Kimlun Corporation Berhad Annual Report 2017

Annual Report 2017 61 INDEPENDENT AUDITORS’ REPORT To the members of Kimlun Corporation Berhad (Incorporated in Malaysia) Report on the audit of the financial statements Opinion We have audited the financial statements of Kimlun Corporation Berhad, which comprise the statements of financial position as at 31 December 2017 of the Group and of the Company, and the statements of 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 65 to 116. 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 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 report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit 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. We have determined that there is no key audit matter to communicate in our report on the financial statements of the Company. The key audit matter for the audit of the financial statements of the Group is described below. This matter was 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 this matter. Our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of the financial statements section of our report, including those in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis of our audit opinion on the accompanying financial statements. (i) Revenue and cost of construction recognition The Group is involved in a number of significant construction contracts for which it applies the percentage of completion method. The revenue and cost of construction projects computed based on stage of completion method contributed to approximately 88% and 90% respectively of the Group’s revenue and cost. We focused on this area because management made significant judgement and estimates in determining the following: • The stage of completion. Significant judgement and estimates are required in determining the estimated total contract costs and the extent of cost incurred, which forms part of the computation of percentage of completion for long term contracts; • The contract revenue. The estimated contract revenue is subject to variations in contract works, the estimated costs to complete and renegotiations; and • The recoverability of the construction contracts. Reimbursement of costs not included in the contract price is subject to a high level of uncertainty and negotiations with customers. The notes relating to revenue recognition are disclosed in Note 2.26 (a), Note 3.2 (b)(i) and Note 4 to the financial statements.