Greenbuilders Pte Ltd (GPL) is a local construction company which specialises in providing bespoke Design and Build construction services for private residential homes that are designed to be environmentally friendly. Due to the niche market GPL caters to, demand for such homes usually come from the more affluent class in Singapore. You are an audit senior conducting an audit on the company for the year ending 30 June 2022.

The war between Russia and Ukraine has resulted in rising labour and material costs in the construction industry. As the country has opened up its borders, the construction industry still faces a labour crunch and rising costs from the ongoing Covid situation and aftermath of the geopolitical impacts.

During the course of your audit, the following information was documented following initial discussions with the Finance Director:

Construction Revenue:

GPL has a policy of recognising revenue based on the Percentage of Completion of the properties under construction. The Finance Director however, believes that all its projects have a very high chance of being delivered given that the worse of the labour crunch is over. He also believes that payment from its clients can be fully received given that they are more affluent than the average Singaporean. As such, GPL fully recognised revenue for some of it smaller projects that were still ongoing. On average, GPLs current list of outstanding projects will need another 3 years to complete.

From the construction or rental revenue process, the following are required:

• Assess and discuss one (1) inherent risk,
• Evaluate one (1) risk of material misstatement (RMM) related to the inherent risk, analyse one (1) key control that GPL should implement, and assess one (1) substantive procedure
• Discuss one (1) corresponding management assertion that you will be most concerned with