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AFRICAN DAWN ANNUAL REPORT 2020

Independent Auditor’s Report

To the shareholders of African Dawn Capital Limited continued

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in
the Material uncertainty relating to going concern section above, we have determined the matters described below to be the key audit matters to
be communicated in our report on the consolidated and separate financial statements.

Matter Audit Response
Impairment allowance on Trade Receivables (Note 1.14 and Our audit approach included obtaining an understanding of the
Note 8) group’s policy in relation to the expected credit loss impairment
allowance of trade receivables, and testing the application of this
At 29 February 2020, trade receivables amounted to R21,46 million policy.
against which an impairment allowance of R12,72 million was
recorded. This is disclosed in Note 8 to the consolidated and separate We performed the following audit procedures:
financial statements. • Evaluated the appropriateness of the application of either a
specific expected credit loss model or a simplified approach
The group applies the accounting standard IFRS 9: Financial to the relevant financial assets by understanding the nature
Instruments and in doing so, calculates expected credit loss (“ECL”) of the financial assets and comparing the application to the
impairments for trade receivables, taking into account reasonable and requirements of the standard;
supportable forward-looking information.
• Tested the IT general control environment and application control
over the ageing of the trade receivables that will determine the
The ECL impairment was a matter of most significance to the audit
and therefore identified as a key audit matter, given the material staging as per IFRS 9.
value of trade receivables as a whole to the consolidated and separate • Obtained an understanding of the group’s approach for
financial statements, the subjective nature / judgements of the estimating ECL and whether this is in compliance with IFRS 9;
impairment allowance calculation and the effect of the impairment • We assessed the appropriateness of relying on the work of the
allowance on the risk management processes and operations of management expert in terms of ISA620 by:
the group. o evaluating the competence, capability and objectivity of the
management expert and
There are a number of significant management-determined
judgements made on the ECL impairment allowance calculations o Having discussions with the management expert to assess the
including: scope of the review performed by the management expert
• We tested the work of the management expert in accordance
• determining the criteria for a significant increase in credit risk;
with ISA620 through verifying the data inputs used by the
• techniques used to determine the probability of default (“PDs”) management expert in the ECL impairment model back to the
• and loss given default (“LGD”) and underlying data.
• forward looking assumptions. • We considered management’s assessment of COVID-19 being
a non-adjusting post reporting date event by considering the
These judgements required models to measure the expected credit timing of when sentiment changed to viewing it as a pandemic,
losses on certain financial assets measured at amortised cost. The taking into account the number of identified COVID-19
large number of data inputs applied in these models increases the risk cases in South Africa, local stock market changes and public
that data used to develop assumptions and operate the model is not announcements.
appropriate or accurate.
• We assessed the reasonableness of the economic factors
considered by management’s expert applied in estimating the
Another judgement required was Assessing the impact of COVID-19
on the forward looking economic model as a nonadjusting post impact of COVID-19 on forward looking information.
reporting date event with it only becoming a pandemic post the
reporting date. Information available up to 29 February 2020 was We furthermore considered the adequacy of the group’s
included in the forward looking economic model. The impact of disclosure of trade receivables and the related impairment
expected lower disposable income and retrenchments was included allowance.
into the macroeconomic variables input in the forward looking
economic model.
An independent expert was appointed by management to assist with
the calculation of the IFRS 9 expected credit losses on the impairment
allowance on trade receivables.

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