Our objectives are to obtain reasonable assurance about whether the 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 (UK) 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 financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below;
Irregularities including fraud
Irregularities, including fraud, are instances of non-compliance; acts of omission or commission by the entity, either intentional or unintentional, which are contrary to the prevailing laws and regulations.
We obtained an understanding of the legal and regulatory frameworks within which the company operates, focusing on those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The laws and regulations we considered in this context were the Companies Act 2006 together with the Financial Reporting Standard applicable in the UK and Ireland (FRS 102). In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which might be fundamental to the company’s ability to operate for example, employment and taxation legislation.
Based on our understanding of the entity, the industry it operates in, and external environment we identified and assessed the risks of material misstatement of the financial statements from irregularities, whether due to fraud or error, and discussed these between our audit team members. We then designed and performed audit procedures responsive to those risks, including obtaining audit evidence sufficient and appropriate to provide a basis for our opinion.
Our audit procedures to respond to these risks included, but were not limited to, the following:
• review of the financial statements and disclosures to underlying supporting documentation
• obtained an understanding of laws and regulations that affect the company both directly and indirectly in the financial statements and its operations
• review and enquiry into journal entries processed during the period under review
• evaluation and consideration of areas where the potential for management bias exists
• enquiries of management about their own identification and assessment of the risks of irregularities
• assessing significant judgements and review of accounting estimates
• performance of analytical review and reviewing the findings of testing
• overall considering the consistency of discussions had with the findings and evidence obtained throughout the audit
Owing to the inherent limitations of an audit there is an unavoidable risk that we may not have detected some material misstatements within the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. Inherent limitations in the audit procedures described above, as irregularities in relation to fraud, are by nature difficult to detect as it would likely have occurred through deliberate concealment and could involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
We are not responsible for preventing fraud or non-compliance with laws and regulations and cannot be expected to detect all fraud and non-compliance with laws and regulations.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorresponsibilties. This description forms part of our auditor’s report.