Serba Dinamik Annual Report 2018

287 SERBA DINAMIK HOLDINGS BERHAD ANNUAL REPORT 2018 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. 1. Existence, accuracy and completeness of revenue recognition Refer to Note 2(p) (accounting policy) and Note 19 (financial disclosures ) Key audit matter Serba Group generates its revenue from provision of operation andmaintenance services (“O&M”) as well as its participations in engineering, procurement, construction and commissioning projects (“EPCC”). Revenue generated from O&M segment is approximately RM2,928 million, representing 89% of total revenue. EPCC segment contributes to 10% of the total revenue. Contracts for both O&M services and EPCC project varies, each with different terms. This leads to complexity around the calculation and recognition of revenue and any accrued and deferred revenue. Currently, the revenue from the maintenance service and certain EPCC contracts is tracked manually on the point of service and, where necessary, estimates of fair values for the services provided that involve a significant degree of management judgment. On the other hand, certain EPCC contract is to be accounted for using contract accounting and the revenue recognition is based on the stage of completion. The stage of completion is determined by reference to the survey of work performed. Hence, revenue recognition has been considered as the key audit matter. How the matter was addressed in our audit Our audit procedures included, amongst others: i) We evaluated the controls designed and appl ied by the Group in the process of determining the revenue recognised in the financial statements. ii) We inspected all new contracts with customers to determine whether, based on the contract terms and billing schedule as well as overall performance of services, the Group has appropriately accounted for the contracts in accordancewith the accounting policy. iii) We checked completeness and accuracy of revenue by inspecting job completion certificates and other relevant documents (i.e. timesheets, delivery order, etc.) whether the associated revenue was recognised in the correct period. iv) We checked billed invoices against the job completion certificates, delivery orders and/or proforma invoices. v) We verified journal entries for revenue and revenue related accounts based on specific high risk criteria set to ascertain whether there are any unusual, unauthorised or unsupported entries made against revenue. vi) We confirmed trade receivables balances and performed alternative test on non-replies by sighting to underlying delivery orders, job completion certificates and other underlying source documents. vii) We compared the accounting policies adopted with the requirements of MFRS 15. viii) We assesed the completeness, accuaracy and appropriateness of disclosures as required by MFRS 15. I N D E P E N D E N T A U D I T O R S ’ R E P O R T