Independent Auditor's Report
to the Members of C&C Group Plc
Opinion
We have audited the financial statements of C&C Group plc (‘the Company’) and its subsidiaries (‘the Group’) for the year ended 29 February 2020, which comprise
- the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income for the year then ended;
- the Consolidated Balance Sheet and the Company Balance Sheet as at 29 February 2020;
- the Consolidated Cash Flow Statement for the year then ended;
- the Consolidated Statement of Changes in Equity and the Company Statement of Changes in Equity for the year then ended; and
- the notes forming part of the financial statements, including the Statement of Accounting Policies set out on pages 111 to 125.
The financial reporting framework that has been applied in their preparation is Irish Law and International Financial Reporting Standards (IFRS) as adopted by the European Union and, as regards the Company financial statements as applied in accordance with the provisions of the Companies Act 2014 and Accounting Standards including FRS 101 Reduced Disclosure Framework (Irish Generally Accepted Accounting Practice).
In our opinion:
- the Group financial statements give a true and fair view of the assets, liabilities and financial position of the Group as at 29 February 2020 and of the Group’s profit for the year then ended;
- the Company Balance Sheet gives a true and fair view of the assets, liabilities and financial position of the company as at 29 February 2020;
- the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;
- the Company financial statements have been properly prepared in accordance with Irish Generally Accepted Accounting Practice; and
- the Group financial statements and Company financial statements have been properly prepared in accordance with the requirements of the Companies Act 2014 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group and Company in accordance with ethical requirements that are relevant to our audit of financial statements in Ireland, including the Ethical Standard as applied to public interest entities issued by the Irish Auditing and Accounting Supervisory Authority (IAASA), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Overview of our audit approach
Key audit matters |
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Audit scope |
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Materiality |
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What has changed? |
both of which are no longer applicable in the current year. |
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
New in 2020
Going concern basis used in preparation of the Annual Report & Financial Statements
The Company’s Annual Report and financial statements are prepared on the assumption that the going concern basis of accounting is appropriate. This basis is dependent on a number of factors, including the Group’s financial performance and the Group’s ability to continue to operate within its financial covenants.
The outbreak of COVID-19 has resulted in the closure of pubs, bars, restaurants and clubs, which negatively impacts C&C’s revenues from its on-trade operations. This has significantly increased the uncertainties inherent in the going concern assessment. Management have updated their base case forecast to reflect the impact of COVID-19, in particular the delayed reopening of on-trade business until Summer 2020. Management have then considered the impact of an assumption of no on-trade operations until the end of the going concern assessment period in 2021. In this case, management have assumed the related reductions in revenue derived costs, such as excise duties and rebates as well as reductions in marketing costs and overheads.
C&C’s forecast liquidity and covenant compliance are key considerations when considering the appropriateness of adopting the going concern basis of accounting.
The Directors have concluded that no material uncertainty over Going Concern exists covering a period of at least 12 months from the date of approval of the Annual Report, as even under the situation where on-trade business does not resume during the going assessment period, the Group has sufficient liquidity and there is no projected breach of covenants.
Refer to the Audit Committee Report (page 69); Going Concern statement (page 20); and Statement of Accounting Policies (page 113).
Our response to the risk
As part of assessment of the appropriateness of adopting the going concern basis of accounting we have:
- Confirmed our understanding of C&C’s going concern assessment process as well as review controls in place on the going concern model and management’s Board memoranda and compared cash available and expected cash generation to forecast liability settlement in order to assess liquidity risk;
- In light of Government announcements in all locations that the Group operates in, we assessed how management have considered these in their base case model and the flexibility of the business model to respond to reduced revenues;
- Challenged the reasonableness of all key assumptions, for each revenue stream, and related expenses and overheads through reconciliation to the budget approved by the Board and comparison with recent actuals, as well as their consistency with other areas of the audit including impairment assessment;
- Recalculated management’s forecast covenant ratio compliance calculations to check for potential breaches for the period out to 12 months from the date of approval of these financial statements under management’s base case and adjustments to the base case, including management’s ability to execute required mitigating actions to implement any required cost savings and obtained evidence of the agreements with lenders confirming the waivers granted and the covenant resets for the period subsequent to 29 February 2020;
- Exercise professional skeptisim through performing independent stress testing of management’s models;
- Reviewed the appropriateness and adequacy of management’s going concern disclosures in describing the risks associated with its ability to continue to operate as a going concern for a period of at least 12 months from the date of our Auditor’s Report which make it clear to readers that the going concern assumption used by management is subject to certain uncertainties.
