INDEPENDENT AUDITORS’ REPORT KEY AUDIT MATTERS (CONT’D.) Revenue and cost of sales in respect of property development activities (cont’d.) (Refer to Note 4 and Note 5 to the financial statements) (cont’d.) How have our audit addressed this matter To address these areas of audit focus, we performed, amongst others, the following procedures: • Obtained an understanding of the internal controls over the accuracy and timing of revenue recognised in the financial statements, including controls performed by management in estimating the total property development cost; • Obtained an understanding of the internal controls over the timeliness of updating the gross development value of each property development project by the management by reference to the latest selling price; • Read the sale and purchase agreements entered into with the customers on a sampling basis to obtain an understanding of the specific terms and conditions; • Evaluated the assumptions applied in estimating the total property development costs on a sampling basis by examining documentary evidence such as letters of award issued to contractors to support the total budgeted costs. We also considered the historical accuracy of management’s budgets for the similar property development projects in evaluating the estimated total property development costs; • Evaluated the determination of the progress towards complete satisfaction of the Group’s performance obligation by examining supporting evidence such as contractors’ progress claims and suppliers’ invoices; • Evaluated the mathematical accuracy of the revenue and profit based on the percentage of completion calculations and considered the implications of identified errors and changes in estimates; and • Observed the progress of the property developments on a sampling basis by performing site visit. Valuation of investment properties (Refer to Note 17 to the financial statements) The carrying value of the Group’s investment properties as at 31 December 2022 was RM1,457,968,000, representing 16% and 12% of the Group’s total non-current assets and total assets respectively. The Group adopts fair value model for its investment properties. When estimating the fair value of a property, the objective is to estimate the price that would be received from the sale of the investment property in an orderly transaction between market participants at the reporting date under current market conditions. In addition, the fair value should reflect, among other things, the property related data used as input to the valuation model and other assumptions that market participants would use when pricing the investment property under current market conditions, which are highly judgmental. Accordingly, we consider this to be an area of audit focus. TO THE MEMBERS OF TROPICANA CORPORATION BERHAD (INCORPORATED IN MALAYSIA) 152 ANNUAL REPORT 2022
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