AE’s Audit Committee was established in 2009 to assist the BoC in carrying out their supervision duties and to ensure proper management of the company in accordance with GCG principles and the Decree of the Capital Market Supervisory Agency No.29-PM/2004 which was superseded by OJK Regulation No. 55/POJK.04/2015 on the Formation and Guidelines for the Work of Audit Committee in 2015.
AE’s Audit Committee consists of three members: one independent commissioner, acting as the Chairman, and two experts, each for the area of accounting and law.
In 2018, the BoC appointed new members of AE’s Audit Committee as the previous members have served as AE’s Audit Committee for two terms since 2009. The term of the previous members of the Audit Committee ended before the end of the term of office of the AE’s BoC.
For the full Audit Committee Charter, please click here.
The current members of the Audit Committee are:
- Member: Mohammad Effendi, He was appointed as the Chairman of AE’s Audit Committee based on the Board of Commissioners’ Decision dated 27th May 2019. For further information, please see the Board of Commissioners' profile.
- Member: Lindawati Gani, 56, an Indonesian citizen, is a member of Audit Committee of PT Adaro Energy Tbk, and was appointed as a member of AE’s Audit Committee based on the Board of Commissioners’ Decision dated 14th May 2018. She is a Professor of Faculty of Economics and Business University of Indonesia and a National Council Member of Institute of Indonesia Chartered Accountants (IAI).
She is also a member of the Audit Committee in public companies, among others, PT Astra International Tbk, PT Astra Graphia Tbk. Currently she also serves as an Independent Commissioner of PT Hero Supermarket Tbk. She earned Bachelor of Economics majoring in Accounting University of Airlangga in 1985, Master of Business Administration (MBA) majoring in General and Strategic Management, Institute of Management Development Indonesia (IPMI) in affiliated with Harvard Business School (Boston-USA) in 1986, and Master in Management majoring in Management Accounting in 1994 from University of Indonesia. She received her Doctor of Philosophy (PhD) in 2002 from University of Indonesia.
- Member: Ignatius Robby Sani, 62 years old, an Indonesian citizen, is a member of the Audit Committee of PT Adaro Energy Tbk, and was appointed as a member of AE’s Audit Committee based on the Board of Commissioners’ Decision dated 23rd April 2018. He has more than 30 years of professional experience. Prior to becoming a member of the Audit Committee of PT Adaro Energy Tbk, he served as Director of PT Adaro Power and Commissioner at PT Makmur Sejahtera Wisesa since 2015, and he has also served as Commissioner of PT Bhimasena Power Indonesia since 2016, by which those positions ended before appointed as a member of the Audit Committee of PT Adaro Energy Tbk.
He started his career at the Department of Credit and International at Bank Indonesia in 1981-1989. In 1990-1993 he served as a legal consultant at the law firm of Kartini Mulyadi & Liene Gunawan. Thereafter he started his career in Astra Group in 1994-2015 as Chief of Legal, Director, President Director and Board of Commissioners. He also served as Director of Bank Permata Tbk in 2006 – 2008, and Audit Committee of PT Acset Indonusa Tbk in 2015.
Duties and Responsibilities
The Audit Committee has performed its roles and responsibilities in accordance with the mandate given by the BoC, and in accordance with the Audit Committee Charter. AE’s Audit Committee has had the Charter since 2009. Recognizing the company’s development, as well as the prevailing laws and regulations, the Charter was amended in November 2017.
As stipulated in the renewed Audit Committee Charter, the Audit Committee’s duties and responsibilities include:
- the review of AE’ financial information;
- the appointment of the independent auditor and the monitoring of their performance;
- internal control effectiveness;
- the compliance with the rules and regulations;
- the implementation of risk management; and
- the implementation of self-assessment of Audit Committee.
