Independent auditor's REPORT

To the Shareholders of EOH Holdings Limited

Report on the audit of the consolidated financial statements

Our opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of EOH Holdings Limited and its subsidiaries (together the Group) as at 31 July 2020, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act of South Africa.

What we have audited

EOH Holdings Limited's consolidated financial statements set out from the Consolidated statement of profit or loss and other comprehensive income to Note 42 comprise:

the consolidated statement of financial position as at 31 July 2020;
the consolidated statement of profit or loss and other comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the financial statements, which include a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the Independent Regulatory Board for Auditors' Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards).

Material uncertainty relating to going concern

We draw attention to note 1.2 to the consolidated financial statements, which indicates that the Group incurred a consolidated net loss of R1.6 billion during the year ended 31 July 2020 and, as of that date, the Group's consolidated current liabilities exceeded its consolidated current assets by R2.4 billion. As disclosed in note 42 to the consolidated financial statements, the Group breached its banking covenants from 1 August 2020, and the breach was waived by the Group's financiers subsequent to year-end. As stated in note 1.2, these events or conditions, along with other matters as set forth in notes 1.2 and 42, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Our audit approach

Overview

Overall group materiality

Overall group materiality: R86 903 500, which represents 1% of consolidated revenue from continuing operations.

Group audit scope

The components that are in scope included the financially significant components of the Group.
The main indicators used to identify components within continuing and discontinued operations included consolidated revenue, consolidated loss before tax, consolidated assets and consolidated liabilities.

Key audit matters

Impairment assessment of goodwill arising from business combinations;
Assessment of whether the Group is the agent or the principal when recognising revenue on the sales of hardware and software licenses;
Accounting treatment of tax exposures that the Group is exposed to; and
Fraud investigations, legal exposures and related provisions and contingent liabilities.

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall group materiality

R86 903 500.

How we determined it

1% of consolidated revenue from continuing operations.

Rationale for the materiality benchmark applied

Consolidated revenue from continuing operations was selected as the benchmark because, in our view it is the benchmark against which the performance of the Group can be consistently measured, as it is an indicator of market share. Consolidated revenue is also considered to be the key objective and focus of the Group's business model and a key performance indicator for the management and investors. Consolidated revenue from discontinued operations is excluded as it will not reflect a consistent measurement of the Group's performance into the future.

We chose 1% based on our professional judgement and after consideration of the range of quantitative materiality thresholds that we would typically apply when using revenue to compute materiality. The considerations included taking cognisance of the intended users and distribution of the consolidated financial statements as well as the financial covenants held over the Group's debt.

How we tailored our group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The Group is made up of three segments, iOCO, NEXTEC, IP and the main operating businesses are located in South Africa. In establishing the overall audit approach to the group audit, we determined the type of work that needed to be performed at the local operations by ourselves, as the group engagement team, and component auditors from other PwC network firms as well as other audit firms operating under our instruction. The Group's operations vary in size. Within these segments, we have identified components, between continuing and discontinued operations, on which to perform full scope audits for group reporting purposes due to their financial significance and contribution to the risk of material misstatement in the consolidated financial statements. Analytical procedures were performed over all components not in scope, to assess whether any risks exist that would require additional audit procedures.

Detailed group audit instructions were communicated to all components in scope, and comprehensive audit approach and strategy planning meetings were held with all reporting component teams before commencing their respective audits. Throughout the audit, various meetings and discussions were held with the teams of the significant components.

We assessed the competence, knowledge and experience of the component auditors and evaluated the procedures performed on the significant audit areas to assess the adequacy thereof in pursuit of our audit opinion on the consolidated financial statements.

