Annual Report 2023

184 2023 Annual Report Transport International Holdings Limited INDEPENDENT AUDITOR’S REPORT Key audit matters (continued) Assessing the contingency provision for insurance Refer to note 27 to the consolidated financial statements and the accounting policies on page 214. The Key Audit Matter How the matter was addressed in our audit The Group is involved from time to time in litigation and claims in connection with its bus operations. The contingency provision for insurance in connection with the Group’s franchised bus operations, which represented the majority of the total balance of HK$234 million as at 31 December 2023, has been set aside by management to meet the liabilities which are expected to arise from third party claims for incidents which have occurred. Management assessed the provision based on independent valuation performed by qualified external actuaries. The assessment of the provision involves estimates based on past claims experience and recent claims developments. The ultimate claim amount is dependent on future external events which are inherently uncertain and actual claims may therefore deviate from management estimations. We identified the assessment of the contingency provision for insurance as a key audit matter because of the level of management judgement required in assessing the variable factors and assumptions in order to estimate the potential costs of settlement of claims. Our audit procedures to assess the contingency provision for insurance included the following: – assessing the design, implementation and operating effectiveness of key internal controls over management’s maintenance of claims records and the assessment of related provision; – assessing the independence, qualifications and expertise of the external actuaries engaged by management and evaluating whether a consistent methodology had been applied in determining the amount of the provision; – with the assistance of our internal actuarial specialists, assessing the valuation methodology adopted by the external actuaries and comparing the key estimates and assumptions adopted in the actuarial valuation with past claims experience; – comparing the claims details provided by management to the external actuaries with the claims records maintained by management, on a sample basis.