Ntegrator International Ltd. - Annual Report 2020

52 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NTEGRATOR INTERNATIONAL LTD. Key Audit Matters (continued) Expected credit loss on financial assets (Refer to Notes 2.10, 12 and 24(b) to the financial statements) Area of focus As at 31 December 2020, the financial assets that are exposed to credit risk are primarily from trade receivables, bills receivables, contract assets and unbilled revenue arising from project sales, project management and maintenance service revenue. The gross amount of these financial assets amounted to S$16,707,000, whereas the allowance for expected credit loss provided as at 31 December 2020 amounted to S$14,000. With reference to SFRS(I) 9 Financial Instruments , the Group applies the simplified approach (lifetime expected credit loss allowance). In determining the expected credit losses (“ECL”), the Group has considered the historical observed default rates, customer ability to repay and adjusted with available forward-looking information. As the ECL assessment on trade receivables, bills receivables, contract assets and unbilled revenue required significant judgement and subjective assumptions in estimating the ECL, we determined this area to be a key audit matter. How our audit addressed the area of focus In obtaining sufficient audit evidence, we have performed the following procedures: • Reviewed and assessed management’s basis and assumptions used in the assessment of the ECL of trade receivables, bills receivables, contract assets and unbilled revenue; • Reviewed the reasonableness of management estimation of ECL rates which is based on the probability of default of the trade receivables, bills receivables, contract assets and unbilled revenue by taking into consideration on current situation and uncertainty caused by COVID-19, the historical observed default rates, customer’s ability to repay and other relevant forward-looking information; and • Reviewed the recoverability of long outstanding trade receivables and unbilled revenue to the subsequent receipts and other supporting evidence. Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Directors for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Act and SFRS(I)s, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets. In preparing the financial statements, management is responsible for assessing the Group’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 management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. The directors’ responsibilities include overseeing the Group’s financial reporting process.