IGO Interactive Annual Report 2019

INDEPENDENT AUDITOR’S REPORT 126 — IGO ANNUAL REPORT 2019 Carrying Value of Mining Inventories Key audit matter How the matter was addressed in our audit We consider accounting for inventory to be a key audit matter because of the: • Quantitative significance of the inventory balance; • Complexity involved in determining inventory quantities on hand due to the assumptions used such as grades, volumes and densities; • Significant judgement in applying an appropriate costing methodology in accordance with the Group’s accounting policy and estimates for calculating stockpiles and concentrate on hand; • Judgemental aspect of the carrying amount of the non-current stockpile at Tropicana; and • Significant judgements made in determining net realisable value, including estimating the future sales price of commodities, less any estimated costs to complete production. Refer to Note 9 for the detailed disclosures which include the related accounting policies, including a description of the major estimates management are required to make. Our work included but was not limited to the following procedures: • Testing the controls over the appropriate allocation of costs to ensure that they are absorbed into inventory accurately; • Reconciling ore stockpile and concentrate inventory balances held at 30 June 2019 to supporting documentation; • Verifying the physical inputs included in the cost models as at 30 June 2019 to stockpile survey and technical reports; • Assessing the competence and objectivity of the experts used by management in the preparation of stockpile surveys; • Assessing the methodology applied by management to record all appropriate costs into the calculation of inventories on hand; • Evaluating management’s Net Realisable Value assessment and agree that the inventory cost carried is lower than Net Realisable Value; and • Testing the net realisable value by assessing management’s calculation including: - Future commodity pricing; - Expected cost to complete; - In the case of the non-current inventory, a review of management’s plans to blend the low grade stockpile with future high grade production over several years; and • We also assessed the adequacy of related disclosures in Note 9 to the financial statements. 126 — IGO ANNUAL REPORT 2019