Report on the Audit of Financial Statements (Continued) Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the 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 Basis for Qualified Opinion section above, we have determined the matter described below to be the key audit matters to be communicated in our qualified report. Key audit matter 1 Audit response Accounting for construction contracts (Refer to Notes 3.2, 4 and 28 to the financial statements) Revenue from construction contracts amounted to approximately $182,368,000 and represented 100% of the Group’s revenue for the financial year ended 30 September 2025. As at year end, the Group recorded a provision $1,175,000 for onerous contracts, reflecting unavoidable costs that the economic benefits expected to be received. This provision is expected to be utilised over the remaining contract periods. The Group’s core businesses are general and building contracting. Revenue from construction contracts is recognised over time using a cost-based input method, measured by reference to the proportion of costs incurred to date relative to the estimated total contract contract costs, excluding costs that do not contribute to satisfying performance obligations. Significant judgement is required in estimating the total contract costs, expected variations or claims recognised as contract revenue, provisions for liquidated damages, and the impact of contract modifications. These judgements affect the measure of progress and the resulting revenue and profit margins, with revisions to estimates recognised in profit or loss when they become known. A provision for onerous contracts is recognised when the expected benefits from a contract are lower than the unavoidable costs of fulfilling the Group’s obligations. This assessment involves additional judgement, including estimating the remaining costs to complete and the expected economic benefits. Given the financial significance of construction contract revenue and the level of judgement involved in the these estimates, this area has been identified as a key audit matter. We performed the following audit procedures, amongst others: • Understood and evaluated the Group’s design and implementation of its system of internal controls relating to revenue recognition, with a focus on key controls; • Agreed the variation orders sum to the approved variation orders by customers; • Assessed provisions for liquidated damages and, where applicable, whether they were appropriately offset against contract revenue; • Tested the project costs on a sample basis by checking that he costs are properly allocated to their respective contracts and that these costs are directly attributable to costs supported by suppliers’ invoices or other supporting documents; • Reviewed management’s estimated costs-to-complete for significant ongoing contracts by assessing the reasonableness of key cost components, including subcontractors’ costs, estimated labour hours and rates, materials, and overheads; • Evaluated the reasonableness of management’s budgets by comparing budgeted costs against actual costs of completed projects; • Obtained an understanding of the Group’s consideration of SFRS(I) 1-37 Provisions, Contingent Liabilities and Contingent Assets (“SFRS(I) 1-37”) in their application of the corresponding requirements of the standard and assess the appropriateness thereof; • Checked the arithmetical accuracy of the revenue recognised based on the input method computations; and • Reviewed the completeness and appropriateness of corresponding disclosures made in the financial statements. ANNUAL REPORT 2025 KEONG HONG HOLDINGS LIMITED 54 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KEONG HONG HOLDINGS LIMITED
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