Where the work was performed by the component auditors, we determined the level of involvement we needed to have in the audit work at these operations to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the consolidated financial statements as a whole.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter	How our audit addressed the key audit matter
Impairment assessment of goodwill arising from business combinations The Group entered into various business combinations over the last couple of years which resulted in a significant amount of goodwill being recognised. As at 31 July 2020 the Group's goodwill balance amounted to over R1.5 billion, of which R604 million is classified as assets held for sale. Goodwill is tested annually for impairment and whenever there is an impairment indicator identified by management, at the level of individual cash-generating units (CGUs). The recoverable amount for each CGU was based on the higher of an asset's fair value less costs of disposal (FVLCOD) and value in use, the latter being determined using discounted cash flow models. In estimating the recoverable amount using value in use estimates, management uses assumptions relating to discount rates, long-term growth rates and cash flow forecasts (which include the impact of COVID-19), taking into consideration the projected revenue growth rates and EBITDA margins of each CGU, which they model using forecast periods for three years and in some instances up to five years. Impairment tests on assets held for sale were based on FVLCOD. The fair value was determined primarily with reference to advanced offers from potential acquirers less estimated disposal costs. CGUs have been identified to reflect the lowest level at which businesses are managed and monitored by common cluster heads and financial directors/managers. Impairments amounting to R413 million were recognised as a result of the aforementioned assessments during the period under review. R189 million of the goodwill impairments recognised relate to held for sale CGUs written down to their fair value less costs of disposal. The impairment assessment of goodwill is considered to be a matter of most significance to our audit of the consolidated financial statements due to the various significant judgements applied by management in determining the recoverable amounts of the respective CGUs, as well as the magnitude of the goodwill balance and impairment recognised. Refer to the following notes to the consolidated financial statements for details: Note 1.3: Significant accounting judgements and sources of estimation uncertainty; Note 1.5: Summary of significant accounting policies, Goodwill and intangible assets; and Note 6: Goodwill.	We tested the mathematical accuracy of the valuation models used by management and found no material differences. We assessed the appropriateness of the valuation models applied by management, with reference to market practice and the requirements of International Accounting Standard (IAS) 36, Impairment of Assets. We assessed revenue growth rates and EBITDA margins against the Group's strategic initiatives, taking into account the anticipated impact of COVID-19, as well as historical growth rates and EBITDA margins achieved. We utilised our valuations expertise to independently source data such as the long-term growth rates, as well as the Group's cost of debt, risk free rates in the applicable market, market risk premiums, the industry's debt/equity ratios, and the betas of comparable companies, in order to recalculate an independent discount rate for each CGU. We applied our independently sourced assumptions and calculated inputs, to management's forecasts, and recalculated a value in use per CGU. We compared management's recoverable amount of each CGU to the results of our calculations. No material differences were noted. We further performed sensitivity analyses to determine the minimum changes in discount rates, long-term growth rates and forecast cash flows that would result in limited or no headroom being available. In respect to the FVLCOD we performed an assessment of the sensitivity of the advanced offers to downward adjustments, by using a sensitivity of 5%. We compared the results of our sensitivity analysis to management's impairment results in order to identify those CGUs considered sensitive to a change in assumptions for disclosure purposes.
Assessment of whether the Group is the agent or the principal when recognising revenue on the sales of hardware and software licenses The Group sells a range of both hardware and software licenses as part of their normal business activities. In most cases, the sale of software licenses is part of an overall solution that the Group sells to its customers whereby the Group integrates and significantly customises the software when installing the solution into the customers' IT infrastructure. The Group mainly acts as a principal in these contracts, but also as an agent in other contracts, depending on the nature and scope of the specific contract and the Group's performance obligations in each such contract. The considerations as to whether the Group is the agent or the principal in these transactions is dependent on whether the Group is taking control of the hardware and software licenses before transferring these items to the End-customer which is considered through application of the "control" principles as outlined in IFRS 15, Revenue from Contracts with Customers (IFRS 15) together with the indicators of control outlined in application guidance set out in Appendix B of IFRS 15. Management applied their judgement in determining whether the Group acts as a principal or agent in these transactions (and in relation to each identified performance obligation), with reference to the principles of IFRS 15. Management engaged an external consulting firm to perform an assessment on certain key contracts in order to obtain comfort that the Group has applied the agent versus principal considerations appropriately to those contracts. The assessment of whether the Group is acting as an agent vs a principal is considered to be an area of most significance in our audit of the consolidated financial statements due to the significant judgement involved in the Group's application of the IFRS 15 standard in this regard and the complexity involved for the industry that the Group operates in. Refer to the following notes to the consolidated financial statements for detail: Note 1.3: Significant accounting judgements and sources of estimation uncertainty; Note 1.5: Summary of significant accounting policies, Revenue; Note 3.2: Restatement of consolidated annual financial statements, Revenue, Principal versus agent; and Note 24: Revenue.	We tested a sample of revenue transactions to assess management's determination on whether the Group is the agent or the principal, with reference to the indicators of control outlined in application guidance set out in Appendix B of IFRS 15, by performing the following procedures: met with management and the related operational staff in order to obtain an understanding of the end-to-end business process with regards to the sales of the hardware and software licenses; inspected the underlying contractual agreements or purchase orders between the Group and the End-customers; identified the performance obligations associated with the contract with the customer and assessed if the Group obtains control of the goods before providing them to the end customer, with reference to the terms of the performance obligations; and inspected the underlying contractual agreements between the Group and the suppliers of the goods. Based on our procedures performed, and where our assessment of agent vs principal for the sample of transactions tested differed to that of management, management engaged an external consulting firm ("management's consultant") to reassess these specific contracts. We assessed the work performed by the management consultant, as outlined in our further audit procedures performed below, and noted no material differences between our and management's final agent vs principal reassessment. We inspected the memorandums provided by management's consultant which outlined their and management's re-assessment of significant contracts which they have identified, including those contracts that we have tested above and on which we noted differences, against the principles of IFRS 15, of whether the Group is the agent or the principal. We tested the IFRS 15 adjustments made by management in their categorisation of transactions identified as either principal or agent. Based on our procedures performed, we did not identify any matters in this regard requiring further consideration. We assessed the adequacy of the disclosures made in the consolidated financial statements pertaining to the agent vs principal considerations, with reference to the requirements of IFRS 15.