During 2018, the Audit Committee held 12 official meetings. The previous Audit Committee held eight meetings before their term ended and the new Audit Committee held four meetings since their term began until the end of 2018.
|Dr Ir Irwandy Arif, M Sc||7||88|
|Mamat Ma’mun, SE||7||88|
|Dr Ir Raden Pardede||4||100|
|Ignatius Robby Sani||4||100|
The above meetings included meetings with business units, division heads, Internal Audit Function, Risk Management Unit, external auditors and AE’s Directors. Based on the meetings during 2018, the Audit Committee concluded that:
- The Audit Committee accepted the explanations given by Finance & Accounting Division and the external auditor with regard to the published financial statements and financial information;
- The external auditors had performed its roles independently and professionally in accordance with the applicable audit standards in Indonesia. The external auditor had communicated the results to AE’s management and the Audit Committee;
- The Internal Audit Function had performed its roles and responsibilities objectively and independently according to its charter;
- AE had put its best efforts to comply with the applicable laws and regulations;
- AE’s risk management and internal control systems had been consistently implemented and worked effectively as intended;
- Self-assessment for the Audit Committee’s performance in 2018 had been conducted in February 2019.
Performance Assessment of Audit Committee
Performance of the Audit Committee is evaluated based on the self-assessment principle, and the result is reported to the BoC as its direct supervisor. The assessment includes all aspects of the activities, such as regular meetings, meetings with relevant parties, overseeing tasks, risk management, internal policies, and external audit, as well as on the potential conflict of interest of transactions.
Self-assessment for Audit Committee performance in 2018 has been conducted in February 2019.
Nomination and Remuneration
The BoC decided that nomination and remuneration functions for the BoC and BoD will be carried out directly by the BoC, without the formation of a nomination and remuneration committee.
In regard to the implementation, the BoC acts independently by referring to the Guideline of Nomination and Remuneration Function, which specifies the BoC’s relevant duties and responsibilities:
- Establish policies regarding: the composition of the BoC and BoD; the criteria required in the nomination process; and performance evaluation of BoC and BoD members;
- Assess the performance of the BoC and BoD members based on the policy;
- Establish policies regarding the BoC and BoD development programs; and
- Determine candidates for membership of the BoC and BoD to be submitted to GMS.
- Establish policies regarding the structure of the remuneration process and amounts; and
- Assess BoC and BoD members’ performance with reference to remuneration received.
The structure, policy and value of the remuneration of the BoC and BoD shall consider the following:
- Remuneration applied within the companies in the same industry and business size;
- The duties, responsibilities and authority of the BoC and BoD related to the achievement of the company’s goals and performance;
- Performance target of each member of BoC and BoD; and
- The balance between fixed and variable allowances.
During 2018, meetings regarding nomination and remuneration were held once every four months and included in BoC meetings.
|Ir. Theodore Permadi Rachmat||5||100|
|Arini Saraswaty Subianto||5||100|
|Dr. Ir. Raden Pardede||5||100|
In 2018, total remuneration of the BoC and BoD of AE and its consolidated subsidiaries was USD23.8 million, a 4% increase from USD22.8 million in 2017.
For the full Guideline of Nomination and Remuneration Function, please click here.
SUPPORTING ORGAN OF THE BOARD OF DIRECTORS
As stipulated in the OJK regulation number 35/ POJK.04/2014, a public company is required to have a corporate secretary function which has access to all material information of the company in relation to the principle of information disclosure and transparency, and occupies a strategic role to ensure that the company is in full compliance with capital market rules and regulations.
The Corporate Secretary is directly responsible to a BoD and is appointed and dismissed based on a BoD decree. The Corporate Secretary must have a thorough knowledge of capital market rules and regulations, an ability to maintain confidentiality and other relevant competencies, especially with regard to information disclosure.
The company’s corporate secretary position is currently held by Mr. Mahardika Putranto. He was appointed Corporate Secretary based on the BoD Decree dated September 1st, 2014 and underwent a Corporate Secretary training program in February 2015.
He earned a bachelor’s degree in commerce from the University of New England, and a master’s degree in economics and finance from Macquarie University, both in Australia.
Mahardika built his early career at several Indonesian securities companies predominantly in areas of equity research and investment banking. In 2005, he joined the investor relations team at PT Apexindo Pratama Duta Tbk, and became the Head of Corporate Finance in 2008 managing both corporate finance and investor relations activities as well as directly involved in Corporate Secretary exercises.
