"AAC Acoustic Holdings Inc." has changed to "AAC Technologies Holdings Inc."   

Current PostionHomeInvestor RelationsCorporate GovernanceInternal Audit, Risk Management and Internal Control

Risk Management, Internal Control and Internal Audit

Internal Audit

In addition to internal control and enterprise risk management, certain critical aspects of organizational governance, business ethics, fraud and financial reporting established by COSO (the Committee of Sponsoring Organizations of the Treadway Commission) have been referred to by Internal Audit in their audit planning and objectives when assessing the effectiveness of internal controls. The work scope of the Internal Audit is to cover internal and external financial reporting objectives and increased focus on operations, compliance and non-financial reporting objectives such as the recruitment and materials usage processes adopted by human resources and production departments respectively.

The internal audit team also provides independent assurance that the internal controls system is effective and efficient. In order to carry out its function, the internal audit team is given unrestricted access to all business operations and personnel, and all business files and accounting records. The head of the team reports directly and regularly to the Audit Committee on the findings of audit matters. The work schedule of the internal audit team is based on a medium-term audit program reviewed and approved by the Audit Committee. Adverse implications from such findings on the accuracy and completeness of the financial report and the effectiveness of the internal control system are discussed in details by the Audit Committee and immediately rectified.

In addition, the external auditors will report and discuss with the Audit Committee any weaknesses or defects of the internal control system revealed by their audit work, and, if appropriate, adjustments are made to the financial reports and accounts.

While management is responsible for the design, implementation and maintenance of the internal controls, the Board acknowledges the responsibility of ensuring that the Group has maintained effective and sound internal controls to safeguard the Shareholders’ investment and the assets of the Group. The Board considers that the Group’s internal control system covers all material aspects, including financial, operational, risk management functions and is in compliance with all relevant regulations.

Enterprise Risk Management

An enterprise-wide risk assessment with management and key-process owners had been carried out to review the effectiveness of the key controls and mechanisms in place. It is anticipated that a framework would be drawn up and active management of the identified influential risks would be carried out. It is intended that the risk management framework would be able to raise risk-awareness within senior management such that a safeguarding culture of the Group’s business and assets is to be developed and implemented.

Internal Control

It is recognized that the assessment of the internal control system is an on-going process which will require applications of underlying principles to the different objective categories in the changing business and operating environments. In particular, management enhancements are required to address deficiencies in internal controls over operations, compliance and financial and non-financial reporting. Meanwhile, the internal audit plan will continue to be based upon a risk-based approach aligned with organizational objectives and, to some extent, stakeholder priorities.

There is a clearly-defined management structure with specified authority limits and segregated responsibilities to achieve business control objectives and safeguard of assets. Guidelines and approval limits for operating (including research and development) and capital expenditures are set clearly and in advance, and, with division of operations and financial personnel to be responsible for the different approval processes. An internal computer system has been implemented to enhance the controls and effectiveness embedded in the approval process. The approval processes prescribed in the system are reviewed regularly by an independent management committee and verified by internal audit. A separate finance team is designated to ensure maintenance of proper and complete accounting records by all Group companies for producing reliable financial information for internal management use. Regular review of the financial information involving senior management and the Board are carried out for verification and monitoring purposes.