Accounting treatment of tax exposures that the Group is exposed to Due to the inherent nature of exposures, rulings issued, assessments and sanctions by tax and regulatory authorities, the Group recognised a significant amount of tax-related provisions, income tax liabilities and contingencies as at 31 July 2020. Management applies judgement to estimate the following: the potential exposure where the interpretation of the applicable tax laws and regulations could be subjective; and the likelihood that a pending claim will succeed, or a liability will arise, and the quantification of the potential financial settlement, as applicable. Furthermore, in the prior year, the Group had raised a provision for the payment of pay-as-you-earn ("PAYE"), which arose in one of the subsidiaries. The Group had further increased such provision in the first half of the current year. We considered the accounting treatment of tax exposures that the Group is exposed to, to be a matter of most significance to the current year audit due to the complexity, nature and magnitude of these exposures, together with a significant level of management judgement involved in interpreting specific acts, regulatory provisions or practices in determining the amounts of these liabilities. Refer to the following notes to the consolidated financial statements for detail: Note 1.3: Significant accounting judgements and sources of estimation uncertainty; Note 3.3: Restatement of consolidated annual financial statements, Timing of recognition of provision; Note 23: Provisions; and Note 34: Contingencies and commitments, Uncertain tax exposure.	We utilised our tax expertise to evaluate management's assessment of the probability of tax exposures relating to income tax, VAT, PAYE and other taxes. We held discussions with group management regarding the significant exposures and inspected available underlying tax correspondence and relevant documentation, in order to evaluate the reasonableness of management's conclusions. Where exposures were deemed to be probable, through inspection of the underlying accounting records, we tested whether management had appropriately estimated and recognised these tax exposures. We noted that a portion of the increase in the PAYE provision recognised during the first half of the current year should have been recognised at the end of the previous year. Management subsequently corrected this as a prior period error, resulting in an increase in current liabilities of R75 million in the prior year, as well as an increase in operating expenses and accumulated loss for the previous year by the same amount. We further assessed the appropriateness of the assumptions applied by management in estimating the likely outcome of the PAYE exposure by assessing these against the advice management obtained from their external tax counsel. We further inspected correspondence received by management from the tax authorities and the Group's external tax advisers to evaluate the consistency and adequacy of the exposures accounted for and disclosures made by management, based on the responses received. We did not identify any matters requiring further consideration.
Fraud investigations, legal exposures and related provisions and contingent liabilities There is uncertainty related to the legal and tax exposures due to suspect transactions identified by the Group and the forensic investigation performed in relation to these suspect transactions. Management engaged with independent forensic specialists ("management's specialists") to perform an assessment on all the contracts identified by management's specialist, to determine the likelihood of a claim being instituted against the Group on the respective contracts. There is also further uncertainty regarding historical income taxes and VAT as a result of the impact of the fraudulent transactions identified in the independent forensic investigation performed during the 2019 financial year. We considered the fraud investigations, legal exposures and related provisions and contingent liabilities to be a matter of most significance to the current year audit due to the potential risk that not all liabilities that the Group may be exposed to, have been appropriately disclosed and accounted for, based on the extent of the uncertainties involved in this assessment. Refer to the following notes to the consolidated financial statements for detail: Note 1.3: Significant accounting judgements and sources of estimation uncertainty; Note 23: Provisions; and Note 34: Contingencies and commitments.	Utilising our forensics expertise, we evaluated management's assessment of opening balances and the impact of the Group's forensics investigation on the current year by performing the following procedures: we assessed the competency, capability, and objectivity of the Group's forensics investigation team, by inspecting their curriculum vitae, certificates of qualifications, company profiles and representations of their independence; we assessed the oversight of the Group's forensics investigation team's scope, procedures and findings by appropriately qualified individuals of management; we inspected and evaluated the work of the Group's forensics investigation team, including the investigation scope, methods and assumptions employed; and we assessed the Group's forensics investigation team's findings for adequacy and reliability of their work performed. Based on our procedures performed above, we noted no aspects requiring further consideration. Utilising our forensics expertise, we also held discussions with the Group's internal and external legal experts, forensics investigation team and management, and inspected their presentations of their findings to the Group to: obtain an understanding of the scope, procedures performed, findings and remediation steps taken by the Group; and determine the significant exposures and evaluate the reasonableness of management's conclusions with reference to their findings reported to the Group. We evaluated whether the findings from the forensic investigation have been adequately considered, recorded and disclosed as in notes 23 and 34 to the consolidated financial statements as at 31 July 2020, and whether subsequent events or further investigations performed by all of management's experts have identified subsequent changes to the exposures identified and disclosed. We noted no matters or exposures requiring further consideration. We inspected correspondence received by management from the respective regulatory authorities to evaluate the adequacy of exposures accounted for and disclosures made in the consolidated financial statements. We noted no matters requiring further consideration.

