Section B: IAASB’s Revised Format of Auditors’ Report
Compiler’s Note
The
International Auditing and Assurance Standards Board (IAASB) had in
June 2012 started a project “Enhancing the Auditor’s Report” and had
issued an Exposure Draft of a revised format of the Auditor’ Report.
While issuing the ED, IAASB observed that “The auditor’s report is the
auditor’s primary means of communication with an entity’s
stakeholders—as such, it has to be meaningful and have value for them.
More than ever before, users of audited financial statements are calling
for more pertinent information for their decision-making in today’s
global business environment with increasingly complex financial
reporting requirements. The global financial crisis also has spurred
users, in particular institutional investors and financial analysts, to
want to know more about individual audits and to gain further insights
into the audited entity and its financial statements. And while the
auditor’s opinion is valued, many perceive that the auditor’s report
could be more informative. Change, therefore, is essential”.
After
considering the several responses to the ED from stakeholders,
regulators, accounting bodies from across the world (including ICAI) and
others, the IAASB in its meeting in September 2014 issued the final
revised standard on Auditor Reporting. Different jurisdictions across
the world are likely to adopt the revised standard from 2015 onwards.
Some of the key changes in the revised standard are:
Additional
information in the auditor’s report to highlight matters that, in the
auditor’s judgment, are likely to be most important to users’
understanding of the audited financial statements or the audit, referred
to as “Auditor Commentary.” This information would be required for
public interest entities (PIEs) –which includes, at a minimum, listed
entities –and could be provided at the discretion of the auditor for
other entities.
Auditor conclusion on the appropriateness of
management’s use of the going concern assumption in preparing the
financial statements and an explicit statement as to whether material
uncertainties in relation to going concern have been identified.
Auditor
statement as to whether any material inconsistencies between the
audited financial statements and other information have been identified
based on the auditor’s reading of other information, and specific
identification of the information considered by the auditor.
Prominent placement of the auditor’s opinion and other entity-specific information in the auditor’s report.
Further suggestions to provide clarity and transparency about audits performed in accordance with ISAs.
Though
the revised standard will become applicable from 2015 onwards, given
below is an illustration of a company whose auditors chose to use the
revised standard for issuing its report to the members.
Independent Auditor’s Report
to the members of Rolls-Royce Holdings plc only
Opinions and conclusions arising from our audit
1
Our opinion on the financial statements is unmodified We have audited
the financial statements of Rolls- Royce Holdings plc for the year ended
31st December 2013 set out on pages 75 to 129. In our opinion the
financial statements give a true and fair view of the state of the
Group’s and of the parent company’s affairs as at 31st December 2013 and
of the Group’s profit for the year then ended; the Group financial
statements have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union (Adopted
IFRS); the parent company financial statements have been properly
prepared in accordance with UK Accounting Standards; and the financial
statements have been prepared in accordance with the requirements of the
Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
2 Our assessment of risks In
arriving at our opinions set out in this report, the risks that had the
greatest effect on our audit and the key procedures we applied to
address them are set out below. Those procedures were designed in the
context of the financial statements as a whole and, consequently, where
we set out findings we do not express any opinion on these individual
risks.
The basis of accounting for revenue and profit in the Civil aerospace business
Refer
to page 81 (Key areas of judgement – Long-term aftermarket contracts),
page 83 (Significant accounting policies – Revenue recognition) and page
44 (Audit committee report – Financial reporting)
The risk
The
amount of revenue and profit recognised in a year on the sale of
engines and aftermarket services is dependent, inter alia, on the
appropriate assessment of whether or not each long-term aftermarket
contract for services is linked to or separate from the contract for
sale of the related engines. As the commercial arrangements can be
complex, significant judgement is applied in selecting the accounting
basis in each case. The most significant risk is that the Group might
inappropriately account for sales of engines and long term service
agreements as a single arrangement for accounting purposes as this would
usually lead to revenue and profit being recognised too early because
the margin in the long term service agreement is usually higher than the
margin in the engine sale agreement
Our response
We
made our own independent assessment, with reference to the relevant
accounting standards, of the accounting basis that should be applied to
each long-term aftermarket contract entered into during the year and
compared this to the accounting basis applied by the Group.
Our findings
We
found that the Group has developed a framework for selecting the
accounting basis to be used which is consistent with accounting
standards and has applied this consistently. For almost all the
agreements entered into during this year, it was clear which accounting
basis should apply. Where there was room for interpretation, we found
the Group’s judgement to have been balanced.
