FINANCIAL STATEMENTS (continued) 67 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SASBADI HOLDINGS BERHAD (continued) (Incorporated in Malaysia) Key Audit Matters (continued) Key Audit Matters of the Group (continued) 2. Impairment assessment of trade receivables (continued) Audit response Our audit procedures included the following: a. Understood management’s internal control and assessment process for impairment of trade receivables and assessed the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors associated with this accounting estimate; b. Evaluated management’s assessment and explanations on the individually significant trade receivables that were past due as at 31 August 2022 with reference to supporting evidence such as payment record of the customers and correspondences with customers; and c. Evaluated the appropriateness of expected credit loss allowance including examining correlation coefficient between the macroeconomic indictors applied by the Group in calculating probability of default using historical data and forward-looking information adjustment. 3. Valuation of inventories As at 31 August 2022, the carrying amount of inventories of the Group was RM64,785,000 and the associated allowance for inventories write down was RM3,450,000, as disclosed in Note 12 to the financial statements. We determined this to be a key audit matter because it requires management to exercise significant judgements in assessing the level of allowance for inventories write down required. Audit response Our audit procedures included the following: a. Evaluated the design and implementation over the control of identification of slow moving inventories and tested their effectiveness; b. Checked selected inventories samples to sales subsequent to the financial year end to determine that these were sold at more than its cost; and c. Assessed the adequacy of the allowance for inventories write down at year end. 67 ANNUAL REPORT 2022
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