ACE 450 MANAGEMENT AUDIT

Group Members

Environmental Name Matric No.

Nurul Iylia Husna Binti Othman 144084
Audit Nureesa Camelia Binti Ussni 141911
Nurul Husna Binti Nordin 141518
Ng Xin Yun 143148
Presented by
Group 8 Yap Hui San 144024
Lin Jia Yee 144087
Rusyda Syazreeza Binti Mohamed Sofian 141711
Muhammad Amir Zakwan Bin Shairul Bazri 144124
Harichandran Thirupathi 144348
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 Agenda
1. Introduction to environmental 9. The risk assessment to be
audit considered
2. Environmental problems 10. The types of preliminary
3. Environmental Policies and information
Legislation in Malaysia 11. Preparing the environmental
4. Environmental Management audit report
System 12. Audit findings &
5. Defining environmental audit recommendation
6. Difference between financial 13. Case study - China’s
audit and environmental audit environmental audit: Taihu Lake
7. Objectives of internal audit in 14. Case study - EMS with
relation to an environmental Construction Site: Kelantan,
audit Malaysia
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8. Scope of an environmental audit 15. Conclusion

 Introduction to
environmental audit
There are raising concerns over organization’s environmental footprint and
sustainability performance. Many stakeholders and investors demand for
environmental audit due to some factors:

1. Growing belief that environmental issues represent a source of risk in

terms of unforeseen (or foreseen) liabilities
2. Social and environmental behavior can reflect ethical performance of an
organization
3. Investors increasingly use social and environmental performance as a
key criterion for their investment decisions
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 Environmental problems

● Refers to the harmful effects of human

activity on the environment that cause
environmental degradation. Examples:
1. Pollution- air pollution, water pollution, land pollution, noise pollution
Causes: 2. Global warming
3. Climate change
1. Human disturbance
4. Acid rain
● Urban development
● Industrialization
● Deforestation Effects:
2. Natural disaster 1. Human health- Respiratory problem, Diarrhea, Induced Noise Hearing
● Earthquakes Loss, High blood pressure, Stress
● Tsunami 2. Loss of biodiversity
● Landslide 3. Ozone layer depletion
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 Environmental Policies
and Legislation in Malaysia
Legislation Explanation

● The central and various levels governments ISO 14001 Focuses on the processes involved in the
should increase the inputs in pollution creation, management and elimination of
governance to enhance R&D. pollution, rather than solely on directly
reducing pollution
● In associated audit work, all departments need
plan as a whole and announce at any time the Local Agenda 21 Program run by the United Nations (UN)
clue and problems that they discover related to sustainable
development and was the planet’s first
respectively.
summit to discuss global warming related
● Competent authority should formulate unified issues
environmental information disclosure standard
EMS within Growing awareness of the effect of
as soon as possible, including disclosure modes,
Construction construction activities on the environment
disclosure contents and so on, in order to ensure Sites
the comparability and usefulness of
environmental information.
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 Environmental
Benefit of EMS
Management System
1. Enhanced regulatory compliance
● An environmental management system (EMS) is a 2. Prevent pollution to environment
system that can be developed by an organization to
3. Increased resource efficiency or
minimize environmental impacts and implement
environmental policy through some processes and reduce costs
practices. 4. Enhanced employee morale
5. Enhanced business reputation
● An EMS helps an organization to efficiently use its
6. Competitive and financial
resources while compliance with the organization's
environmental policy include reducing environmental advantage
impacts of its products, services and operating
activities or increasing their positive effects.
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 ISO 14001- International
Organization for Standardization

● An international standard that specifies requirements for Environmental Management

Systems (EMS) requires businesses to identify and manage the environmental aspects
and impacts resulting from their operations, products and services.

● Helps businesses to manage ecological risks effectively and improve their environmental
performance. The standard applicable for all types of company whether large or small,
private or public sector and any activity or sector.