The measurement of revenue and profit in the Civil aerospace business
Refer
to page 81 (Key areas of judgement – Long-term aftermarket contracts),
page 83 (Significant accounting policies – Revenue recognition) and page
44 (Audit committee report – Financial reporting)
The risk
The
amount of revenue and profit recognised in a year on the sale of
engines and aftermarket services is dependent, inter alia, on the
assessment of the percentage of completion of long-term aftermarket
contracts and the forecast cost profile of each arrangement. As
long-term aftermarket contracts can extend over significant periods and
the profitability of these arrangements typically assumes significant
life-cycle cost improvement over the term of the contracts, the
estimated outturn requires significant judgement to be applied in
assessing engine flying hours, time on wing and other operating
parameters, the pattern of future maintenance activity and the costs to
be incurred. The inherent nature of these estimates means that their
continual refinement can have an impact on the profits of the Civil
aerospace business that can be significant in an individual financial
year. The assessment of the estimated outturn for each arrangement
involves detailed calculations using large and complex databases with a
significant level of manual intervention.
Our response
We tested the controls designed and applied by the Group to provide assurance that the estimates used in assessing revenue and cost profiles are appropriate and that the resulting estimated cumulative profit on such contracts is accurately reflected in the financial statements; these controls operated over both the inputs and the outputs of the calculations. We challenged the appropriateness of these estimates for each programme and assessed whether or not the estimates showed any evidence of management bias. our challenge was based on our assessment of the historical accuracy of the Group’s estimates in previous periods, identification and analysis of changes in assumptions from prior periods and an assessment of the consistency of assumptions across programmes, detailed discussions and assessments of the achievability of the Group’s plans to reduce life-cycle costs and an analysis of the impact of these plans on forecast cost profiles taking account of contingencies and analysis of the impact of known technical issues on cost forecasts. Our analysis considered each significant airframe that is powered by the Group’s engines and was based on our own experience supplemented by discussions with an aircraft valuation specialist engaged by the Group. We assessed whether the valuer was objective and suitably qualified. We also checked the mathematical accuracy of the revenue and profit for each arrangement and considered the implications of identified errors and changes in estimates.
Our findings
Our testing identified weaknesses in the design and operation of controls. in response to this we assessed the effectiveness of the Group’s plans for addressing these weaknesses and we increased the scope and depth of our detailed testing and analysis from that originally planned. We found no significant errors in calculation. overall, our assessment is that the assumptions and resulting estimates (including appropriate contingencies) resulted in mildly cautious profit recognition.
Recoverability of intangible assets (certification costs and participation fees, development expenditure and recoverable engine costs) and amounts recoverable on contracts primarily in the civil aerospace business
Refer to page 82 (Key sources of estimation uncertainty
– Forecasts and discount rates), pages 86 and 87 (Significant accounting policies – Certification costs and participation fees, Research and development, Recoverable engine costs and Impairment of non-current assets), page 99 (Note 9 to the financial statements – Intangible assets) and page 44 (Audit committee report– Financial reporting)
The risk
The recovery of these assets depends on a combination of achieving sufficiently profitable business in the future as well as the ability of customers to pay amounts due under contracts often over a long period of time. assets relating to a particular engine programme are more prone to the risk of impairment in the early years of a programme as the engine’s market position is established. In addition, the pricing of business with launch customers makes assets relating to these engines more prone to the risk of impairment.
Our response
We tested the controls designed and applied by theGroup to provide assurance that the assumptions are regularly updated, that changes are monitored, scrutinised and approved by appropriate personnel and that the final assumptions used in impairment testing have been appropriately approved. We challenged the appropriateness of the key assumptions in the impairment test (including market size, market share, pricing, engine and aftermarket unit costs, individual programme assumptions, price and cost escalation, discount rate and exchange rates) focusing particularly on those assets with a higher risk of impairment (those relating to the trent 900 programme and launch customers on the trent 900 and 1000 programmes). Our challenge was based on our assessment of the historical accuracy of the Group’s estimates in previous periods, our understanding of the commercial prospects of key engine programmes, identification and analysis of changes in assumptions from prior periods and an assessment of the consistency of assumptions across programmes and customers and comparison of assumptions with publicly available data where this was available. We considered the appropriateness of the related disclosures in note 9 to the financial statements.
