of the ARMC:
- Financial Statements: The ARMC reviews the significant financial reporting issues and judgments to ensure the integrity of the financial statements of GIL and any announcements relating to GIL’s financial performance. The Manager makes representations to the Board in connection with GIL’s financial statements on the proper accounting record and transaction.
- Internal Controls: The ARMC reviews and reports to the Board at least annually the adequacy and effectiveness of GIL’s internal control systems, including financial, operational, compliance and information technology controls and risk management systems. It reviews the scope of the external auditors’ review of internal controls and reviews reports on significant findings and recommendations.
- Internal Audit: The ARMC reviews the effectiveness of the Manager’s internal auditor’s work on GIL.
- External Audit: The ARMC reviews and advises the Board on the external auditors’ annual plan for GIL, the external auditors’ proposed fees and their independence as well as the scope and results of the external audit. It establishes policies as appropriate with regards to, and reviews, the independence and objectivity of the external auditors.
- Compliance: The ARMC considers the work plan for compliance activities and reviews the updates and effectiveness of the system for monitoring compliance with laws and regulations.
- Risk Management: The ARMC considers the overall Risk Management Framework and reviews its effectiveness in meeting sound corporate governance principles. It keeps the Board informed of all significant business risks and reviews the status report from the Manager.
The ARMC meets as required and normally at least four times a year. It reviews its effectiveness and performance against its charter, and reports its findings to the Board at least annually. The ARMC meets with the external auditors at least semi-annually or more frequently if required. The ARMC has the opportunity to discuss any matters in a private session with GIL’s external auditors at least annually.
During the year under review, the ARMC, among others:
- Reviewed and recommended to the Board the release of the quarterly and full year financial statements
- Reviewed and recommended to the Board the Compliance Plan 2018
- Reviewed and opined that GIL’s risk management and internal control system was adequate and effective for FY2018
The ARMC conducted a self-review against the responsibilities set out in the Audit and Risk Management Committee Charter and concluded that the ARMC had been adequately fulfilling its duties.
To ensure ARMC members keep abreast of changes to accounting standards and important accounting issues, continuing education is provided to update and enhance their skills and knowledge. Information on training and updates can be found in the Induction, Orientation and Training section under Principle 1.
The ARMC recommends to the Board the proposals to the shareholders on the appointment, reappointment and removal of the external auditors and recommends to the Board the remuneration and terms of engagement of the external auditors. The re-appointment of the external auditors is subject to approval of the shareholders at GIL’s AGM.
During the financial year, the ARMC held a meeting with the external auditors without the presence of the Manager.
Independence of the External Auditors
For the purposes of the FY2018 audit, the ARMC reviewed the independence of the external auditors and determined that there were no circumstances that would impair the independence of the external auditors. The ARMC noted the declaration of independence in the external auditor’s report and noted that for FY2018, the fees paid to the external auditor for audit services and non-audit services were as follows:
Neither the members nor the Chairman of the ARMC are former partners or directors of the external auditors.
Principle 13: Internal Audit
The Manager has its own outsourced internal auditor, RSM Risk Advisory Pte Ltd (RSM), which conducts audit on certain areas of the Manager’s scope of work under the Management Agreement with GIL such as operations, setting of risk parameters and adherence to risk limits, monitoring of risk limit breaches, adequacy of compliance policies and periodic monitoring framework. RSM adopts and meets the International Standards for the Professional Practice of Internal Auditing. The Manager’s internal auditor has access to GIL’s documents, records and properties. RSM reports the findings from the audit of the Manager’s scope of work under the Management Agreement to the Manager’s ARMC. The Manager’s officers also meet with RSM and the Board to ensure that GIL’s internal procedures and policies are compliant with all applicable laws and regulations.