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Fima Corporation Berhad
(21185-P)
financial statements
86
Key Audit Matters (Cont’d.)
Revenue recognition
(Refer to Note 3 to the financial statements)
Revenue from production and trading of security and confidential documents contributed to approximately 63% of the Group’s revenue.
Given its magnitude and significant volume of transactions involved, revenue recognition is identified as a key audit matter in our audit.
There is a risk that revenue could be subject to misstatement, particularly in respect of the timing and amount of revenue recognised.
As part of our audit, we performed the following:
a)
Obtained an understanding of the Group’s relevant internal controls and tested the controls over timing and amount of revenue
recognised;
b)
Inspected the terms of significant sales contracts to determine the point of transfer of significant risk and rewards;
c)
Inspected documents evidencing the delivery of goods to customers; and
d)
Tested the recording of sales transactions close to the year end, including credit notes issued after year end, to establish whether
the transactions were recorded in the correct accounting period.
Provision for warranty
(Refer to Note 30 to the financial statements)
As at 31 March 2017, the provision for warranty amounted to RM14.8 million. The Group provides warranty for defective travel
documents and licenses for a specified period or term. The Group assessed the provision for warranty based on the estimated
replacement costs to be incurred for the defective products during the warranty periods. The costs are estimated based on historical
rate of return of the defective products. Given its magnitude and significant judgement involved in management’s assessment, we
identified the provision for warranty to be an area of audit focus.
As part of our audit, we performed the following:
a)
Obtained an understanding of the Group’s warranty estimation process;
b)
Assessed the reasonableness of the provision for warranty by comparing with the average historical rate of return of the respective
products. Our audit procedures, included amongst others, evaluating the validity of the historical data used to determine the rate
of return and performing test of details on the historical products claims; and
c)
Recomputed the management’s calculation of the provision for warranty.
Information other than the financial statements and auditors’ report thereon
The directors of the Company are responsible for the other information. The other information comprises the information included in the
annual report, but does not include the financial statements of the Group and the Company and our auditors’ report thereon.
Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express
any form of assurance conclusion thereon.
Independent auditors’ report
to the members of Fima Corporation Berhad