Our findings
Our testing did not identify any deviation in the operation of controls which would have required us to amend the nature or scope of our planned detailed test work. We found that the assumptions and resulting estimates were balanced and that the disclosures in note 9 appropriately describe the inherent degree of subjectivity in the estimates and the potential impact on future periods of revisions to these estimates. We found no errors in calculations.
Accounting for the consolidation of rolls- royce Power systems holding Gmbh and valuation of Daimler AG’s put option
Refer to page 81 (Key areas of judgement – Rolls-Royce Power Systems Holding GmbH), page 82 (Key sources of estimation uncertainty – Intangible assets arising on consolidation of Rolls-Royce Power Systems AG and put option on Rolls-Royce Power Systems Holding GmbH), page 83 (Accounting policies – Basis of consolidation) and page 44 (Audit committee report – Financial reporting) Control of Rolls-Royce Power Systems Holding GmbH
The risk
rolls-royce Power Systems holding Gmbh (a special purpose vehicle owned equally by the Group and daimler aG (RRPSh)) acquired a controlling interest in rolls-royce Power Systems AG (RRPS) on 25 august 2011. From that date, the Group equity accounted for its joint venture interest in RRPSh as control was shared with Daimler AG. On 1 January 2013, conditions were fulfilled which the Group considered gave it control over RRPSh and from that date the Group’s 50 per cent interest has been classified as a subsidiary and RRPSH has been consolidated in the Group financial statements. Assessing whether or not the Group controls RRPSh is a critical accounting judgement. The rights of the Group and daimler AG are encapsulated in shareholder agreements and assessing whether the Group’s rights are sufficient to give it control over RRPSh requires detailed consideration of the relevant provisions and a commercial assessment as to which rights are most important.
Our response
We analysed the shareholder agreements with particular reference to rights relating to key matters including the existence of a casting vote in respect of key matters described on page 81 at the shareholders meeting and Shareholders’ Committee of RRPSh.
Our findings
We found that the terms of the agreements provide the Group with the power to establish key operating and capital decisions of rrPSh and to appoint, remove and set the remuneration of key management personnel. the agreements also provide daimler AG with rights (in particular over matters that would significantly change the scale, scope and financing of RRPSH’s business, certain significant supplier relationships and changes to contractual arrangements between RRPSh with rolls- royce) which we have determined provide protection to daimler AG over its interest in RRPSh but are not sufficient to prevent the Group from controlling RRPSH. on that basis, we consider that it is appropriate that RRPSh (and hence RRPS) has been consolidated from 1 january 2013.
Consolidation of Rolls-Royce Power systems holding GmbH
The risk
estimating the fair value of intangible assets of rrPS at the date of consolidation involved the use of complex valuation techniques and the estimation of future cash flows over a considerable period of time. To the extent that greater or lesser value is attributed to intangibles (which are subject to amortisation), lesser or greater value is attributed to goodwill (which is not).
Our response
We evaluated the basis upon which the Directors identified and assessed the fair value of each significant asset, liability and contingent liability of rrPS and its subsidiaries having regard to the relevant accounting standards. for the intangible assets, we assessed whether the measurement basis and assumptions underlying the estimate of the fair values were reasonable, taking account of our experience of similar assets in other comparable situations and of the work performed by a valuer engaged by the Group. We assessed whether the valuer was objective and suitably qualified, had been appropriately instructed and had been provided with complete, accurate data on which to base its evaluation. We also assessed whether or not the estimates showed any evidence of management bias with a focus on whether there was any indication of value being inappropriately attributed to goodwill rather than depreciable assets.
Our findings
We found that the intangible assets identified were typical for acquisitions of similar businesses and that the valuation bases used were in accordance with accounting standards. We have no concerns with the basis on which the valuer had been instructed by the Group and found that (i) the valuer was objective and competent, (ii) the estimates used in the valuations were balanced and did not result in either too much or too little goodwill being recognised and (iii) the valuations arrived at by the valuer had been adopted by the Group without adjustment.
Valuation of Daimler AG’s put option
The risk
As part of the shareholder agreements, for a period of six years from 1 january 2013 daimler aG has the option to require the Group to purchase its 50 per cent interest in RRPSH. The estimated amount of the purchase price of this option has been recognised as a financial liability on the Group balance sheet. The purchase price is based on averaging three valuations, which are based on both internal and external metrics, at the date the option is exercised. The external metrics include price/earnings ratios for comparable companies and those implicit in comparable transactions. There is judgement involved in choosing appropriate comparable companies and transactions and in predicting what these might be at a future date.
