AFRICAN DAWN ANNUAL REPORT 2018 29 Independent Auditor’s Report To the shareholders of African Dawn Capital Limited continued As a result of the differences identified by the auditor, the credit committee undertook to review the estimates to the impairment allowance in light of changing economic circumstances und updated collection trends. An independent expert was appointed to assist with the review. Based on the outcome of the expert’s review, the committee was prompted to revise the estimates used in the different categories as disclosed in Note 37 “Change in Estimate”. The change in estimate resulted in an additional impairment allowance of R1.7million. The impairment allowance was a matter of most significance to the audit and therefore identified as a key audit matter, given the material value of trade receivables as a whole to the financial statements, the subjective nature of the allowance calculation and the effect of these on the risk management processes and operations of the Group. We have placed reliance on management’s expert and performed the following audit procedures: • Evaluated the competence, capability, and objectivity of management’s expert; • Held discussions with the expert to assess the scope of the review performed; • Performed an input test on the information received by the expert, by comparing the information on a sample basis to other sections of audit work performed. • Performed detailed work on a sample of subsequent payments received by debtors. The results of the subsequent payment test was in line with management’s calculations. • Assessed the reasonableness of the revised policy applied by management based on the outcome of the expert’s review. We furthermore considered the adequacy of the Group’s disclosure of trade receivables and the related impairment allowance. Timing of recoverability of R4.7million from a long outstanding debtor. At 28 February 2018, R4.7million from a long outstanding debtor has been reflected as part of trade receivables disclosed in Note 10, and also separately disclosed in Note 27. This debtor is key to the going concern assessment of the Group and has been disclosed as a material uncertainty under the going concern judgement as per Note 1.18. The payment schedule that was in place and that had failed, has been restructured subsequent to year end. This has been disclosed in Note 39. Agreements incorporating the restructured arrangements have been concluded. As per management’s estimate, the restructured arrangement significantly increases the likelihood of repayment by the debtor in the next 12 months. Significant management judgement is involved in the assumptions regarding the timing of the recoverability of the material debtor, and hence this has been identified as a key audit matter. In addition, as disclosed in Note 1.18 a director has waived his right to claim, call up, or access his loan account contributions after year end to the sum of R2.4million, which shall only become due, owing and payable at such time when the restructured arrangement relating to the long outstanding debtor of R4.7million has been paid or discharged in full. If the board of directors of the company determine that the debt is no longer recoverable, then the director irrevocably waives his right, title and interest in and to his loan account to the sum of R2.4million. Our audit included obtaining, understanding and testing the restructured arrangement. In evaluating the restructured arrangement, we performed various procedures, including the following: • Obtained the restructured signed settlement agreements and confirmed the settlement agreements amounts are covering the full outstanding balance of R4.7million. • Obtained an understanding of the deals structured in the settlement agreements to repay the debtor. • Performed a sensitivity analysis to determine the minimum percentage success rate of the deals to repay the outstanding debtor. • Assessed the minimum percentage success rate of the deals in terms of reasonability to conclude if the deals will provide sufficient cash flow to recover the debtor. With regards to the director’s waiver of his right to claim, call up or access his loan account contributions after year end we performed the following procedures: • We have obtained the signed waiver and inspected that the terms agreed with the director is in line with our expectations, • We have inspected the bank statement for the subsequent payment of R2.4million paid by the director after year end. We furthermore considered the adequacy of the Group’s disclosure of the long outstanding debtor.
AFRICAN DAWN 2018 Annual Report
To see the actual publication please follow the link above