ENRA Group Berhad Annual Report 2021

FINANCIAL STATEMENTS & OTHERS ENRA Group Berhad | Annual Report 2021 92 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ENRA GROUP BERHAD (Incorporated in Malaysia) Key Audit Matters (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 incorporating the impact of the COVID-19 pandemic; and (d) performed sensitivity analysis to stress test the key assumptions used by management in the impairment model. (2) Impairment of trade receivables As at 31 March 2021, gross trade receivables of the Group were RM10.20 million as disclosed in Note 13 to the nancial statements. 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 with consideration of the impact COVID-19 pandemic. Audit response Our audit procedures included the following: (a) Recomputed the probability of default using historical data and forward looking information adjustment, incorporating the impact of the COVID-19 pandemic 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; and (c) Inquired of management to assess the rationale underlying the relationship between the forward-looking information and expected credit losses. (3) Impairment assessment of inventories As at 31 March 2021, property held for sales of the Group were RM31.49 million and completed properties of the Group and Company were RM5.03 million and RM4.56 million respectively, as disclosed in Note 12 to the financial statements. We determined this as a key audit matter because of the judgement made by the Directors in determining an appropriate inventory valuation which involved predicting the amount of future demand from customers. Besides that, judgements are also required to identify slow moving and obsolete inventories which need to be written down to their net realisable value with consideration of the impact COVID-19 pandemic.