Al-`Aqar Healthcare REIT Annual Report 2019

Al-`Aqar Healthcare REIT 06 FINANCIAL STATEMENT 105 Key audit matter How the key audit matter was addressed in our audit Valuation of investment properties Investment properties of the Group and of the Fund as at 31 December 2019 amounting to RM1,569.8 million and RM1,449.4 million respectively (2018: RM1,485.7 million and RM1,353.3 million respectively) are the most quantitatively material account balance in the Financial Statements. Further, the investment properties are measured at fair value and the valuation of the Group’s and the Fund’s investment properties is inherently subjective due to, among other factors, the individual nature of each property, its location and the expected future rental income for that particular property. The fair values of the Group’s and the Fund’s investment properties, as determined by the independent valuers appointed by the managementof theManager, areprimarilybased on the capitalisation of net income method with comparison and cost methodologies used as a secondary check. The accounting policy and key sources of estimation uncertainty for valuation of investment properties are set out in Note 3.4 and Note 4.2(a) to the Financial Statements respectively, and the details of the investment properties of the Fund have been disclosed in Note 11 to the Financial Statements. Our audit procedures included the following: (a) Assessed and discussed with management their process for reviewing the work of the independent valuers. (b) Evaluated the competency, independence and integrity of the independent valuers. (c) Obtained the valuation reports and discussed with the independent valuers the results of their work. (d) Tested the accuracy of the data provided to the independent valuers to underlying lease agreements. (e) Benchmarked and challenged the key assumptions to external industry data and comparable property transactions, in particular the allowance for void, term yield rates, reversionary yield rates, capitalisation rates and discount rates. (f) We have also assessed the adequacy and appropriateness of the disclosures on valuation methodology and estimation made in the financial statements. INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITORS’ REPORT THEREON The Manager of the Fund is responsible for the other information. The other information comprises the information included in the Manager’s Report, Shariah Committee Report and contents in the 2019 Annual Report of the Group and of the Fund but does not include the financial statements of the Group and of the Fund and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Fund 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 Fund, 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 Fund 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. Independent Auditors’ Report To The Unitholders Of Al-`Aqar Healthcare REIT (Continued) KEY AUDIT MATTERS (CONTINUED)