Key Audit Matters (continued) Slow-moving and obsolete inventories Refer to Note 11 to the financial statements Key Audit Matter (“KAM 3”) How our audit addressed the key audit matter As of 31 December 2023, the Group’s inventories was approximately RM125.22 million. The review and assessment of inventories write-downs due to excess quantities, obsolescence and decline in net realisable value below cost involved judgements and estimation uncertainty in forming expectations about future sales and demand. Possible changes in these estimates could result in revisions to the valuation of inventories. Our procedures included, amongst others: • Obtaining an understanding of the process on allowance for slow-moving and obsolete inventories and the design and control effectiveness over slow-moving inventories; • Reviewing the ageing analysis of inventories and testing the reliability thereof; • Reviewing the net realisable value of major inventories; and • Evaluating whether the inventories have been written down to their net realisable value for inventory items with net realisable value lower than their cost. Key audit matters in relation to significant subsidiaries Refer to Notes 3, 4, 6, 10, 11, 13 and 23 to the financial statements Key Audit Matter (“KAM 4”) How our audit addressed the key audit matter Silterra Malaysia Sdn. Bhd. and its subsidiaries (“Silterra”) and Ping Petroleum Limited and its subsidiaries (“Ping”) are 60% owned and 90% owned indirect subsidiaries of the Group respectively. Silterra and Ping are significant subsidiaries due to their significant contributions to the Group’s financial position and performance for the financial period from 1 July 2022 to 31 December 2023 (“FPE 31 December 2023”). We found that, in the context of our audit of the consolidated financial statements of the Group, the key audit matters relating to Silterra and Ping included: - Impairment of property, plant and equipment, right-of-use assets and intangible assets (KAM 1); - Recoverability of trade receivables (KAM 2); - Slow-moving and obsolete inventories (KAM 3); - Revenue recognition; and - Valuation of deferred tax assets. Other than the key audit matters addressed in our previous sections, other key audit matters relating to Silterra and Ping are summarised below. i. Revenue recognition For FPE 31 December 2023, Silterra and Ping contributed approximately RM999.17 million and RM532.94 million to the Group respectively. Revenue is one of the largest accounts in the financial statements and an important driver of the Group’s operating results. Significant management judgement and estimates are required in determining the revenue recognition when (or as) the Group satisfy a performance obligation. We have communicated with Silterra’s and Ping’s component auditors and discussed their identified audit risks and audit approaches, results of their work and key audit matters identified; and have reviewed their working papers. The procedures performed by the component auditors on the respective key audit matters other than the key audit matters addressed in our previous sections, are summarised below. Silterra and Ping • Discussing with management the walkthrough process and implementation of controls through inquiring, observation and inspection of relevant documents; • Reviewing the major contracts and identifying their distinct performance obligations; • Performing test of operating effectiveness over the revenue recognition; • Reviewing significant credit notes issued after period end; • Reviewing manual journal entries to revenue accounts; and • Performing revenue cut-off test. Integrated Report 2023 309
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