Integrated Reports Senwes Financial Review 2018 - Page 8

8 FINANCIAL REVIEW Key Audit Matter | How the matter was addressed in the audit | continued INVESTMENT IN PRODIST (PTY) LTD Our audit procedures involved, amongst others, the following: (Consolidated and separate financial statements) Senwes has an effective shareholding of 37.5% in Prodist (Pty) Ltd (Prodist). Senwes holds 50% of the shareholding in Hinterland SA (Pty) Ltd (Hinterland) which in turns hold 75% in Prodist. The financial performance of Prodist required the shareholders to provide cash funding and guarantees to ensure the continuance of the operations. This resulted in significant impair- ments of investments, loans, and guarantees amounting to R75 million as disclosed in notes 5.1.4, 4.1.2 and 4.2.5 respectively. The assessment of the recoverable amount of Prodist and consequently Hinterland requires estimation and judgement around estimates and assumptions used including: The manner in which a restructuring plan may be decided upon and the effective implemen- tation thereof to realise as much value as possible of the assets in Prodist; The realisation value of the assets; and The net exposure to creditors. Other Information The directors are responsible for the other information. The other information comprises the Directors’ Report, the Audit Committee’s Report, the Company Secretary’s Certificate as required by the Companies Act of South Africa and the Inte- grated Report, which we obtained prior to the date of this re- port. Other information does not include the consolidated and separate financial statements and our auditor’s report thereon. Our opinion on the consolidated and separate financial state- ments does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other in- formation is materially inconsistent with the consolidated and FINANCIAL REVIEW continued We compared the assets used for determination of the recoverable amount calculation to Prodist’s annual financial statements; We assessed the reasonability of methodology used by management to determine the realisation value of these assets; We determined the total exposure to creditors using the liabilities per the Prodist annual financial statement, including plans to restructure or realise working capital in the business; We recalculated the recoverable amount using the realisation value and total exposure to creditors. We compared the allocation of the non-recoverable portion of the exposure to manage- ment’s accounting entries to the investment, loan and creditor guarantee. We assessed the adequacy of the disclosures made on judgements and estimates made on the impairment. separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other infor- mation obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other in- formation, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the consolidated and separate financial statements The directors are responsible for the preparation and fair pre- sentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is nec- essary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and separate financial state- ments, the directors are responsible for assessing the group’s ability to continue as a going concern, disclosing, as applica- ble, matters related to going concern and using the going con- cern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated and separate financial statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with