The Corporate secretary activities in 2018 included:
- Presented regular reports and information disclosures to the OJK and IDX in compliance with capital market rules and regulations;
- Supported the BoD in conducting AGMS 2018 and 2018 Annual Public Expose;
- Oversaw the company’s shareholders registration and reported the adjustments to the BoD and regulators;
- Provided updates to the BoC and BoD on AE’s shares and other capital market matters;
- Together with the Internal Audit Division, promoted GCG implementation in the company and identified governance risks, including risks to company reputation or image;
- Maintained effective communications with stakeholders, in particular with capital market regulatory bodies;
- Ensured the company’s website was fully updated and in compliance with capital market rules and regulations; and
- Developed and proposed to the related director on work plans, budget and performance indicators of Corporate Secretary & Investor Relations Division.
In 2018, Corporate Secretary Department achieved 100% compliance to the capital market rules and regulations. There were no fines and/or penalties have been imposed to the company during 2018.
Investor Relations is responsible for building communication between the company and the shareholders at both local and international levels, by sharing the information on the company’s business and financial performance, as well as corporate achievements. The information is expected to help analysts in building stories about the company and the investors in making investment decisions.
The investor relations and corporate secretarial functions at AE are performed by one division namely Corporate Secretary and Investor Relations Division, which is headed by Mahardika Putranto. He reports directly to the Chief Financial Officer and actively maintains communications with all members of the BoD as well as the personnel of the other functions within the company to obtain information on the company’s operations, finance, projects, corporate actions, and other aspects. The BoD and the rest of the company are supportive of the investor relations activities.
Together with the Corporate Communications Division, the Investor Relations Department maintains active interactions and close relationships with capital markets participants, which include institutional investors, potential investors, analysts, and the media. The company believes that ongoing dialogues with the shareholders based on fact and transparency will create maximum shareholder value.
The measures to communicate the company’s information are manifested through several regular activities, such as the quarterly press releases, investor presentations, the public exposes, and the regular meetings with analysts and investors. As of the end of 2018, AE was covered by 26 analysts who issued reports on AE’s operational and financial analyses, as well as on the coal market as a whole. The Investor Relations’ team attended 15 conferences and 8 non-deal international and domestic roadshows, with a total of 281 meetings attended during the year.
The Internal Audit Function has carried out its duties in accordance with the Internal Audit Charter. The Board of Directors has given its full support to the internal audit activities and there were no restrictions on the scope and access for the Internal Audit Function.
As the third line of defense in risk management, the Internal Audit Function’s role is to provide an objective and independent assurance and consultancy services for PT Adaro Energy Tbk and its subsidiaries in the areas of governance, risk management and control, to improve the company’s operations and add value.
The Internal Audit Function directly reports to the President Director, who has delegated the Internal Audit Charter to the Internal Audit Function as a mandate to perform and execute its duties and responsibilities. The Internal Audit Charter has been updated in November 2017 and signed by the President Director, Vice President Director and the Board of Commissioners.
For the full Internal Audit Charter, please click here.
The Internal Audit’s practices are based on the International Standards for the Professional Practice of Internal Auditing issued by the Institute of Internal Audit (IIA).
Annual Audit Plan
To provide optimum benefits with the available resources, the Internal Audit Function selects objects to be included in an annual audit plan based on risk priorities by taking into account the risk profile of all strategic business units. Before it is finalized, the annual audit plan is presented to the BoD and Audit Committee to ensure that the plan is aligned with the company’s strategy and has addressed their concerns.
In 2018, there were 446 audit objects in AE’s audit universe, out of which 30 audit objects were selected to be included in the annual audit plan. A total of 27 audit and consulting reports were completed, a decrease from 28 audit reports completed in 2017, due to the decrease of the number of AE’s audit team members. AE’s audit covered 9 of the 38 strategic business units and 12 of 29 risk types.
Implementation of corrective actions
Each audit report includes recommendations or corrective actions agreed with the relevant managements.
The recommendations will only provide value if implemented; therefore, the implementation is monitored and reported to the Board of Directors and the Audit Committee on a quarterly basis. The number of corrective actions implemented by the management is one of the Internal Audit Function’s key performance indicators (KPIs).