● SIRIM QAS International offers Environmental Management System (EMS) certification

based on the ISO 14001. The standard can provide assurance to company’s stakeholders
including external stakeholders that environmental impact is being measured and
improved.
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 Five Main Stages of an EMS

Commitment
and Policy

Review Planning
Continuous
Improvement

Evaluation Implementation
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 Five Main Stages of an EMS 3. Implementation
Implementing the action plan in operation using the necessary
1. Commitment and Policy resources. An important component of EMS is employee
training and awareness for all employees. Other main steps in
Organizations commit to improve environmental performances
implementation steps are documentation, following operating
and establish the organization’s environmental policy based on
procedures and setting up internal and external
EMS framework.
communication lines.
2. Planning
Then, the organization uses its environmental policy as a basis for
4. Evaluation
An organization continuously monitors its operations to
planning, sets objectives and targets to improve environmental
evaluate whether its achieve their objectives and target. If the
performance. Firstly, an organization needs to identify
objectives and target are not being achieved, the organization
environmental aspects of its operations. Environmental aspects
should implement corrective action.
are those operations that involve negative impact to the
environment such as water pollutants, air pollutants or hazardous 5. Review
waste. Then organization analyze which aspects are significant Top management of the organization reviews
by choosing criteria considered most important by the the results of the evaluation to see whether the
organization. system is effectively implemented or not.
An organization sets its objectives and targets when significant The plan is then altered to increase
environmental aspects are determined. Lastly, an organization the EMS's efficiency. The review
initiate an action plan to meet the targets including segregate stage creates a loop of continuous
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responsibilities, organize a schedule and designing clearly improvement for a company.

defined steps.
 Defining environmental audit
● An environmental audit is a thorough examination into an organization's environmental
responsibilities

● An environmental audit typically contains three elements: agreed metrics (what should be
measured and how), performance measured against those metrics, and reporting on the
levels of compliance or variance

● The production of an environmental audit is voluntary

● Environmental impacts are now recognized as essential by all companies, and they
realize that their environmental performance will be scrutinized by a wide range of
interested parties

● Some companies conduct internal audits while others hire external auditors,
partially to improve the audit's credibility and partly due to a lack of internal
expertise
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 Types of environmental audit When to perform environmental
audit?
1. Compliance audit
• Notification from Department of Environment (DOE)
• Evaluates organization’s compliance status to the • Require for Condition of Approval for the Environmental
regulatory requirements relevant to that organization Impact Assessment or as Condition of License
• Provides an indication of the environmental risk that it • Environmental liabilities and insurance costs
poses • Investment and decisions to buy facilities
• Detailed investigation of specific issues
2. Environmental Management Systems Audit
• Corporate image and marketing opportunities
• Helps the organization or company understand how it is • Concern about the environmental impact of the
performing on its own environmental performance organization
standards. • Past environmental accidents
• Comparison of actual conditions to expected conditions,
and a determination as to whether one is in
conformance or not in conformance.
Limitations of environmental audit
• Time-consuming and expensive - not suitable for small
3. Environmental Risk Assessment businesses with limited financial resources.
• Address specific environmental risks that have been • Insincere - the company may simply want to take advantage
identified either by way of communication from of positive publicity without actually
interested parties, or detected by DOE through its intending to be environmentally responsible.
enforcement activities or as a result of the environmental • Biased - may lead to a consistently good
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compliance-type audit. environmental record, but this is not the

case.
 Difference between financial audit and environmental audit
Financial audits Environmental audits
Legal basis of Part of regulatory (legal) Voluntary affairs, no statutory requirement in
audit process, organizations Malaysia that requires public listed companies to
have to perform it disclose environmental information to the public
Frequency Annually Whenever the organization decides to perform one

Who does it? Performed by external Performed by external and/or internal auditors.
auditors However, compliance audit can only performed by
competent external auditors registered under DOE
Methodology Based on accounting Varies between auditors and companies
standards. Etc: Malaysian
Financial Reporting
Standards (MFRS)
Access to audit The results are public Very few audits are public, although some results
documents in the form of are often published in the Environmental Reports
annual reports
Liability Auditors are partially liable With few exceptions that are negotiated between
for their reports. They have auditor and auditee, there is no external liability
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to provide a 'true and fair' implication in environmental audits

view of the organization
 Objectives of internal 1. Assess the company’s compliance with
laws and regulations and other relevant
audit in relation requirements

to an environmental 2. Establish a performance basis for planning

and developing an environmental
management system
audit 3. Promote good environmental management
4. Maintain credibility with the public
5. Raise awareness and enforce the
company’s internal commitment to
environmental policies

6. Minimize risk exposure from

environmental issues to
health and safety
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 Scope of an environmental audit

