Independent auditor's report to the members of The Profit Recovery Company Limited (continued)
For the period ended 30 December 2023
Auditor's responsibilities for the audit of the financial statements (continued)
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
How the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
∙the Senior Statutory Auditor ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
∙we made enquiries of management as to where they considered there was susceptibility to fraud, and their knowledge of actual, suspected and alleged fraud;
∙we identified the laws and regulations that could reasonably be expected to have a material effect on the financial statements of the company through discussions with directors and other management at the planning stage;
∙the audit team held a discussion to identify any particular areas that were considered to be susceptible to misstatement, including with respect to fraud and non-compliance with laws and regulations; and
∙we focused our planned audit work on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company including the Companies Act 2006, and taxation legislation.
We assessed the extent of compliance with the laws and regulations identified above through:
∙making enquiries of management;
∙inspecting legal correspondence throughout the period for any potential litigation or claims; and
∙considering the internal controls in place that are designed to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
∙determined the susceptibility of the company to management override of controls by checking the implementation of controls and enquiring of individuals involved in the financial reporting process;
∙reviewed journal entries throughout the period to identify unusual transactions;
∙performed analytical procedures to identify and large, unusaul or unexpected transactions and investigates and large variances from the prior period; and
∙reviewed accounting estimates and evaluated where judgements or decisions made by management indicated bias on the part of the company's management.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which
included:
∙agreeing financial statement disclosures to underlying supporting documentation; and
∙enquiring of management as to actual and potential litigation and claims.
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