ENRA Group Berhad Annual Report 2019

64 ENRA GROUP BERHAD ∞ Annual Report 2019 page Key Audit Matters (cont’d) Group level (cont’d) (1) Impairment assessment of the carrying amount of goodwill (cont’d) Audit response Our audit procedures included the following: (a) compared cash flow projections against recent performance and assessed the reasonableness of the key assumptions used by management in the cashflow forecast and projections by comparing to actual historical growth rates; (b) compared prior period budgets and forecasts to current period’s actual results to assess the historical accuracy of the forecasts; (c) assessed the suitability of the pre-tax discount rate used by the CGU by comparing to the weighted average cost of capital of the Group and relevant risk factors; and (d) performed sensitivity analysis to stress test the key assumptions used by management in the impairment model. (2) Recoverability of trade receivables As at 31 March 2019, trade receivables of the Group were RM17 million as disclosed in Note 13 to the nancial statements. Management recognised impairment losses on trade receivables based on specific known facts or circumstances or customers’ abilities to pay. We determined this to be key audit matter because it requires management to exercise significant judgement in determining the probability of default by trade receivables, appropriate forward looking information and estimated cash flows recoverable in worst-case scenarios. Audit response Our audit procedures included the following: (a) Recomputed the probability of default using historical data and forward looking information adjustment applied by the Group; (b) Recomputed the correlation coefficient between the macroeconomic indicators used by the Group and historical losses to determine the appropriateness of the forward-looking information used by the Group; (c) Inquired of management to assess the rationale underlying the relationship between the forward-looking information and expected credit losses; and (d) Challenged management on the basis for determining cash flows recoverable in worst-case scenarios. (3) Impairment assessment of inventories As at 31 March 2019, the Group held a significant inventory amounted to RM83 million as disclosed in Note 12 to the financial statements and it constituted approximately 56% of the Group’s total current assets. As at 31 March 2019, inventories were assessed and recognised at the lower of cost and net realisable value (“NRV”). Management recognised written down on property inventories of RM9 million to the estimated NRV as there are currently no sales agreed for any of the units and the cost is larger than the listed price. Independent Auditors’ Report To the Members of ENRA Group Berhad (Incorporated in Malaysia)