FGV Annual Report 2016

ANNUAL INTEGRATED REPORT 2016 155 FINANCIAL REPORT REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters Fraud losses in a subsidiary of a joint venture During the financial year, the Group discovered fraud losses in Felda Iffco Gida Sanayi ("FIGS"), a subsidiary of a joint venture, Felda Iffco Sdn Bhd ("FISB"), located in Turkey, of which RM52.9 million being the Group's 50% share of the total losses identified. The fraud losses resulted from overstatements of inventories and receivables in FIGS's current and prior years' financial statements. It was also discovered that the fraud had been committed by previous management of FIGS from the financial years 2011 to 2016, which resulted in material errors in the preparation of the financial statements of FIGS. Accordingly, the impact of the errors relating to the fraud perpetrated in prior financial years had been corrected as prior year's adjustments in accordance with FRS 108. The impact of the prior year adjustments of RM10.4 million and RM26.4 million had been adjusted against the results for the financial year ended 31 December 2015 and periods prior to 1 January 2015 respectively. The assessment of the nature of the fraud and the quantification of the fraud losses by management required significant audit attention. The audits of the financial statements of FISB and FIGS are carried out by another firms of auditors in Malaysia and Turkey respectively. Refer to Notes 5(iii) and 58 to the financial statements. We have performed the following audit procedures: •We evaluated management's assessment of the fraud losses as material errors in the preparation of the financial statements, in particular, quantification of the Group's share of the adjustments of the losses relating to the financial years ended 31 December 2016, 31 December 2015 and periods prior to 1 January 2015; •We read board and Audit Committee minutes of FIGS, FISB and the Company which set out the outcome of discussions on the fraud and the losses incurred from the financial years 2011 to 2016. We also discussed with management of the Company, FISB and FIGS to obtain understanding on the fraud losses; •We read the reports on forensic investigation and understand the procedures performed by another firm of auditors to assess the amount of fraud losses quantified by management; and •We reviewed the work papers of component auditors for FISB and FIGS and assessed the audit procedures performed based on our group audit instructions, in particular, on inventories, revenue, receivables and journal adjustments made by FIGS' management. We also reviewed their work performed on the verification of the fraud losses carried out by another firm of auditors in Turkey and the prior year adjustments disclosed in FISB's and FIGS's financial statements. •We assessed the adequacy of the disclosure on this matter in the financial statements. Based on our procedures, we noted no significant exceptions. INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FELDA GLOBAL VENTURES HOLDINGS BERHAD