Integrated Report 2020

Independent Auditor’s Report TO THE SHAREHOLDERS OF CIM FINANCIAL SERVICES LTD Audit Response We assessed and tested the design and operating effectiveness of key controls over facilities as well as the estimated expected credit loss allowance associated with non-performing loans (NPL). In relation to impairment, careful audit consideration was given to specific impairment calculations and collateral valuation. For non-credit impaired facilities, we assessed the appropriateness of the model used including the inputs and assumptions by reviewing the followings: • The appropriateness of the level of segmentation used, • The buckets used in the free floor rate analysis, • The appropriateness of the data and assumptions used to determine the Loss Given Default (LGD), • The criteria for staging of credit exposures and ensure these are in line with the requirements of IFRS 9 including any backstops used in the methodology, and • The reasonableness of overlays applied by management to factor in the impact of the COVID-19 pandemic. For stage 3 loans, we have tested the list of all credit impaired loans identified by management by performing the following procedures: - We obtained and tested loan arrears reports and ensured all that arrears exceeding 90 days past due were included in the impaired portfolio category for specific impairment assessment. - We evaluated whether facilities that are credit-impaired have been properly identified by management through identifying facilities meeting certain criteria such as financial difficulties of the borrower, restructured loans, insufficient collaterals and exposures to sectors in decline. - Where exposures are collateralised, we evaluated the Group’s legal right to the collateral, as well as the appropriateness of the valuations of the collateral in relation to ECL determination; and - We ensured that management overlays used are appropriate and in line with the Group’s risk management policies. Other information The Directors are responsible for the other information. The other information comprises the information included in the Financial Highlights, Chairperson’s message, Group Review, Risk Management Report, Other Statutory Disclosures, Directors’ Report, the Secretary’s Certificate as required by the Companies Act 2001, and the Directors of Subsidiary Companies, 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 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. Corporate Governance Report Our responsibility under the Financial Reporting Act is to report on the compliance with the Code of Corporate Governance disclosed in the annual report and assess the explanations given for non-compliance with any requirement of the Code. From our assessment of the disclosures made on corporate governance in the Annual Report, the Group has pursuant to section 75 of the Financial Reporting Act, complied with the requirements of the Code. Responsibilities of Directors and Those Charged with Governance for the Financial Statements The Directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Companies Act 2001, and for such internal control as the Directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group and the Company’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 the Directors either intend to liquidate the Group and the Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group and the Company’s financial reporting process. INTEGRATED REPORT 2020 CIM FINANCIAL SERVICES LTD Report on the audit of the Financial Statements (Cont’d) 63