1. As a general guidance for all processes

and activities on the competence and How to define the scope of environmental audit?
evaluation of auditors.
The scopes should include a description of the:
2. Applicable to organization the need to
1. Activity undertaken in respect of which the environmental audit is to be
conduct external and internal audit or
conducted
environmental management system.
2. Components of the activity to be considered
3. To conduct quality management system
3. Segments of the environment to be considered
audits and environmental management
4. Elements to be considered
system audit.
5. Beneficial uses to be considered
4. To comply with Environmental Quality
6. Risk assessment to be conducted
1974 and related laws and regulations.
7. Period of time over which the audit is to be conducted
8. Exclusions from the scope of the audit
with the reason
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 The audit criteria against The segment of the
activities to be covered environment to be considered
To ensure that the objectives and the scopes of the Segment in relation to the environment means any portion
audit will be met, the audit criteria need to be chosen or portions of the environment expressed in terms of：
carefully from a variety of sources, which are: • Volume, Space, Area, Quantity, Quality, Time, or Any
i. Legislation such as Environment Quality Act combination thereof.
1974
ii. Environment protection regulations and waste The elements to be considered
management policies
iii. Conditions contained in EPA notices or licenses The consideration of the relevant elements should be given to
iv. Codes of practice each of the principal constituent parts of the environment, for
v. Policies, management plans or strategies examples:
vi. Guidelines or procedure • Waters no matter surface waters or
vii. Best practice groundwater, Atmosphere, Land,
Vegetation, Climate, Sound, Odor,
Aesthetics, Fish, Wildlife
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 The beneficial uses
to be conducted

▪ Beneficial use means a use of the environment or any element or

segment of the environment which is conducive to public benefit,
welfare, safety, health or aesthetic enjoyment and which requires
protection from the effects of waste discharges, emissions or
deposits or of the emission of noise.

▪ The actual and potential ‘beneficial uses’ need to be identified and

conducted before any risk of harm to them can be assessed. In
considering the beneficial uses for a segment of the environment,

▪ The environmental auditor should have the documents regarding

to relevant policies, strategies or management plans of those
elements of the environment subject to audit. These documents
in terms of ‘ecological integrity’, ‘threatened species’ and
‘environmental asset’ may be related to beneficial uses.
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 The risk assessment to be considered
Risk assessment can be used within an environmental
audit to:
The audit scope in accordance
1. Risk assessment to refine the scope with DOE audit request
• A process of hazard identification, analysis of
risks and categorization of the risks. It is 1. In Malaysia, the Lead Auditor
important that the audit scope clearly identify should determine the scope of the
how this process will be used so that the audit audit in accordance with the type
can focus on high-risk areas. of audit requested by DOE in their
2. Assessing risk to beneficial uses audit notification to the
organization.
• The actual or potential risk of harm to beneficial 2. The Lead Auditor shall request for
uses of the segment concerned should be preliminary information from the
assessed and reported by the auditor. This may organization which allows the
involve application of risk assessment auditor to determine the scope of
methodology to the key findings of an audit to the audit.
determine whether a risk to beneficial uses
exists. The environmental auditor and client
should agree on the level of risk assessment
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required.
 The types of preliminary
❑ The organization must submit the preliminary
information information to the auditor within 14 calendar days of
the date the request is received. The Lead Auditor shall
● organization’s site layout showing key notify DOE if the organization does not submit the
activities, preliminary information within this or other agreed
● description of key activities (process timeframe. If the organization seeks exclusion of areas
flow) to be audited from the audit scope, the Lead Auditor
● an outline of environmental monitoring shall document this in the environmental audit report.
programs ❑ If the organization is unwilling to include the discoveries
● EIA conditions of approval in the scope of the audit, the auditor shall carry on with
● Conditions of licenses the agreed scope and at the same time the auditor
● Written approvals shall notify DOE immediately. The new discovery and
● Environmental Management Plans the reasons for the unwillingness of the organization to
● Erosion Control and Sedimentation enlarge the audit scope shall be documented in the
Plans environmental audit report.
● Any other approvals related to the
Environmental Quality Act 1974
● Other relevant document
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 Preparing the Audit administrative details
Necessary details:
environmental audit report i. DOE Audit Tracking v. Audit Scope/Areas
Importance of audit report: Number vi. Audit Criteria
● Prompt reporting secures the non-compliance as quickly as ii. Organization vii. Audit Site Visit Date
possible to minimize further environmental damage. Therefore, the
reporting period has been established to reflect the importance of
iii. Audit viii. Date of Report
the audit exercise and shall prevail unless otherwise agreed upon Location/Address ix. Lead Auditor
or notified by DOE iv. Organization x. Auditors
representative
The audit report shall be prepared for submission to the Department of
Environment (DOE) according to the guidelines provided. Basically, the
Regulatory compliance summary
report should contain the following item:
Purposes:
● Audit administrative details
• To facilitate the administrative processing of
● Regulatory compliance summary the audit reports that will be submitted to the
DOE
● Main report – (Audit findings and recommendations)
• Useful for quick review on the audit findings by
● Attachments the higher management of the organization
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 Audit findings
The findings will fall into the following categories:
● Compliance - There is sufficient and appropriate evidence to demonstrate the particular
regulatory requirement has been complied with
● Non-compliance - Clear evidence has been collected to demonstrate the particular
regulatory requirement has not been complied with
Notes of non-compliance:
✓ If the organization has begun the process of compliance however the DOE still
considers that the organization is not in compliance, the Lead Auditor should ensure
that the mitigating circumstances are noted when documenting the non-compliance
✓ When writing non-compliances for air pollution control equipment, the non-
compliances shall be cited separately for each equipment. In addition, all instances
of scheduled waste found not in compliance with the regulation can be grouped
when citing the specific regulation
● Observations - Issues of environmental concern were observed which did not strictly
relate to the scope of the audit or assessment of compliance. Further observations
are considered to be indicators of potential noncompliance or areas
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where environmental performance may be improved

