The Board acknowledged that the management had progressively implementing an adequate internal control system to ensure the effective functioning of the Group’s operational, financial and compliance areas as follows:
1. Operational
The management is responsible for analysing the control environment, identifying risks pertaining thereto, and implementing various controls therein as follows:
(i) Approach taken: The management conducts interview with relevant staff members, reviews relevant documentation of the Control Systems and evaluates findings of any deficiencies in the design of the Control Systems, then provides recommendations for improvement and assesses the effectiveness of implementation of such recommendations, where appropriate. The scope and findings of the review on the Control Systems will be reported to the Audit Committee annually;
(ii) Procedure manuals and operational guidelines: They are in place to safeguard the assets against unauthorised use or disposition and ensure maintenance of proper accounting records that are in compliance with the applicable laws, rules and regulations for the provision of reliable financial information for internal use and/or external publication;
(iii) Management information system andtechnology: To control over the business activities, it allows close tracking of various inputs and outputs of the Group’s business such as inventory, products and customer relationship and human resources. It also tracks audit trails in the authorisation system, under which permissions and responsibility of authorisation are clearly identified and adequate records can be maintained in the Control Systems;
(iv) Reports and variance analysis: Reports and analysis of each segment are conducted on regular basis;
(v) Information flow: The transparent information flow alerts the management promptly of any deviations. Benchmarking with historical database and comparisons with the same also acts as a detecting device for spotting unusual activities;
(vi) Safeguarding of assets: Regular physical count of inventories, daily cash, movie vouchers and ticket exchange coupons for each cinema with reconciliation of report generated from the ticketing system are performed by Finance and Accounts Department and reviewed by Internal Audit Department; and
(vii) Service quality control: Regular review on operational systems of cinema business segment to ensure the service quality
2. Financial
(i) proper controls are in place for the recording of complete, accurate and timely accounting and management information
(ii) annual budget of cinema operation is prepared and approved by the management before being adopted
(iii) monthly financial statements are provided to all directors and senior management which give a balanced and understandable assessment of the Group’s performance, financial position and prospects in sufficient details;
(iv) the management monitors the business activities closely and review monthly financial results of cinema operation against the budget;
(v) regular reports on revenue, debtors’ ageing and internal financial reports are prepared to the management which give a balanced and understandable assessment of the Group’s financial performance;
(vi) daily available fund report and monthly cash flow forecast are reviewed to monitor the cash flows of the Group;
(vii) the Group policy and guideline on cheque payment to individual strengthened; and
(viii) annual audit by external auditor is carried out to ensure that the consolidated financial statements are prepared in accordance with generally accepted accounting principles, the Group’s accounting policies and the applicable laws and regulations.
3. Compliance
The following policies and procedures are in place to safeguard the compliance control:
(i) Systems and Procedures on Protection and Disclosure of Inside Information to ensure, with the assistance of internal work team (if required), that any material information which comes to the knowledge of any one or more officers should be promptly identified, assessed and escalated, where appropriate, for the attention of the Board. The Board shall make timely decisions on disclosure, if necessary, and take appropriate measures to preserve confidentiality of inside information until proper dissemination of the inside information;
(ii) Policies and practices on compliance with legal and regulatory requirements which shall be reviewed and monitored regularly by the Corporate Governance Committee as delegated by the Board;
(iii) CCT Compliance Committee is established to monitor, control and regularly review connected transactions and continuing connected transactions of the Company and ensure proper compliance with all relevant laws and regulations and the Listing Rules and disclosure requirements;
(iv) Whistle-blowing policy for employees of the Group to raise concerns, in confidence, about possible improprieties in financial reporting, internal control or other matters. Such arrangement will be reviewed by the Audit Committee which ensures that proper arrangement is in place for fair and independent investigation of the matters; and
(v) Anit-money Laundering and Counterterrorist Financing Policy and Procedures is established to set out the general framework for combating against money laundering and financing of terrorism. It provides guideline to prevent the Group’s employees and clients / customers / suppliers / vendors / contractors from misused for money laundering, terrorist financing or other financial crime and has set out some indications of potentially suspicious transactions / activities for employees’ reference.
