Serba Dinamik Annual Report 2019

322 2019 ANNUAL REPORT FINANCIAL STATEMENTS SERBA DINAMIK HOLDINGS BERHAD 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 21 (financial disclosures) How the matter was addressed in our audit Our audit procedures included, amongst others: i) We evaluated the controls designed and applied by the Group in the process of determining the revenue recognised in the financial statements. ii) We inspected material 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 the contracts in accordance with MFRS 15. iii) We inspected job completion certificates and other relevant documents (i.e. timesheets, delivery order, etc.) whether the associated revenue was recognised in the appropriate accounting period. iv) We tested on sampling basis on the revenue transactions to the job completion certificates, delivery orders and invoices to test on the accuracy and occurrence of the revenue transactions. 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 the underlying delivery orders, job completion certificates and other underlying source documents. vii) We assessed the completeness, accuracy and appropriateness of disclosures as required by MFRS 15. Key audit matter The 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 RM3,895 million, representing 86% of total revenue. EPCC segment contributes to 11% of the total revenue. Contracts for bothO&Mservices and EPCC project varies, eachwith different terms. This leads to complexity around the calculation and recognition of revenue in accordance with MFRS 15 Revenue from Contracts with Customers. The revenue fromO&M and certain EPCC contracts are derived from provision of manpower services and supply of materials. Provision of manpower services is recognised over the period in which the services are rendered. Whereas the revenue from supply of materials are recognised when the customer accepts the delivery of the goods. EPCC – contract revenue is to be accounted for using cost incurred method. This involves professional judgment made by the Group to measure the accuracy of revenue recognised overtime in accordance with MFRS 15. Hence, revenue recognition has been considered as the key audit matter. 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