The Internal Audit Division of the Malaysia Co-operative Societies Commission (SKM) was established on 1 January 2008. Its establishment aligns with General Circular No. 3/1998, which mandates all Federal Statutory Bodies to establish an Internal Audit Unit.

The Internal Audit Division operates under the supervision of the SKM Audit Committee for operational and reporting matters, and under the Executive Chairman for administrative matters.

The Terms of Reference for the SKM Internal Audit Unit can be found at the following link:<berikut>.

• To assist the Malaysia Cooperative Commission in achieving its goals through a systematic and disciplined approach in evaluating the effectiveness of internal control processes and governance;
• To assist SKM management in executing the 4P management process—Planning, Organising, Directing, and Controlling—within the organisation;
• To support management in enhancing the operational systems of various divisions and units within SKM; and
• To aid management in ensuring that the workflows of divisions and units comply with the policies, regulations, and standards established by the government, SKM management, and other relevant authorities.

The scope of duties and responsibilities of the Internal Audit Division, as stipulated in Paragraph 7.1.4 of General Circular No. 3 of 1998, is as follows:

1. To periodically review the organisation to determine whether the functions of planning, supervision, direction, and control have been effectively implemented in accordance with established policies, directives, and management regulations, and aligned with organisational objectives and sound management practices;

2. To determine the reliability and effectiveness of internal control systems and operational controls;

3. To examine the accuracy and validity of financial information and identify methods for measuring, classifying, and reporting such information;

4. To review existing systems to ensure they are aligned with current policies and regulations, especially those with operational impact, and to determine compliance. Where necessary, to recommend appropriate policies;

5. To evaluate methods for safeguarding assets and to verify the existence of assets;

6. To assess the benefits and efficiency of resource utilisation, identify opportunities for improvement, and recommend solutions to address related issues;

7. To examine organisational operations and program implementation to ensure that outcomes align with predetermined objectives and that execution follows the planned strategy;

8.To coordinate the functions of Internal Audit and External Audit;

9. To participate in the planning, design, development, and implementation of computer-based management systems, particularly in the areas of:

(a) Control features;
(b) Accuracy features;
(c) Documentation capabilities, so that the systems developed assist the statutory body in achieving its goals;

10. To submit the annual audit work schedule to the Chief Executive and Audit Committee for review and approval;

11. To report to management the parties responsible for taking action on audit findings;

12. To report any staff involved in misconduct or fraud;

13. To ensure that all planning and actions undertaken by the statutory body consider prior audit recommendations;

14.To evaluate whether plans and actions taken are consistent with audit comments or findings;

15. To submit a quarterly report to the Audit Committee, which shall include:

i. Follow-up actions taken on significant internal audit findings;
ii. Improvements in operational efficiency and effectiveness resulting from audit interventions;
iii. Coordination between Internal and External Audit to prevent duplication of efforts;
iv. Audit work planning;
v. Obstacles encountered in conducting audit activities; and

16. The Director of Internal Audit shall serve as the Secretary to the Audit Committee (JAD) Meetings.

i. The authority of the Internal Audit Division is established through the SKM Audit Committee (JAD), which is empowered by the SKM Board of Directors. Functionally, the division reports to the Audit Committee and reports to the Executive Chairman (PE) of SKM for administrative matters;

ii. The Internal Audit Division is granted full, independent, and unrestricted access to any information, records, systems, assets, functions, operations, and personnel within SKM, including its branches and subsidiaries;

iii. The Internal Audit Division is responsible for conducting internal audits or investigations in an independent, efficient, high-integrity, and quality-driven manner based on valid evidence, and for issuing accurate and fair reports regarding the internal audit activities carried out;

iv. The Internal Audit Division is authorised to recommend corrective or improvement actions for any audited processes or activities; and

v. The Internal Audit Division must maintain the confidentiality of all information obtained in the course of its duties.

The independence of the Internal Audit Division is crucial to prevent unfair and biased judgment. It can be upheld through the following methods:

1. The status of the Internal Audit Division within the overall structure of SKM must be clearly defined to enable auditors to effectively fulfill the objectives of the audit;

2. The position and status of the Head of Internal Audit must be equivalent to that of other division, state, and unit directors to enable effective engagement with peers and superiors in carrying out duties and responsibilities;

3. Avoidance of conflicts of interest that may arise from auditors' professional or personal relationships with staff members or entities being audited;

4. Freedom to plan, investigate, and report without any element of control, influence, pressure, or external restriction in selecting techniques, obtaining information, and presenting accurate findings from the audit;

5. The Internal Audit Division must not be involved in designing or establishing procedures, preparing records, or participating in activities that are typically subject to audit and evaluation, as this could be interpreted as compromising its independence and objectivity. However, such independence shall not be compromised when the division proposes the appropriate level of control to be applied in the development of any system or procedure.

The independence of the Internal Audit Division is essential to prevent unfair and biased judgment. This independence is upheld through the following practices:

1. Audit Planning

i. To prepare the Annual Audit Plan for the upcoming year and present it at the Fourth Quarter Meeting (October–December) of the SKM Audit Committee for approval by the Audit Committee (JAD).

2. Implementation of Audit Review

i. To prepare and submit the comprehensive audit report to the auditee within fourteen (14) days after the exit meeting with the auditee; and
ii.To ensure that the audit report is presented accurately and fairly.

i. To conduct a follow-up audit visit to the auditee to ensure the implementation of corrective actions within six (6) months after the comprehensive audit report has been tabled at the Audit Committee Meeting.

4. Audit Committee (JAD) Meetings

i. To issue a draft of the meeting minutes within seven (7) days after the meeting is held; and
ii. To distribute the confirmed minutes and extracts of the minutes to the relevant parties within seven (7) days after the minutes have been confirmed by the Chairperson of the Audit Committee.