The managements of the strategic business units are active in implementing the corrective actions recommended by the Internal Audit Function. In 2018, 154 corrective actions had been fully implemented, or 88% (target 83%) of the total corrective actions that were due by December 2018.
Review of the internal control system effectiveness
The Internal Audit Function rates the adequacy of controls implemented by management to mitigate risks and shows this in each audit report submitted to the Board of Directors, Board of Commissioners the Audit Committee and related management personnel. The Internal Audit Function has completed 23 audit reports covering 9 strategic business units. Based on our review of the effectiveness of three lines of defense, it can be concluded that the internal control system in the Adaro Group has been working as intended.
Use of information technology
To facilitate its activity, the Internal Audit function has been using information technology as needed, such as for working papers, internal audit portal for knowledge management, timesheets and corrective actions data. In January 2019, the company purchased data analytics software to be used in audit activities.
Internal audit team
The internal audit team consists of internal auditors with a variety and complementary range of educational backgrounds (such as accounting, information technology and industrial engineering), skills and work experiences.
The function is led by the Chief Audit Executive, Mr. Zayarwan Zain, who reports directly to the President Director. In accordance with the OJK Regulation, his appointment in 2013 has been reported through an official letter to the Financial Services Authority and copied to the Board of Commissioners and Board of Directors of PT Adaro Energy Tbk.
Zayarwan has more than 31 years’ experience; 16 years as an internal audit practitioner and 15 years as a consultant. As an internal auditor practitioner, Zayarwan worked at PT International Nickel Indonesia Tbk and PT London Sumatra Indonesia Tbk. In addition, as a consultant, he previously served as a Director at PT PricewaterhouseCoopers Advisory Indonesia, where he specialized in providing services in internal audit, risk management, performance improvement and governance.
Zayarwan graduated from the Padjadjaran University in Bandung, majoring in accounting. He holds international professional certifications including Certified Internal Auditor, Certified Fraud Examiner, and Certified Risk Management Assurance. He was also the governor of the Indonesian professional association of internal audit (IIA Indonesia) for the period of 2014 – 2017.
The internal audit team consisted of eleven auditors. Two of them have obtained international professional certification related to their internal audit work. The internal audit team also develops training programs to ensure they have adequate skills and knowledge to perform their responsibilities. In 2018, on average, each auditor had eight days of training.
The Internal Audit Function adopts the Internal Audit Code of Ethics issued by the IIA. Each internal auditor is required to read and understand the code. To maintain its objectivity and independence, every year the internal auditors must sign a Conflict of Interest Statement to ensure that they do not have a potential conflict of interest in carrying out their duties and responsibilities. If there is any potential for a conflict of interest, actions will be taken to address the risk.
Quality assurance and improvement program
To ensure and keep improving its audit quality, the Internal Audit Function implements a quality assurance and improvement program that comprises:
- conducting surveys to obtain feedback from the management;
- performing self-assessment and peer review for each audit assignment to ensure compliance with the existing Internal Audit manual;
- conducting self-assessment on the conformance with International Standards for the Professional Practice of Internal Auditing and compliance with the OJK regulations;
- reviewing external quality assurance required to be performed every five years – this was scheduled for 2018 but postponed to the next term; and
- conducting continuous improvement program (CIP) to improve audit cycle time and productivity
The result of quality assurance and improvement program is compiled and discussed every year to be included in our continuous improvement project for the following year. The quality assurance and improvement program has been performed regularly and produced positive results. The outcomes are reported to the Board of Directors and the Audit Committee on a regular basis.
Meeting with key stakeholders
To fulfill the accountability aspect, the Internal Audit Function conducted periodic meetings in 2018 with the BoD (4 times) and the Audit Committee (2 times) with following agenda:
- progress of the 5-year plan;
- progress of the annual audit plan;
- audit reports;
- status of corrective actions’ implementation; and
- constraints in implementing the Internal Audit Charter.
The Internal Audit Function also held one meeting with the BoC to discuss the relationship between the Internal Audit Division and the BoC and the summary of internal audit activities during 2018.