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TEHO INTERNATIONAL INC LTD Annual Report 2012 24
The Company engages RSM Chio Lim LLP (“External Auditors”) to audit its Singapore
incorporated subsidiaries. The AC is of the view that the External Auditors is a suitable
auditing frm that meets the Group’s audit obligations, its size and complexity, and having
also considered the External Auditors’ professional standing, the reputation of its audit
engagement partner and the adequacy of the resources and experience of its supervisory
and auditing staff assigned for the audit. The External Auditors is also an auditing frm
registered with the Accounting and Corporate Regulatory Authority. The Company’s foreign
incorporated subsidiary is being audited by separate auditing frm, as disclosed in Note 17
to the fnancial statements in this annual report which have been cleared by the External
Auditors. The Board and AC have reviewed and are satisfed that the appointment of
different auditors would not compromise the standard and effectiveness of the audit of the
Company. Therefore, Rules 712, 715 and 716 of the Rules of Catalist have been complied
with.
The AC reviews the scope and results of the audit carried out by the External Auditors and
its independence and objectivity. In the AC’s opinion, the External Auditors is suitable for re-
appointment and it has accordingly recommended to the Board that the External Auditors
be nominated for re-appointment as the auditors of the Company at the forthcoming AGM.
The AC had met with the external auditors, without the presence of management to review
the adequacy of audit arrangements, with emphasis on the scope and quality of their audit,
and the independence, objectivity and observations of the auditors.
The AC has implemented a whistle blowing policy for the Group with the objective of
providing an avenue for staff, suppliers and customers to raise in confdence concerns about
possible improprieties in matters of fnancial reporting or other matters which they become
aware. A copy of the whistle blowing policy has been posted on the Company’s website for
the information of our stakeholders.
Internal Controls
Principle 12: The board should ensure that the management maintains a sound system of
internal controls to safeguard the shareholders’ investments and the company’s assets.
The Board is responsible for the overall internal control framework and is fully aware
of the need to put in place a system of internal controls within the Group to safeguard
shareholders’ interests and the Group’s assets, and to manage risks.
On 22 July 2009 the Board under the AC recommendation selected and appointed Ernst
& Young Advisory Pte. Ltd. (“EYA”) to review, recommend and subsequent rectifcations
follow-up review on the Company’s internal controls systems, and to expand and enhance
on its policies and procedures manual in the following major areas of operations of the group
under two (2) phases:
Phase 1:
(a) Purchases, payables and payments (including purchase and safeguarding of fxed
assets)
(b) Inventory management
(c) Financial close reporting
Phase 2:
(a) Sales, receivables and collections
(b) Treasury and cash management
(c) Human resources and payroll
The frst full cycle internal controls review and follow-up reviews of the major areas of
operations with direct consultations, presentations and reportings made to the AC were
completed in March 2012. At the recommendations of the AC, EYA will continue with its
second full cycle internal controls review which will span over FY2013 and FY2014. In
addition at the recommendation of the AC, EYA was also been engaged to undertake the
frst cycle of the Enterprise Risk Assessment fo the Company that will commence in the
second quarter of FY2013.
The AC had also extended to the External Auditors, the respective reports of EYA frst full
cycle internal controls review and follow-up reviews.
Since its initial public offer, the risk profle of the Company has not changed signifcantly as
the Company has not made any major or very substantial acquisition of non-core business
except for a discloseable acquisition in May 2012 of a company in the same industry sector.
In its audit of the Company FY2012 accounts, the External Auditors informed the Board that
it did not notice any signifcant defciency or major lapses in the internal controls that would
warrant highlighting to the Management, AC and Board.
At the recommendation of the AC, the chief fnancial offcer now takes on the additional
duties of a compliance offcer and to coordinate and oversee the works of the Company’s
professional service providers.
Based on the internal controls established and maintained by the Group, and the fndings
and reports of the appointed internal and external auditors reviewed by the management
and the Board, the Board with the concurrence of the AC is of the opinion that the Group’s
internal controls addressing fnancial, operational and compliance risks are adequate to
meet the Group’s needs and control objectives and provide reasonable assurance for
safeguarding the Group’s assets in the current business environment. The Board notes
that no system of internal control can provide absolute assurance against the occurrence of
material errors, poor judgement in decision-making, human error, fraud or other irregularities.
Report of Corporate Governance