Key audit matter

How our audit addressed the key audit matter

Impairment assessment of goodwill arising from business combinations

The Group entered into various business combinations over the last couple of years which resulted in a significant amount of goodwill being recognised.

As at 31 July 2020 the Group's goodwill balance amounted to over R1.5 billion, of which R604 million is classified as assets held for sale. Goodwill is tested annually for impairment and whenever there is an impairment indicator identified by management, at the level of individual cash-generating units (CGUs).

The recoverable amount for each CGU was based on the higher of an asset's fair value less costs of disposal (FVLCOD) and value in use, the latter being determined using discounted cash flow models.

In estimating the recoverable amount using value in use estimates, management uses assumptions relating to discount rates, long-term growth rates and cash flow forecasts (which include the impact of COVID-19), taking into consideration the projected revenue growth rates and EBITDA margins of each CGU, which they model using forecast periods for three years and in some instances up to five years.

Impairment tests on assets held for sale were based on FVLCOD. The fair value was determined primarily with reference to advanced offers from potential acquirers less estimated disposal costs.

CGUs have been identified to reflect the lowest level at which businesses are managed and monitored by common cluster heads and financial directors/managers.

Impairments amounting to R413 million were recognised as a result of the aforementioned assessments during the period under review.

R189 million of the goodwill impairments recognised relate to held for sale CGUs written down to their fair value less costs of disposal.

The impairment assessment of goodwill is considered to be a matter of most significance to our audit of the consolidated financial statements due to the various significant judgements applied by management in determining the recoverable amounts of the respective CGUs, as well as the magnitude of the goodwill balance and impairment recognised.

Refer to the following notes to the consolidated financial statements for details:

Note 1.3: Significant accounting judgements and sources of estimation uncertainty;
Note 1.5: Summary of significant accounting policies, Goodwill and intangible assets; and
Note 6: Goodwill.

We tested the mathematical accuracy of the valuation models used by management and found no material differences.

We assessed the appropriateness of the valuation models applied by management, with reference to market practice and the requirements of International Accounting Standard (IAS) 36, Impairment of Assets.

We assessed revenue growth rates and EBITDA margins against the Group's strategic initiatives, taking into account the anticipated impact of COVID-19, as well as historical growth rates and EBITDA margins achieved.

We utilised our valuations expertise to independently source data such as the long-term growth rates, as well as the Group's cost of debt, risk free rates in the applicable market, market risk premiums, the industry's debt/equity ratios, and the betas of comparable companies, in order to recalculate an independent discount rate for each CGU.

We applied our independently sourced assumptions and calculated inputs, to management's forecasts, and recalculated a value in use per CGU. We compared management's recoverable amount of each CGU to the results of our calculations. No material differences were noted.

We further performed sensitivity analyses to determine the minimum changes in discount rates, long-term growth rates and forecast cash flows that would result in limited or no headroom being available. In respect to the FVLCOD we performed an assessment of the sensitivity of the advanced offers to downward adjustments, by using a sensitivity of 5%. We compared the results of our sensitivity analysis to management's impairment results in order to identify those CGUs considered sensitive to a change in assumptions for disclosure purposes.