 The recommendations could Notes of recommendation:
● The audit recommendations
Audit recommendations cover the need for:
● Adequate staffing made by the Lead Auditor are
The audit is intended to be a useful exercise for the ● Clearly defined roles and not legally binding and can be
organization and a key part of that is for the auditor to develop responsibilities improved upon by the
audit recommendations that are environmentally beneficial ● Appropriate training and clear organization if their own
and practical. procedures analysis suggests that there
● Improving the monitoring of its may be an alternative
Purposes of recommendations: environmental approach which will yield
● An appropriate recommendation addresses the root emissions/discharges equally acceptable results or
cause of the problem including administrative or ● Greater management better.
management deficiencies oversight
● It also provides a yardstick to DOE to gauge the ● Periodic internal audits
appropriateness of the action taken by the organization

Person in charge of recommendations: Attachments

● The Lead Auditor - he/she should provide enough The Audit Notes comprise of: ● Attendance list at the closing
information in the audit recommendation for the ● Audit checklist and opening meeting
organization to develop a preliminary idea of the expected ● Audit evidence ● Summary Sheet of findings
level of corrective and preventive action but not be so ● Documents (letters, drawings, presented at the closing
specific as to be construed as binding requirements. The procedures, data, records, meeting
Lead Auditor shall advise the organization that the etc) provided by the
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corrective action plan is to be submitted to DOE within 15 organization in the course of

calendar days of the site visit. the audit
● Photographs
 Important notes:
Distributing the ● Restriction on audit reports distribution
- The report is for the use of the Department of Environment only
environmental audit report - The audit report shall not be made available to the public either by
the auditor or by the DOE, unless an injunction has been received by
the DOE to release the report to the injured party
The processes involved:
- The injured party is a party who by legal avenues, is seeking
i. The audit report must be signed by the compensation for injuries that are purportedly a result of the
appointed registered Lead Auditor organization’s environmental pollution or waste, intentional or
ii. A printed copy issued directly to the DOE State otherwise.
Office - Where the audit report is to be made available to the public, the
iii. A printed copy and softcopy (Pdf format in CD- process information in such reports that are deemed as industrial
ROM) must also be submitted to the DOE patent or trade secret shall be deleted from the report in such form
and extent to be agreed upon by the organization and DOE
Headquarters
iv. Another copy shall be sent to the organization ● Auditors to sign confidentiality form - The auditors and Lead Auditor
v. All submissions must done within 14 calendar shall sign a standard confidentiality form and attach it to the audit
days after the audit or any other specified report
timeframe
vi. In the event of any factual error found in the ● Keep audit notes and audit report for 3 years - The Lead
audit report, the organization shall notify DOE on Auditor shall also ensure that all the audit notes
the correction involved and reports are retained and kept securely
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to prevent loss and destruction for a period

