ENRA Group Berhad | Annual Report 2022 83 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ENRA GROUP BERHAD (INCORPORATED IN MALAYSIA) Key Audit Matters (Cont’d) (1) Impairment assessment of the carrying amount of property, plant and equipment (Cont’d) Audit response Our audit procedures to assess management’s impairment testing based on VIU included the following: (a) enquired with business development teams to obtain an understanding of the status of negotiation and the likelihood of securing new revenue contracts, including timing of commencement and expected value of revenue contracts; (b) compared cash flow projections against recent performance and assessed the reasonableness of the key assumptions used by management in the cashflow forecast, projections by comparing to terms and conditions stipulated in the charter party agreements, available industry data, taken into consideration of comparability and market factors; (c) assessed whether the assumptions on the operating costs are supportable when compared to the past trends; (d) evaluated the discount rate used to determine the present value of the cash flows and whether the rate used reflects the current market assessments of the time value of money and risks specific to the asset; and (e) performed sensitivity analysis to stress test the key assumptions used by management in the impairment model. Our audit procedures to assess management’s impairment testing based on FVLCS are as follows: (a) Considered the independence, competence, capabilities and objectivity of the external valuer; and (b) Obtained and understanding of the methodology adopted by the independent valuer in estimating the fair value of the marine equipment and assessed whether such methodology is consistent with those used in the industry. In addition, we also evaluated the adequacy of the Group’s disclosure of each key assumption on which the Group has based its cash flow projections and to which the CGU’s recoverable amounts is most sensitive as disclosed in Note 4 to the financial statements. (2) Impairment assessment of inventories As at 31 March 2022, property held for sales of the Group were RM32.18 million and completed properties of the Group and Company were RM4.60 million respectively, as disclosed in Note 10 to the financial statements. We determined this as a key audit matter because of the judgement made by the Directors in determining an appropriate inventory valuation which involved predicting the amount of future demand from customers. Besides that, judgements are also required to identify slow moving and obsolete inventories which need to be written down to their net realisable value with consideration of the impact COVID-19 pandemic. Audit response Our audit procedures included the following: (a) assessed the unsold units based on enquiries with management including corroborative enquiries with the key management personnel on the plans to address slow moving inventories, incorporating the impact of the COVID-19 pandemic; (b) for those unsold completed units which have recent sale transactions, we tested the carrying amount of these unsold completed units, by comparing to the recent selling prices for similar units stated in the signed sale and purchase agreements, net of discounts given; and
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