Assessment of whether the Group is the agent or the principal when recognising revenue on the sales of hardware and software licenses

The Group sells a range of both hardware and software licenses as part of their normal business activities. In most cases, the sale of software licenses is part of an overall solution that the Group sells to its customers whereby the Group integrates and significantly customises the software when installing the solution into the customers' IT infrastructure. The Group mainly acts as a principal in these contracts, but also as an agent in other contracts, depending on the nature and scope of the specific contract and the Group's performance obligations in each such contract. The considerations as to whether the Group is the agent or the principal in these transactions is dependent on whether the Group is taking control of the hardware and software licenses before transferring these items to the End-customer which is considered through application of the "control" principles as outlined in IFRS 15, Revenue from Contracts with Customers (IFRS 15) together with the indicators of control outlined in application guidance set out in Appendix B of IFRS 15.

Management applied their judgement in determining whether the Group acts as a principal or agent in these transactions (and in relation to each identified performance obligation), with reference to the principles of IFRS 15.

Management engaged an external consulting firm to perform an assessment on certain key contracts in order to obtain comfort that the Group has applied the agent versus principal considerations appropriately to those contracts.

The assessment of whether the Group is acting as an agent vs a principal is considered to be an area of most significance in our audit of the consolidated financial statements due to the significant judgement involved in the Group's application of the IFRS 15 standard in this regard and the complexity involved for the industry that the Group operates in.

Refer to the following notes to the consolidated financial statements for detail:

Note 1.3: Significant accounting judgements and sources of estimation uncertainty;
Note 1.5: Summary of significant accounting policies, Revenue;
Note 3.2: Restatement of consolidated annual financial statements, Revenue, Principal versus agent; and
Note 24: Revenue.

We tested a sample of revenue transactions to assess management's determination on whether the Group is the agent or the principal, with reference to the indicators of control outlined in application guidance set out in Appendix B of IFRS 15, by performing the following procedures:

met with management and the related operational staff in order to obtain an understanding of the end-to-end business process with regards to the sales of the hardware and software licenses;
inspected the underlying contractual agreements or purchase orders between the Group and the End-customers;
identified the performance obligations associated with the contract with the customer and assessed if the Group obtains control of the goods before providing them to the end customer, with reference to the terms of the performance obligations; and
inspected the underlying contractual agreements between the Group and the suppliers of the goods.

Based on our procedures performed, and where our assessment of agent vs principal for the sample of transactions tested differed to that of management, management engaged an external consulting firm ("management's consultant") to reassess these specific contracts. We assessed the work performed by the management consultant, as outlined in our further audit procedures performed below, and noted no material differences between our and management's final agent vs principal reassessment.

We inspected the memorandums provided by management's consultant which outlined their and management's re-assessment of significant contracts which they have identified, including those contracts that we have tested above and on which we noted differences, against the principles of IFRS 15, of whether the Group is the agent or the principal.

We tested the IFRS 15 adjustments made by management in their categorisation of transactions identified as either principal or agent. Based on our procedures performed, we did not identify any matters in this regard requiring further consideration.

We assessed the adequacy of the disclosures made in the consolidated financial statements pertaining to the agent vs principal considerations, with reference to the requirements of IFRS 15.

Accounting treatment of tax exposures that the Group is exposed to

Due to the inherent nature of exposures, rulings issued, assessments and sanctions by tax and regulatory authorities, the Group recognised a significant amount of tax-related provisions, income tax liabilities and contingencies as at 31 July 2020.

Management applies judgement to estimate the following:

the potential exposure where the interpretation of the applicable tax laws and regulations could be subjective; and
the likelihood that a pending claim will succeed, or a liability will arise, and the quantification of the potential financial settlement, as applicable.

Furthermore, in the prior year, the Group had raised a provision for the payment of pay-as-you-earn ("PAYE"), which arose in one of the subsidiaries. The Group had further increased such provision in the first half of the current year.

We considered the accounting treatment of tax exposures that the Group is exposed to, to be a matter of most significance to the current year audit due to the complexity, nature and magnitude of these exposures, together with a significant level of management judgement involved in interpreting specific acts, regulatory provisions or practices in determining the amounts of these liabilities.