Our response
We analysed the shareholder agreements and tested the reasonableness of the estimate of the purchase price of the option, including assessing whether the Group’s judgement as to which external metrics should be used was appropriate, and the accuracy of its calculation. We also assessed whether or not the estimates showed any evidence of management bias with a particular focus on the risk that the liability might be understated given its visibility.
Our findings
We found that the resulting estimate was acceptable but mildly optimistic resulting in a somewhat lower liability being recorded than might otherwise have been the case.
Liabilities arising from sales financing arrangements
Refer to page 82 (Key areas of judgement – financing support), page 88 (Significant accounting policies – Sales financing support, page 112 (Note 18 to the financial statements – Provisions for liabilities and charges) and page 44 (Audit committee report – Financial reporting)
The risk
The Group has contingent liabilities in respect of financing and asset value support provided to customers. this support typically takes the form of either a guarantee with respect to the value of an aircraft at a future date or a guarantee of a customer’s future payments under an aircraft financing arrangement. Judgement is required to assess the likelihood of these liabilities crystallising, in order to assess whether a provision should be recognised and if so the amount of that provision. The total potential liability is significant and can be affected by the assessment of the residual value of the aircraft and the creditworthiness of the customers.
Our response
We analysed the terms of guarantees on aircraft delivered during the year in detail and obtained aircraft values from and held discussions with aircraft valuation specialists engaged by the Group. We assessed whether the valuer was objective and suitably qualified, had been appropriately instructed and had been provided with complete, accurate data on which to base its evaluation. for all contracts on delivered aircraft, we assessed the commercial factors relevant to the likelihood of the guarantees being called, including the credit ratings and recent financial performance of the relevant customers and their fleet plans, and critically assessed the Group’s estimate of the required provisions for those liabilities. We considered movements in aircraft values and potential changes in the assessed probability of a liability crystallising since the previous year end and considered whether the evidence supported the Group’s assessment as to whether or not a liability needs to be recognised and the amount of the liability recognised or contingent liability disclosed. We considered the appropriateness of the related disclosure in note 18 to the financial statements.
Our findings
We found that the assumptions and estimates were balanced and that note 18 appropriately discloses the potential liability in excess of the amount provided for in the financial statements for delivered aircraft and highlights the significant but unquantifiable contingent liability in respect of aircraft which will be delivered in the future.
Accounting for risk and revenue sharing arrangements refer to page 81 (Key areas of judgement – risk and revenue sharing arrangements), page 84 (Significant accounting policies – risk and revenue sharing arrangements), page 11 (Chief Financial Officer’s review) and page 44 (audit committee report – financial reporting)
The risk
The Group receives non-refundable cash payments under risk and revenue sharing arrangements (which are referred to as entry fees). The assessment of when these entry fees should be recognised in the income statement involves analysis of their commercial substance in the context of the agreement as a whole. As there is no single accounting standard that directly addresses these types of agreements, management has to apply very significant judgement in deciding how to apply the various provisions of accounting standards that are relevant to different aspects of the agreements. These arrangements are complex and have features that could be indicative of: a collaboration agreement, including sharing of risk and cost in a development programme; a long-term supply agreement; sharing of intellectual property; or a combination of these.
Our response
We independently analysed the agreements under which significant entry fees have been received to establish the range of possible accounting treatments that could be adopted and to assess which of these would in our view most appropriately reflect the requirements of accounting standards. The most significant accounting standards considered were iaS 8 accounting policies, changes in accounting estimates and errors, IAS 18 revenue, IFRS 11 joint arrangements in terms of the timing of recognition of the entry fees and IAS 1 Presentation of financial statements in respect of their presentation as an offset against the expenditure to which they relate. We also had regard to the definitions of assets, liabilities, income and expenses in the ifrS framework and, to the extent they did not conflict with Adopted IFRS, to pronouncements of other standard-setting bodies that more explicitly address accounting for payments from suppliers and collaborative arrangements. We examined correspondence between the Group and the financial reporting Council and attended meetings between them. We sought to identify the accounting applied in similar circumstances by other companies including the Group’s direct competitors and compare these to the approach adopted by the Group and the requirements of adopted IFRS. We assessed whether the change to the accounting policy made in the year was appropriate and recalculated the resulting amounts in the financial statements. We considered the appropriateness of the related disclosures.
