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AirAsia X Berhad • Annual Report 2014
Budget
The Group undertakes a comprehensive budgeting process each year, to establish goals
and targets against which performance is monitored on an on-going basis. The Board
participates in the review and approval of the Yearly Budget. A quarterly reporting and
review of financial results and forecast has been established and is consistently observed.
The quarterly financial performance is constantly presented to the Board.
Limits of Authority (LOA)
AAX documented its Limits of Authority (“LOA”) which clearly defines the level of authority
and responsibility in making operational and commercial business decisions. Approving
authorities cover various levels of management and includes the Board. The LOA is
reviewed regularly and any amendments made to the LOA must be tabled to and approved
by the Board. The latest version of LOA which named Revised LOA was approved by the
Board in November 2012.
Insurance and Physical Safeguards
The Group undertakes adequate insurance and ensure physical safeguard on assets are in
place to ensure that the assets are sufficiently covered against any mishap that will result
in material losses. AAX Aviation Insurance program comprises of the following: -
• Aviation Hull and Spares All Risks and Liability;
• Aviation Hull and Spares War and Allied Perils (Primary and Excess);
• Aircraft Hull and Spares Deductible;
• Aviation War, Hi-jacking and Other Perils Excess Liability (Excess AVN52); and
• General Insurance Program.
Information and Communication
While the management is responsible to ensure proper implementation of internal control
procedures, the Board can request to review the state of internal controls as and when it
deems necessary. The Board can request for information and clarification from management
as well as to seek inputs from the Audit Committee, external and internal auditors, and
other experts, and any costs shall be borne by the Company.
Audit Committee
The Audit Committee has been established by the Board since year 2013. The Audit
Committee comprises of three (3) members of the Board, majority of who are independent
directors. Its terms of reference together with the Audit Committee Report are disclosed in
pages 97 to 99 of this Annual Report.
Internal Audit Function
The Audit Committee has established the Internal Audit Department (“IAD”) since year
2013. The IAD of AAX acts as an independent appraisal function to assist the Audit
Committee in discharging their duties and to provide assurance to Management and the
Board that all internal controls are in place, adequate and functioning effectively within
the acceptable limits and expectations. IAD strives to provide the means for the Company
to accomplish its control objectives by introducing a systematic and disciplined approach
in evaluating and improving the effectiveness of risk management, internal control and
governance processes. The purpose, authority and responsibility of IAD as well as the
nature of assurance and consultancy activities provided to the Company are clearly stated
in the Internal Audit Charter as approved by the Audit Committee in year 2014. In order to
preserve its independence, the Head of IAD reports directly to the Audit Committee and
administratively to the Acting Chief Executive Officer of AAX.
Throughout the year 2014, the IAD activities are focusing more towards operational audits.
Nevertheless in November 2014, the IAD developed the risk-based Internal Audit Plan
which covering strategic, operational, information technology and financial activities that
are significant to the overall performance of the Company. The Internal Audit Plan will be
reviewed and approved by the Audit Committee. The IAD primarily acts as an assurance unit
which reviews the effectiveness of the system of internal control, highlighting any areas for
improvement and recommend enhancement to the internal controls where necessary and
to minimize or eliminate the risk of internal fraud and irregularities.
As an integral part of the management process, IAD furnishes the Management with
independent analysis, appraisals, counsel and information on the activities under review.
The key internal audit activities that add value to AAX can be summarized as follows:
1.
Identify all auditable activities and relevant risk factors, and to assess their
significance;
2.
Research and gather information that is competent, factual and complete;
3.
Analyse and examine that operational activities are carried out effectively;
4.
Provide assurance on compliance to statutory requirements, laws, company policies
and guidelines;
5.
Recommend appropriate controls to overcome deficiencies and to enhance company
operations;
6.
Evaluate procedures in place to safeguard company assets;
7.
Assist Management in establishing a proper risk management framework, assessing
risk and monitoring the effectiveness of the risk management program and ensuring
the adequacy of the internal control system.
Code of Conduct
Our Code of Conduct (“the Code”) governs the professional conduct of our employees and
outlines their responsibilities to the Company in performing their duties. The various policies
and guidelines within the Code spell out the standards and ethics that all employees are
expected to adhere to in the course of their work. It highlights AAX’s expectations on their
professional conduct which includes amongst others:
• The environment inside and outside of workplace.
• How we work.
• Conflict of interest.
• Confidentiality and disclosure of information.
• Good practices and controls.
• Duty and declaration.
The Code is designed to maintain discipline and order in the work place among employees
at all levels. It also sets out the circumstances in which such employees would be deemed
to have breached the Code and the disciplinary actions that can be taken against them.
Whistle Blower Policy
A Whistle Blower Policy was approved by the Board in year 2013 and then being introduced
to all staff in the same year. The Policy provides a platform for employees to report
instances on unethical behaviour, actual or suspected fraud or dishonesty, or a violation
of the Company’s Code of Conduct. The Whistle Blower Policy includes protection for the
whistle-blowers from any reprisals as a direct consequence on making such disclosures.
It also covers the procedures for disclosure, investigation and the respective outcomes of
such investigations. AAX expects its employees to act in the Company’s best interests and
to maintain high principles and ethical values. AAX will not tolerate any irresponsible or
unethical behaviour that would jeopardize its good standing and reputation.
The Board has received an assurance from the Acting CEO and CFO of AirAsia X Berhad that
the risk management and internal control system is operating adequately and effective, in
all material aspects.
STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL
