INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KIMLUN CORPORATION BERHAD (Incorporated in Malaysia) Registration No: 200901023978 (867077-X) Key Audit Matters (Cont'd) Reasonableness of attributable profits arising from construction contracts Refer to Notes 2.18 (a), 3.2 (b)(i) and 4 to the financial statements Key Audit Matter How our audit addressed the Key Audit Matter • • • Reviewing the reasonableness of the estimated construction contract cost by reviewing the contract works awarded, assessing the basis of estimation for contract works not awarded and comparing to the actual costs incurred up to the end of the reporting period, on sample basis. To address this risk, our audit procedures involved the following: Making inquiries and obtaining an understanding from management on the procedures and controls in relation to the estimation of and revision to the construction contract revenue and cost; Reviewing the reasonableness of the estimated construction contract revenue by comparing the letter of awards and variation orders, on sample basis; and The Group recognises revenue and costs relating to its construction activities over time, by reference to the progress towards complete satisfaction of the performance obligation at the end of the reporting period using the input method. This requires the use of estimates on construction contract revenue and cost. Revenue and cost recognised on construction activities have an inherent risk as it involves judgement and estimates. Substantial changes to construction contract revenue and cost estimates in the future can have a significant effect on the Group’s results. - 10 - INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KIMLUN CORPORATION BERHAD (INCORPORATED IN MALAYSIA) Annual Repor t 2021 70
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