Our findings
Our analysis indicated that in substance, from the point of view of both the Group and the risk and revenue sharing workshare partners, the entry fees represent the reimbursement of expenditure incurred by the Group as part of an engine development programme and that this represented a significant transfer of development risk from the Group to the partners that should be reflected in the income statement at the time the reimbursed expenditure is recognised. on that basis, we found that the revised accounting policy most appropriately reflects the commercial substance of the entry fees. So far as it was possible to tell, we found that the accounting applied by the Group was similar to the approach taken by others. We found that the change to the accounting policy made by the Group was appropriate given the incidence of entry fees in the year and the costs capitalised on the programmes to which these entry fees relate. We found that the disclosures in the financial statements properly describe the accounting treatment adopted by the Group and the directors’ basis for applying that treatment bribery and corruption
Refer to page 120 (Note 23 to the financial statements– Contingent liabilities) and page 44 (Audit committee report – Financial reporting)
The risk
A large part of the Group’s business is characterised by competition for individually significant contracts with customers which are often directly or indirectly associated with governments and the award of individually significant contracts to suppliers. The procurement processes associated with these activities are highly susceptible to the risk of corruption. In addition the Group operates in a number of territories where the use of commercial intermediaries is either required by the government or is normal practice. The Group is currently under investigation by law enforcement agencies, primarily the Serious Fraud Office in the UK and the US Department of justice. Breaches of laws and regulations in this area can lead to fines, penalties, criminal prosecution, commercial litigation and restrictions on future business.
Our response
We evaluated and tested the Group’s policies, procedures and controls over the selection and renewal of intermediaries, contracting arrangements, ongoing management, payments and responses to suspected breaches of policy. We sought to identify and tested payments made to intermediaries during the year, made enquiries of appropriate personnel and evaluated the tone set by the Board and the executive Leadership team and the Group’s approach to managing this risk. having enquired of management, the audit committee and the Board as to whether the Group is in compliance with laws and regulations relating to bribery and corruption, we made written enquiries of the Group’s legal advisers to corroborate the results of those enquiries and maintained a high level of vigilance to possible indications of significant non-compliance with laws and regulations relating to bribery and corruption whilst carrying out our other audit procedures. We discussed the areas of potential or suspected breaches of law, including the ongoing investigation, with the audit committee and the Board of directors as well as the Group’s legal advisers and assessed related documentation. We assessed whether the financial effects of potential or suspected breaches of law or regulation have been properly disclosed in note 23 to the financial statements.
Our findings
We found that the disclosures in note 23 to the financial statements reflect appropriately the matters required to be disclosed by accounting standards and highlighted that, as the investigation is at too early a stage to assess the consequences (if any), including in particular the size of any possible fines, no provision can be made at year end.
The presentation of ‘underlying’ profit
Refer to page 10 (Chief Financial Officer’s review), page 89 (Note 2 to the financial statements – Segmental analysis) and page 44 (Audit committee report – Financial reporting)
The risk
In addition to its Adopted IFRS financial statements, the Group presents an alternative income statement on an ‘underlying’ basis. the directors believe the ‘underlying’ income statement reflects better the Group’s trading performance during the year. the basis of adjusting between the adopted ifrS and ‘underlying’ income statements and a full reconciliation between them is set out in note 2 to the financial statements on pages 89 and 91. A significant recurring adjustment between the adopted ifrS income statement and the ‘underlying’ income statement relates to the foreign exchange rate used to translate foreign currency transactions. The Group uses forward foreign exchange contracts to manage the cash flow exposures of forecast transactions denominated in foreign currencies but does not generally apply hedge accounting in its adopted IFRS income statement. the ‘underlying’ income statement translates these amounts at the achieved foreign exchange rate on forward foreign exchange contracts settled in the period, retranslates assets and liabilities at exchange rates forecast to be achieved from future settlement of such contracts and excludes unrealised gains and losses on such contracts which are included in the adopted IFRS income statement. In addition, adjustments are made to exclude one-off past-service credits on post-retirement schemes and the effect of acquisition accounting and a number of other items.
Alternative performance measures can provide investors with appropriate additional information if properly used and presented. in such cases, measures such as these can assist investors in gaining a better understanding of a company’s financial performance and strategy. However, when improperly used and presented, these kinds of measures might mislead investors by hiding the real financial position and results or by making the profitability of the reporting entity seem more attractive.
