Key audit matters How we addressed the key audit matters Recognition of revenue and cost of construction and marine projects – (Refer to Note 3 - Revenue and Note 23 - Due from/(to) customers on contracts, to the financial statements) A significant proportion of the Group’s revenues and profits are derived from long-term construction and marine projects which span more than one accounting period. We focused on this area because management applies significant judgement and estimates in determining the stage of completion in respect of heavy engineering and marine projects and in estimating total estimated project costs. The Group uses the percentage-of-completion (“POC”) method in accounting for the revenue of these long-term contracts. The stage of completion is measured by reference to the percentage of completion of the contracts. Cost is recognised based on actual costs incurred to date In addressing this area of audit focus, we obtained an understanding of the relevant internal controls over the accuracy and timing of revenue and cost recognised in the financial statements, including controls performed by the management in estimating total project costs, profit margin and POC of projects. In addition, we also performed the following: (a) obtained an understanding of the relevant internal controls over the accuracy and timing of revenue recognised in the financial statements, including controls performed by the management in estimating budgeted project costs, estimated project margins and stage of completion; (b) read all key contracts to obtain an understanding of the specific terms and conditions; (c) agreed contract sum to the original signed customer contracts and/or approved variation orders; (d) reviewed management meeting minutes to obtain an understanding of the performance and status of the projects above our testing threshold; (e) reviewed management’s budgeted project costs to ensure adequacy of costs to complete; (f) assessed the reasonableness of inputs used in the determination of the POC in light of supporting evidences such as engineers’ reports in relation to marine projects and actual invoices or signed progress reports by third party for heavy engineering projects and tested the underlying calculations of the POC; (g) considered the historical accuracy of management’s budgeted project margins in assessing the reasonableness of estimated margins of similar projects; (h) assessed and ensured that actual project costs including foreseeable losses are appropriately accrued and supported by documentary evidences, such as work completion reports and material acceptance certificates, which represent activities performed to date; (i) reperformed the calculations of the revenue based on the POC method and where applicable, considered the implications of any changes in estimates; and (j) evaluated the presentation and disclosures of construction contracts in the financial statements, including significant accounting policies. Key audit matters How we addressed the key audit matters Contingent liability – (Refer to Note 43(a)(i) – Significant Events -Material litigation - Gumusut-Kakap Semi-Floating Production System (L) Limited (“GKL”) and Sabah Shell Petroleum Limited (“SSPC”), to the financial statements) We focused on this area as the eventual outcome of claims is uncertain and the positions taken by the Directors are based on the application of material judgement and estimation. Accordingly, unexpected adverse outcomes against the positions taken by the Directors could significantly impact the Group’s reported profit and statement of financial position. In addressing this area of audit focus, we considered whether an obligation exists, the appropriateness of provisioning and/or disclosure based on the facts and circumstances available. We have performed the following: (a) Obtained and reviewed the relevant correspondences in relation to Arbitration and Litigation cases; (b) Compared the opinion provided by the Group’s external legal counsel against management’s assessment on the measurement and/or disclosures for the contingent liability; (c) Considered the independence, reputation and capabilities of the external legal counsel; (d) Obtained legal confirmations from the Group’s external legal counsel; and (e) Considered whether the Group’s disclosures of the application of judgement in estimating provisions and contingent liabilities adequately reflected the uncertainties associated with legal and regulatory matters. Information other than the financial statements and auditors’ report thereon The directors of the Corporation are responsible for the other information. The other information comprises the information included in the Group’s 2021 Annual Report, but does not include the financial statements of the Group and of the Corporation and our auditors’ report thereon. The Group’s 2021 Annual Report is expected to be made available to us after the date of this auditors’ report. Our opinion on the financial statements of the Group and of the Corporation does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Corporation, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Corporation or our knowledge obtained in the audit or otherwise appears to be materially misstated. Responsibilities of the directors for the financial statements The directors of the Corporation are responsible for the preparation of financial statements of the Group and of the Corporation that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Corporation that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Corporation, the directors are responsible for assessing the Group’s and the Corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Corporation or to cease operations, or have no realistic alternative but to do so. Key audit matters (cont’d.) Key audit matters (cont’d.) to the members of MISC Berhad (Incorporated in Malaysia) INDEPENDENT AUDITORS' REPORT to the members of MISC Berhad (Incorporated in Malaysia) INDEPENDENT AUDITORS' REPORT MISC Berhad 452 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 453 FINANCIAL STATEMENTS FINANCIAL STATEMENTS
RkJQdWJsaXNoZXIy NDgzMzc=