GHL System Berhad Annual Report 2017

GHL SYSTEMS BERHAD 64 Key Audit Matters (cont’d) b) Assessment of impairment on the carrying amounts of costs of investments and amounts owing by subsidiaries As at 31 December 2017, the carrying amounts of costs of investments and amounts owing by subsidiaries of the Company amounted to RM22,471,518 and RM42,667,915 respectively as disclosed in Note 14 and Note 19 to the financial statements. We considered this to be a key audit matter because the determination of the recoverable amount of costs of investments and amounts owing by subsidiaries requires significant judgement and estimates about the future results and key assumptions applied to cash flow projections of the subsidiaries in determining the recoverable amounts. These key assumptions include projected earnings before interest and tax (“EBIT”) margins and growth rates, as well as determining an appropriate pre-tax discount rate used. Audit response Our audit procedures included the following: (i) Challenge assessment of management that no further impairment losses on investments and amounts owing by subsidiaries were required based on recoverable amounts of the subsidiaries; (ii) Assessed the historical reliability of management’s projections by comparing prior period projections to actual results; (iii) Verified the pre-tax discount rate by comparison to market data, and relevant risk factors; and (iv) Performed sensitivity analysis to stress test the key assumptions used in the impairment assessment. Information Other than the Financial Statements and Auditors’ Report Thereon The Directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Directors for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the ability of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. INDEPENDENT AUDITORS’ REPORT to the Members of GHL Systems Berhad CONT’D