Ni Hsin Berhad Annual Report 2017

Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Ni Hsin Resources Berhad, which comprise the statements of financial position as at 31 December 2017 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 42 to 91. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2017, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our auditors’ report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Valuation of inventories Refer to Note 2(h) - Significant accounting policy: Inventories and Note 7 Inventories The key audit matter How the matter was addressed in our audit The Group has RM20 million of inventories as at 31 December 2017. Inventories are measured at the lower of cost and net realisable value. Valuation of inventories is a key audit matter due to: � Significant amount of inventories of the Group are slow moving. � Significant level of judgement required in: - assessing the Group’s assessment that inventories are stated at the lower of cost and net realisable values as the transaction price that could be referenced may not be current and readily available. - assessing the adequacy of the Group’s provision for slow- moving inventories. We performed the following audit procedures, among others, around the valuation of inventories: � We tested the accuracy of the aging of inventories by testing the age profile of the inventory balances to the respective Goods Received Notes, Work Orders, and Handover documents; � We evaluated the Group’s inventory net realisable values for finished goods as at 31 December 2017 by comparing the carrying value of the inventories to sales made to external customers subsequent to year end to test whether these exceeded the carrying value of inventory at year end; � For those inventories without sales subsequent to year end, we evaluated the Group’s basis of provisioning for slow- moving inventories as at 31 December 2017 based on our understanding of the utilisation and scrap sales of each components of these inventories; and � Based on the inventory aging, we assessed the Group’s adequacy of provision for slow-moving inventories as at 31 December 2017 by comparing the Group’s provision amount to provision computed by us based on our work performed above. We have determined that there are no key audit matters in the audit of the separate financial statements of the Company to communicate in our auditor’s report. Independent auditors’ report to the members of Ni Hsin Resources Berhad Annual Report 2017 93