Page 33 - Inegrated Annual Report 2020-Eng

Key audit matters
Key audit matters are those matters that, in our professional judgment, 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 financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report, including in relation to these matters. Accordingly,
our audit included the performance of procedures designed to respond to our assessment of the risks
of material misstatement of the consolidated financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit
opinion on the accompanying consolidated financial statements.

Project revenue recognition How our audit addressed the area of focus

The Group recognised AED 3,776 million of We obtained an understanding of the key internal
project revenue for the year ended 31 December controls and IT systems which support the project
2020. management and accounting. These included
controls in the policies and procedures concerning
Project revenue recognition is significant to the determination of the percentage of completion,
financial statements based on the quantitative estimates to complete for both revenue and costs
materiality and the degree of management and provisions for loss making projects.
judgement required for revenue recognition.
Revenue is recognized according to the stage of We enquired of management for a selection of
completion of the respective projects, which is major projects to gain an understanding of the
measured using the “cost-to-cost method” and progress of developments, any material contract
surveys of work performed. variations and the projected financial performance
of projects against feasibility reports.
Due to the contracting nature of the business,
revenue recognition involves a significant degree We inspected a sample of contracts with
of judgement, with estimates being made to: customers and assessed project costs to date,
estimates of revenue and costs to complete. We
• assess the total contract costs; also agreed a sample of costs incurred to invoice
and/or payment, including testing whether they
• assess the stage of completion of the contract; were allocated to the appropriate project. We also

• assess the proportion of revenues, including evaluated subsequent payments made after the
variation orders, to recognize in line with reporting date to assess whether the costs were
contract completion; accrued in the correct reporting period.

• forecast the profit margin on each contract We also evaluated the accounting principles for
incorporating appropriate allowances for revenue recognition, which form the basis for the
technical and commercial risks; and recognition of unbilled receivables. In addition,
we evaluated the adequacy of the Company’s
• appropriately identify, estimate and provide for disclosures regarding trade receivables and
onerous contracts. unbilled receivables on projects, the related
risks such as credit risk and the aging of trade
There is a range of acceptable outcomes receivables as disclosed in note 12 of the
resulting from these judgements that could lead consolidated financial statements.
to different revenue or income being reported in
the consolidated financial statements.

2020 Integrated Annual Report 33