Refer to the following notes to the consolidated financial statements for detail:

Note 1.3: Significant accounting judgements and sources of estimation uncertainty;
Note 3.3: Restatement of consolidated annual financial statements, Timing of recognition of provision;
Note 23: Provisions; and
Note 34: Contingencies and commitments, Uncertain tax exposure.

We utilised our tax expertise to evaluate management's assessment of the probability of tax exposures relating to income tax, VAT, PAYE and other taxes.

We held discussions with group management regarding the significant exposures and inspected available underlying tax correspondence and relevant documentation, in order to evaluate the reasonableness of management's conclusions.

Where exposures were deemed to be probable, through inspection of the underlying accounting records, we tested whether management had appropriately estimated and recognised these tax exposures. We noted that a portion of the increase in the PAYE provision recognised during the first half of the current year should have been recognised at the end of the previous year. Management subsequently corrected this as a prior period error, resulting in an increase in current liabilities of R75 million in the prior year, as well as an increase in operating expenses and accumulated loss for the previous year by the same amount. We further assessed the appropriateness of the assumptions applied by management in estimating the likely outcome of the PAYE exposure by assessing these against the advice management obtained from their external tax counsel.

We further inspected correspondence received by management from the tax authorities and the Group's external tax advisers to evaluate the consistency and adequacy of the exposures accounted for and disclosures made by management, based on the responses received. We did not identify any matters requiring further consideration.

Fraud investigations, legal exposures and related provisions and contingent liabilities

There is uncertainty related to the legal and tax exposures due to suspect transactions identified by the Group and the forensic investigation performed in relation to these suspect transactions.

Management engaged with independent forensic specialists ("management's specialists") to perform an assessment on all the contracts identified by management's specialist, to determine the likelihood of a claim being instituted against the Group on the respective contracts.

There is also further uncertainty regarding historical income taxes and VAT as a result of the impact of the fraudulent transactions identified in the independent forensic investigation performed during the 2019 financial year.

We considered the fraud investigations, legal exposures and related provisions and contingent liabilities to be a matter of most significance to the current year audit due to the potential risk that not all liabilities that the Group may be exposed to, have been appropriately disclosed and accounted for, based on the extent of the uncertainties involved in this assessment.

Refer to the following notes to the consolidated financial statements for detail:

Note 1.3: Significant accounting judgements and sources of estimation uncertainty;
Note 23: Provisions; and
Note 34: Contingencies and commitments.

Utilising our forensics expertise, we evaluated management's assessment of opening balances and the impact of the Group's forensics investigation on the current year by performing the following procedures:

we assessed the competency, capability, and objectivity of the Group's forensics investigation team, by inspecting their curriculum vitae, certificates of qualifications, company profiles and representations of their independence;
we assessed the oversight of the Group's forensics investigation team's scope, procedures and findings by appropriately qualified individuals of management;
we inspected and evaluated the work of the Group's forensics investigation team, including the investigation scope, methods and assumptions employed; and
we assessed the Group's forensics investigation team's findings for adequacy and reliability of their work performed.

Based on our procedures performed above, we noted no aspects requiring further consideration.

Utilising our forensics expertise, we also held discussions with the Group's internal and external legal experts, forensics investigation team and management, and inspected their presentations of their findings to the Group to:

obtain an understanding of the scope, procedures performed, findings and remediation steps taken by the Group; and
determine the significant exposures and evaluate the reasonableness of management's conclusions with reference to their findings reported to the Group.

We evaluated whether the findings from the forensic investigation have been adequately considered, recorded and disclosed as in notes 23 and 34 to the consolidated financial statements as at 31 July 2020, and whether subsequent events or further investigations performed by all of management's experts have identified subsequent changes to the exposures identified and disclosed. We noted no matters or exposures requiring further consideration.

We inspected correspondence received by management from the respective regulatory authorities to evaluate the adequacy of exposures accounted for and disclosures made in the consolidated financial statements. We noted no matters requiring further consideration.

Other information

The directors are responsible for the other information. The other information comprises the information included in the documents titled "EOH Integrated Report 2020" and "EOH Holdings Limited Annual Financial Statements for the year ended 31 July 2020", which includes the Directors' Report, the Audit Committee's Report and the Report of the Company Secretary as required by the Companies Act of South Africa. The other information does not include the consolidated or the separate financial statements and our auditor's reports thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the consolidated financial statements

The directors are responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that PricewaterhouseCoopers Inc. has been the auditor of EOH Holdings Limited for one year.

PricewaterhouseCoopers Inc.

Director: D.H. Höll

Registered Auditor

Johannesburg

2 December 2020