can result in a potential overstatement of the net investment in leases and other credit agreements, loans and advances balance in the consolidated and separate financial statements. Identification of credit-impaired facilities (i.e. those classified in Stage 3) and determination of the expected credit losses thereon involves significant judgement, estimates and assumptions regarding (i) determination of whether a facility is credit impaired and (ii) in estimating the forecasted cash flows the Group and Company expect to receive from the obligors. This includes an estimate of what the Group and Company can realise from the collaterals they hold as security on the impaired facilities. Given the inherent risk associated, the management overlays used and the nature of the business and size of the facilities, we deemed the expected credit loss allowance to be a key audit matter. Related Disclosures Refer to notes 10, 15, 16 and note 2.7 (accounting policies), 3 (Significant accounting estimates and judgements) and note 4.1 (financial risks) of the accompanying financial statements. Audit Response • We discussed and understood from management the impairment process, governance, approval and implementation of the ECL model. • We used our IT Specialist and discussed with management to assess the completeness, accuracy and validity of data and inputs used during the development and application of the ECL models scoped; CFA and Cards, Personal Loans, Finance Leases and Factoring. • We assessed the competence, independence and integrity of the management’s credit specialist. • We obtained and tested loan arrears reports and ensured all those arrears exceeding 90 days past due were included in the impaired portfolio category for specific impairment assessment. • We assessed proper staging of all financial asset portfolios. • We obtained explanation for customers on caution lists and assessed their staging. • We engaged with our credit specialist and: - Gained an understanding of the nature of the underlying loans in the loan portfolio. - Reviewed the ECL methodology for compliance with IFRS 9 Financial Instruments principles and best practice. - Reviewed and reperformed the management ECL revised model calculations for accuracy. - Obtained the appropriate management data and performed the relevant procedures to prepare the management data for the challenger ECL model using independent inputs (PD, LGD, EAD, CCF and forward-looking macro- economic factors). - Held regular discussions with management to understand and resolve the differences arrived at based on managagement’s calculations and the challenger model. • We reviewed minutes of Risk Management Committee to identify any matter relating to ECL such as inputs used in calculation of postmodel management adjustments. • We performed an analytical review and analysed year on year variances and movement in ECL and linked to movement in facilities and obtained explanations from management. • Where exposures are collateralised, we evaluated the Company’s legal rights to the collateral, as well as the appropriateness of the valuations of the collateral in relation to ECL determination, and the linking of collateral to the corresponding accounts. We reviewed the reconciliation and allocation of the General Ledger balances to which the impairment parameters are applied. • We also reviewed and assessed the completeness of the disclosures in the Financial Statements for compliance with International Financial Reporting Standards including disclosure on significant inputs. Other Information The directors are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the consolidated and separate financial statements and our auditor’s report thereon. We have obtained prior to the date of this auditor’s report, the statement of compliance, the corporate governance report, the other statutory disclosures and the statement of directors’ responsibilities and the company secretary’s certificate. All other information in the Annual Report will be made available to us after the auditor’s report date. If we conclude there is a material misstatement therein, we are required to communicate the matter to those charged with governance. 95 OUR YEAR AT A GLANCE OUR PEOPLE GOVERNANCE FINANCIAL STATEMENTS
RkJQdWJsaXNoZXIy MzQ3MjQ5