Excel Force MSC Berhad Annual Report 2016

EXCEL FORCE MSC BERHAD ANNUAL REPORT 2016 42 Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Excel Force MSC Berhad, which comprise the statements of financial position as at 31 December 2016 of the Group and of the Company, 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 financial year then ended, and notes to the financial statements as set out on pages 46 to 112. 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 2016, and of their financial performance and their cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 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 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. Assessment for the impairment of product development costs The Group had product development costs of RM9,832,069 as at 31 December 2016 and had disclosed their assessment for impairment of product development costs in Note 8 to the financial statements. Significant judgement is involved in the estimation of the present value of future cash flows generated by product development costs, which involves uncertainties and is significantly affected by assumptions used and judgement made regarding estimates of future cash flows including forecast revenue growth, profit margin of the products and discount rates. Audit response Our audit responses to address risk on assessment for the impairment of product development costs were as follows: (a) Evaluated management’s assessment of whether there were any indicators of impairment on product development costs. (b) Tested management’s assumptions used in their impairment assessment of the product development costs of the Group. Our procedures included: (i) assessing the reasonableness of cash flow forecast and projections by comparison to historical performance and future outlook and through discussion with management; (ii) verifying the discount rate by comparison to third party information, the Group’s cost of capital and relevant risk factors; and (iii) performed sensitivity analysis taking into account the historical forecasting accuracy of the Group to stress test the key assumptions in the impairment model. Independent Auditors’ Report to the Members of Excel Force MSC Berhad