The Board of directors stresses on the internal control system and internal audit in both management and operational levels. The board of directors and the management are directly responsible for providing and maintaining internal control system, and evaluating the sufficiency of the internal control. The internal control consists of five components: organization and environment, risk management, operational control of management, information system and communication, and monitoring system. These components help determine business direction, develop information and communication to ensure well-informed decisions, divide authority and determine the financial approval for each management level, and set clear operational procedure for each line of work. These areas of control also determine ethical practice, set transaction process to prevent conflict of interest with any parties, ensure appropriate access to information, and uphold the generally accepted accounting principles which support the work of independent auditors.
The internal control of the company examines financial transactions, operations and other functions which involve business activities. It helps make sure that all the activities are conducted in accordance with the efficient and determined directions. To secure the independence, the internal audit department directly reports to audit committee.
In 2015, the audit committee had 9 meetings to consider the transactions and the sufficiency of internal control. It also had meetings with auditors to review and scrutinize the financial disclosure in the financial statements as well as considering annual audit plan.
Control on Inside Information
The company requires that its executives, member of the board and the employees adhere to the ethical use of inside information. The information, especially the trading of the company’s shares, must be kept confidential. The measures to prevent the use of inside information for personal gain are following:
Punitive measures for violators range from verbal warning to termination of employment.
Currently, The company does not have any labor dispute.
Personnel Development Policy
The company has internal trainings to improve skills of staff. The training involves on the job training and coaching by senior staff in each line of work. The company also encourages its employees to attend external seminars and has decent remuneration to ensure long-term work commitment.
The company has policy to pay dividend to the shareholders. In case of sufficient cash flow and there is no need for additional investment, the company will pay dividend of 40% of net profit. However, the company board may set a different dividend level in respond to the circumstance of the company, the situation of the company’s liquidity, the economic condition and market outlook.
The internal audit department did the assessment of the sufficiency for 2015. The assessment was approved by the audit committee and was forwarded to the board meeting no.1/2016 on 17 February 2016.
The evaluation of sufficiency for internal control took into account five elements including (1) Control Environment, (2) Risk Assessment, (3) Control Activities, (4) Information and Communication, and (5) Monitoring System. The board was of the view that the internal control was sufficient.
In addition, the board viewed that the control on transaction with major shareholders and the management was ample, and encouraged consistent internal control to uphold good corporate governance.
Assessment of Sufficiency for Internal Control
The Board has considered the assessment of the sufficiency of the internal control systems of the Company for 2015 with details 5 sections as follow :
The committee sets clear and measurable target for operation. For example, it requires annual operation plan and three-year plan which contributes to the achievement of vision and mission. After the approval, these plans will be translated into action plan for the execution of each business unit. The management then constantly monitors the plan implementation. If problems arise or any situation is likely to derail the plan, the management will adapt the plan and seek the board approval before implementing the adaption.
The board reviews the goal and business plan to make sure that the management has prudently conducted the business based on the past and present performance, vision and mission of the company, overall national economic data, and direction set by the board. The board also reviews the efficiency of personnel and the appropriateness of remuneration relative to economic conditions.
The company establishes departments which are suitable for operation. A review on the company structure is made to determine if it is respondent to the change of business environment. For operational efficiency, the head office is structured into various departments to ensure strong support organization-wide.
The company has code of conduct as part of good corporate governance. The code of conduct is announced company-wide. Especially, it reminds the management and the employees to refrain from conflict of interest with any trading partners. Punitive measures are also clearly written.
The company has operation manual and business process flow for financial transactions, procurement activities and administration. This is to prevent malpractice and corruption. The announcements, regulations and instructions are always updated to keep pace with the change in business practice.
As a service provider, the company takes into consideration the fairness to all business partners for common benefits. All partners are treated equally, responsibly with transparency.
The company regularly conducts risk management to establish external and internal risk factors which may impact the company. All risks are properly handled and closely followed up.
The company carefully analyzes the situation which may lead to risks. This serves as early warning which will be brought to attention of the board for risk management.
The company has the policy to control risks and maintain follow-up measures to reduce risk for the company.
Executive meetings are held monthly or when emergency case arises. There are also channels to communicate organization-wide to urge staff to observe risk management measures. Risks are also prioritized for systematic response.
Follow-up mechanism is established to make sure the compliance of risk management plan with indicators for relevant risks. This will be reported to the board every month.
The company has written instruction to set approving authority for each management level and all employees are informed of this authority. This authority is regularly reviewed to reflect business operation.
The company delegate (1) approval function, (2) account recording function, and (3) property custodianship with clear workflow. This is to ensure mutual control.
The company has clear procedure in approving the transaction with major shareholders, and executive committee members. The board and the audit committee have a clear ethical policy for this. The conduct of any transaction is always made with awareness of corporate long-term benefit. Any transaction with possible conflict of interest must be reported to the audit committee for review.
The company ensures compliance of obligation to all parties concerned.
The company monitors the operation of its subsidiaries. If the company invests in any subsidiary companies, it will send a representative into the board of the subsidiary. Likewise, the subsidiary sends a representative in the debtor committee of the company.
The company conducts its business in accordance with the law. A legal department is established to follow up change in laws and regulations, and provide internal legal advice.
The company never violates the law. It supports lawful practice.
The company always prepares documents and information in advance of the board’s meetings. Additional documents may be provided to the board on the meeting day.
Invitation letters, meeting documents and report of previous meeting are always sent out to the participants prior to the meeting date.
Meeting minutes are made to capture essential details, suggestion, concerns and opposition (if any). The minutes may be amended and will be approved in the subsequent meeting.
The documents for accounting records are well kept.
The company uses appropriate accounting methods under the generally accepted accounting principles. It is also audited by certified public accountants.
The company sets its annual goal and seeks approval from the board. The management regularly reports the progress to the board.
Each business unit is evaluated on daily, monthly and yearly basis in various platforms, such as key performance index. This not only ensures the goal achievement and performance index. This not only ensures the goal achievement and reduces risk but also allows the company to adjust itself in respond to the changing environment.
The company establishes the audit committee and the audit department.
This is to enhance internal control and compliance to the regulations. This department gives advice to other departments by encouraging self control. It reports to the management and the audit committee.
Though the management directs the internal control, the audit department is independent and reports to the audit committee. It provides guidance to ensures compliance to internal control system. The work of internal audit is also reported to the high-level management and the audit committee.
The audit department reports to the board and the audit committee every month. Any default which needs urgent attention will be reported to the audit committee immediately for prompt action also assign to the internal audit department follows and regularly monitor and report progress to improve the deficiencies are significant ongoing to the board/the audit committee every month.
The management is responsible for reporting to the board of directors its decision which may have significant impacts on the reputation and financial situation of the company. This includes any issues related to malfeasance and violation of law. In addition, the internal audit department that monitors the performance, including fraud or suspected fraud. Practice that violates the law, which may affect the reputation. And financial position of the company significantly as the audit committee assignments. And reported the matter to the Audit Committee.