Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outline above, to detect material misstatements in respect of irregularities, including fraud. The extent to which these can detect irregularities, including fraud is detailed below.
To assess the susceptibility of the company's financial statements to material misstatement, including how fraud may occur.
- We enquired with the director for the companies policies and procedures to detect fraud as well as whether their have knowledge of any actual, suspected or alleged fraud
- Using analytical procedures to identify any unusual or unexpected transactions
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud within the company.
As required by auditing standards we perform procedures to address the risk of management override of controls and in particular that the company management may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates and judgements such as prepayments and accruals.
We did not identify any additional fraud risks.
In determining the audit procedures we took into account the results of our evaluation and testing of the operating effectiveness of the company's fraud risk management controls.
We also performed procedures including:
- Identifying journal entries to test for all full scope components based on risk criteria and comparing the identified entries to supporting documentation. These included, as relevant, those posted to unusual accounts
- Assessing significant accounting estimates for bias
- Reviewing large and unusual transactions outside the ordinary course of the company's business.
- Identifying undisclosed related parties
We discussed with management matters related to actual or suspected fraud and considered any implications for our audit.
We ensured that the audit team collectively had the necessary competence and skills to recognise non-compliance with laws and regulations.
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements and through discussion with the director (as required by auditing standards).
As the company is regulated our assessment of risks involved gaining an understanding of the control environment including the company's procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.
The potential effect of these laws and regulations on the financial statement varies considerably.
Firstly the entity is subject to very strict laws and regulations that directly affect the financial statements including financial reporting legislation, including the Companies Act 2006, FRS102, the UK Corporate tax laws. We assessed the extent of the compliance with these laws and regulations by carrying out a review of the financial statement disclosures and a review of correspondence with the tax authorities.
Secondly the entity is subject to many other laws and regulations including the AML regulations, GDPR and Health and Safety, where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and management and inspection of regulatory and legal correspondence, if any.
Therefore if a breach of operational regulations is not disclosed to us or evident from the relevant correspondence , an audit will not detect that breach.