of three years
 Case study - China’s environmental audit: Taihu Lake
The 6 stages of environment audit process on the Taihu Lake:
Stage 1: Perceive Stage 3: Survey “the state of the
“symptoms” by discovering hazard“ by collecting data of the
the outbreak of the Taihu Stage 2: Formulate audit strategy by Taihu Lake
Lake hazard determining environmental audit procedure
• The statistical data of nitrogen
• The large accumulation • Auditors should be informed of their and phosphorus in the Taihu
of a large number of respective assignment and Lake from 1998 to 2009 relevant
blue-green algae and it responsibility and initially evaluate to “blue-green algae event” is
produces unpleasant audit risk in preparatory stage, collect carried out by the auditors and
tastes and odors audit evidence in implementation stage realized that nitrogen has
• Investigation and in order to form audit opinion, analyze become an important pollution
analysis the reason for and synthesize audit evidence to source. A major reason is the
water contamination are determine audit opinion in analysis developed animal husbandry,
carried out and put stage and last, examine whether there aquaculture in the Taihu Lake
forward concrete are measures in response to audit basin. The use of detergents in
administration scheme opinion in subsequent stage. people’s life causes the content
and measures. of phosphorus in Taihu
Lake rises again.
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 Case study - China’s environmental audit: Taihu Lake
The 6 stages of environment audit process on the Taihu Lake:

Stage 4: Promulgate “pathogen” Stage 5: Give a prescription with: Stage 6: Supervise the
in discovering the reasons for proposing targeted suggestion implementation by carrying out
former unsatisfactory follow-up work
governance result.
• Enhance R&D in pollution
governance • The auditor should examine
• Inadequate of fund for • Planning as a whole in associated whether organizations adopt
environmental protection audit work and announcing the effective measures to improve the
• Inconformity of data problems discovered at any time environmental conditions.
standard from various • Competent authority should • If organizations reject to fulfill their
department causes failure of formulate unified environmental responsibility, audit institutions
communication in information disclosure standard as should enforce and enact proper
environmental information soon as possible punishment so that the authority
• The environmental of environmental audit be
information disclosure safeguarded to improve
system is not normative the governance
of environmental
pollution.
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 Case study - EMS with Construction Site: Kelantan, Malaysia
Result:
Aim of conducting EMS
1. Awareness of EMS among the construction players in Kelantan State is very low.
implementation survey:
• Although most of the construction players understand what EMS is, yet they did not
i. To check for the existence of implement and apply the system within the construction sites.
environmental management • They understand an EMS and its obligation, but some of them, indicated that it is not
skill and experience among important to be implemented, as they are doing projects just to get the profit.
the construction players • Although, the construction players understand an EMS, but they do not have any skills and
within construction site experiences in implementing EMS within construction site.
ii. To know their awareness and 2. The construction players level of knowledge of an EMS was very poor.
understanding of • They do not really know and understand which of the EMS framework, standards and
Environment Management specification they should follow and based on.
System (EMS) 3. Most of the construction companies do not have an environmental or sustainability policy,
iii. To access the responsibilities they do not have intention to develop an EMS and also do not have EMS steering
and acceptance of EMS committee or management team to lead the EMS.
among the construction
players in their construction
Recommendation:
activities and their
understanding to the The construction players should have more environmental training
and they should know the EMS so that in the future can create
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implementation of EMS in
order to create a sustainable sustainable environment and avoid any negative impacts on the
development environment.
 Conclusion

● Environmental audit means a periodic, systematic, documented and objective

evaluation to determine the compliance status to environmental regulatory
requirements, the environmental management system and the overall
environmental risk of the premises.

● EMS is a system that can be developed by an organization to minimize

environmental impacts and implement environmental policy through some
processes and practices. EMS has five stages which are planning,
implementation, evaluation, review, commitment and policy.

● Relevant environmental standards and legislation to be comply are

Environmental Quality 1974. Department of Environment is an agency
responsible for the conservation, management, and development of the
Malaysia's environment and natural resources.

● The environmental audit report will contain details of audit administrative

details, regulatory compliance summary, main report including
audit finding and recommendations and attachments.
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 Thank you!
Do you have any question?
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