Explanation as to what extent the audit was considered capable of detecting irregularities

Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of noncompliance with laws and regulations. We design procedures inline with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with ISAs (UK).
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most significant are those related to the reporting framework (UK- adopted international accounting standards. We communicated this framework and potential fraud risks to all engagement team members and remained alert to any indicators of fraud or noncompliance with laws and regulations throughout. Detailed reviews of internal audit reports were also undertaken to identify any control deficiencies, noncompliance with the regulatory framework, the use of whistleblowing facilities and alleged instances of fraud We understood how the group is complying with the relevant legal and regulatory frameworks by making enquiries of management, internal audit, those responsible for legal and compliance procedures, and other senior members of the team as deemed reasonable, such as in-house legal and tax departments. We corroborated our enquiries through the review of Council and Audit Committee minutes, and Internal Audit reports, as well as making further enquiries to those charged with governance. All parties confirmed there were not aware of any instances of noncompliance and nor did they have any knowledge of actual, suspected, or alleged fraud We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur, by evaluating management’s incentives and opportunities for manipulation of the group financial statements. This included the evaluation of the risk of management override of controls. We determined that the principal risks were in relation to journal entries relating to judgemental areas of income (for example deferred income, potential management bias in determining estimates relating to intangible assets, provisions, pension assets and liabilities, recoverability of intercompany balances and right-of-use assets. Audit procedures performed by the group engagement team included- evaluation of the design effectiveness of controls around journals testing and testing any journal entries which were inconsistent with our expectations based on the understanding gained- utilising specialists for areas of high judgement (specifically pension assumptions, namely financial assumptions relating to discount rates applied, life expectancies and projected improvements- challenging judgements, assumptions and estimates utilised in relation to potential management bias- In addition to this, we completed audit procedures in relation to the estimates and judgements that comprise the basis of preparation of the financial statements.
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• These audit procedures were designed to provide reasonable assurance that the group financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed noncompliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it Assessment of the appropriateness of the collective competence and capabilities of the engagement team included consideration of the engagement teams- understanding of, and practical experience with audit engagements of similar nature and complexity through appropriate training and participation- knowledge of the industry in which the client operates- understanding of the legal and regulatory requirements specific to the group including the provision of the applicable legislation and the applicable statutory provisions In assessing the potential risk of material misstatement, we obtained an understanding of the entity’s operations (including the nature of its income streams, account balances, expected disclosures and business risks) and the entities control environment. No component auditors were engaged as part of this group audit.
Use of our report
This report is made solely to the ACCA’s Council, as a body, in accordance with our terms of engagement. Our audit work has been undertaken so that we might state to the ACCA’s Council those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility to anyone other than the ACCA and the ACCA’s Council as a body, for our audit work, for this report, or for the opinions we have formed.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
3 July 2021 70

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