Report on the Audit of the Financial Statements (Cont’d) Key Audit Matters (Cont’d) b) Assessment of impairment of trade receivables As at 31 December 2023, gross trade receivables of the Group and of the Company were RM238,821,596 and RM7,794,779 respectively as disclosed in Note 20 to the nancial statements. We considered this to be key audit matter because it requires management to exercise significant judgement in determining the probability of default by trade receivables and appropriate forward-looking information. Audit response Our audit procedures included the following: (i) Recomputed the probability of default using historical data and forward-looking information adjustment; (ii) 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 (iii) Inquiries of management to assess the rationale underlying the relationship between the forward-looking information and expected credit losses. c) Assessment of impairment on the carrying amounts of costs of investments of subsidiaries As at 31 December 2023, the Company’s carrying amounts of costs of investments of the subsidiaries amounted to RM163,019,821 as disclosed in Note 16 to the nancial statements. We considered this to be a key audit matter because the determination of the recoverable amount of costs of investments of the 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 operating profit margins and growth rates, as well as determining an appropriate pretax discount rate used. Audit response Our audit procedures included the following: (i) Assessed the historical reliability of management’s projections by comparing prior period projections to actual cash flows; (ii) Evaluated the reasonableness of projected profit margins and growth rates by assessing evidence available to support these assumptions; (iii) Evaluated 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. d) Assessment of impairment on the carrying amounts of amounts owing by subsidiaries As at 31 December 2023, gross amounts owing by subsidiaries of the Company were RM124,564,511 as disclosed in Note 20 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 subsidiaries, appropriate forward-looking information and significant increase in credit risk. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GHL SYSTEMS BERHAD (Incorporated in Malaysia) CONT’D 77 ANNUAL REPORT 2023
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