Our response
We assessed the appropriateness of the basis for the adjustments between the adopted ifrS income statement and the ‘underlying’ income statement and recalculated the adjustments with a particular focus on the impact of the foreign exchange rate used to translate foreign currency amounts in the ‘underlying’ income statement. As the Group has discretion over which forward foreign exchange contracts are settled in each financial year, which could impact the achieved rate both for the period and in the future, we assessed whether or not this showed any evidence of management bias. We also assessed: (i) the extent to which the prominence given to the ‘underlying’ financial information and related commentary in the annual report compared to the Adopted IFRS financial information and related commentary could be misleading;
(ii) Whether the Adopted IFRS and ‘underlying’ financial information are reconciled with sufficient prominence given to that reconciliation; (iii) whether the basis of the ‘underlying’ financial information is clearly and accurately described and consistently applied; and (iv) whether the ‘underlying’ financial information is not otherwise misleading in the form and context in which it appears in the annual report.
Our findings
We have no concerns regarding the basis of the ‘underlying’ financial information or its calculation and found no indication of management bias in the way the Group managed forward foreign exchange contracts during the year. We consider that there is sufficient appropriate disclosure of the nature and amounts of the adjustments to allow shareholders to understand the implications of the two bases on the financial measures being presented. We consider that the ‘underlying’ financial information is useful to shareholders as an adjunct to the adopted IFRS financial information particularly in the context of isolating trends resulting from trading performance from trends that result from other factors. We found the presentation of the ‘underlying’ financial information to be balanced.
In addition to these key audit risks, we also focused on the recognition of revenue and profit on other long-term contracts; the implementation of a new consolidation system; warranties and guarantees; valuation of derivative contracts; valuation of post-retirement scheme liabilities; and the recoverability of tax assets and the adequacy of provisions for tax contingencies.
3 our application of materiality and an overview of the scope of our audit the materiality for the Group financial statements as a whole was set at £86 million. this has been calculated with reference to a benchmark of profit before taxation (representing 4.9% of reported and ‘underlying’ profit before taxation) which we consider to be one of the principal considerations for members of the company in assessing the financial performance of the Group.
We agreed with the audit committee to report to it the following misstatements that we identified through our audit: (i) all material corrected misstatements; (ii) uncorrected misstatements with a value in excess of £4 million for income statement items (or £8 million for balance sheet reclassifications); and (iii) other misstatements below that threshold that we believe warranted reporting on qualitative grounds.
In order to gain appropriate audit coverage of the risks described above and of each individually significant reporting component:
(a) Audits for Group reporting purposes were carried out at 13 key reporting components located in the following countries: United Kingdom (9 key reporting components), uSa (1), Germany (2) and norway (1). in addition, audits for Group reporting purposes were performed at a further 20 reporting components. Together these covered 90 % of revenue, 87 % of underlying profit before taxation and 85 % of total assets; and
(b) Specified reporting procedures were carried out over key risk areas at a further 12 reporting components, none of which are considered to be key.
In total our procedures covered 98 % of revenue, 99 % of underlying profit before taxation and 94 % of total assets. detailed audit instructions were sent to the auditors of all these reporting components. these instructions covered the significant audit areas that should be covered by these audits (which included the relevant risks of material misstatement detailed above) and set out the information required to be reported back to the group audit team. The group audit team visited the following locations: united Kingdom, USA, Germany, norway and Singapore. Telephone meetings were also held with the auditors at these locations and the majority of the other locations that were not physically visited.
The audits undertaken for Group reporting purposes at the reporting components were all performed to materiality levels set by, or agreed with, the group audit team. These materiality levels were set individually for each such component and ranged from £0.5 million to £50 million.
4 our opinion on other matters prescribed by the Companies Act 2006 is unmodified In our opinion: the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies act 2006; and the information given in the Strategic report and directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.
5 We have nothing to report in respect of the matters on which we are required to report by exception under ISA (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading. in particular, we are required to report to you if:
We have identified material inconsistencies between the knowledge we acquired during our audit and the directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy; or the audit committee report does not appropriately address matters communicated by us to the audit committee.
Under the Companies act 2006 we are required to report to you if, in our opinion:
Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: the directors’ statement, set out on page 72, in relation to going concern; and the part of the corporate governance report on page 39 relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code (2010) specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities as explained more fully in the directors’ responsibilities statement set out on pages 72 and 73, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of accounts is provided on the financial reporting Council’s website at www.frc.org. uk/auditscopeukprivate. this report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at which are incorporated into this report set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