Key observations communicated to the Audit Committee
We completed our planned audit procedures with no exceptions noted.
We reported to the Audit Committee that, based on our testing performed, we agreed that the going concern assumption adopted in the 2020 financial statements remains appropriate after considering management’s base case reflecting COVID-19 and adjustments made to the base case to reflect, in particular, the potential for delay in respect of the extent and timing of the recovery in the on-trade business from the impact of the COVID-19 pandemic.
We agreed that management’s disclosure appropriately describes the risks associated with the Group’s ability to continue as a going concern.
Risk
New in 2020
Recoverability of on-trade receivable balances and advances to customers (Trade receivables 2020: €93.1m, 2019: €90.0m, advances to customers 2020: €44.7m, 2019: €51.4m)
The Group has a risk through exposure to on-trade receivable balances and advances to customers who may experience financial difficulty given the outbreak of COVID-19 which has resulted in the closure of pubs, bars, clubs and restaurants across Ireland and the UK. .
Refer to the Audit Committee Report (page 69); and Statement of Accounting Policies (page 122); and Note 15 of the Consolidated Financial Statements (pages 157 to 158).
Our response to the risk
We have performed a thorough review of the Expected Credit Loss (ECL) model in relation to on-trade receivables and advances with customers considering C&C’s use of top-down ‘management overlays’ to account for current macro-economic scenarios. As part of this review we have challenged management’s assumptions and estimates for accuracy and robustness.
We have also benchmarked assumptions used within the model to third party data where possible.
Given the level of uncertainty and the sensitivity of judgements and estimates used, we reviewed all key assumptions used and judgements made in estimating ECL.
Key observations communicated to the Audit Committee
We completed our planned audit procedures with no exceptions noted.
Our observations included our assessment of management’s methodology for calculating expected credit losses in accordance with IFRS 9. We focused on the significant judgements made by management, benchmarked key assumptions and the appropriate disclosure of these in the financial statements.
Risk
Impairment assessment of goodwill & intangible brand assets (2020: €652.9m, 2019: €683.7m)
The Group holds significant amounts of goodwill & intangible brand assets on the balance sheet. In line with the requirements of IAS 36: ‘Impairment of Assets’ IAS 36), management tests goodwill balances annually for impairment, and also tests intangible assets where there are indicators of impairment.
The annual impairment testing was significant to our audit because of the financial quantum of the assets it supports as well as the fact that the testing relies on a number of critical judgements, estimates and assumptions by management. Judgemental aspects include CGU determination for goodwill purposes, assumptions of future profitability, revenue growth, margins and forecast cash flows, and the selection of appropriate discount rates, all of which may be subject to management override.
Management has recorded an impairment of €34m in the Group’s North America operating segment in respect of intangible asset – brands.
Given the level of impairment recorded through the year and the judgement inherent therein coupled with management’s ability to override controls in this area, we consider this to be a fraud risk.
Refer to the Audit Committee Report (page 69); Statement of Accounting Policies (pages 116 to 117); and Note 12 of the Consolidated Financial Statements (pages 148 to 154).
Our response to the risk
Valuations specialists within our team performed an independent assessment against external market data of key inputs used by management in calculating appropriate discount rates, principally risk-free rates, country risk premia and inflation rates.
We challenged the determination of the Group’s 6 cash-generating units (‘CGUs’), and flexed our audit approach relative to our risk assessment and the level of excess of value-in-use over carrying amount in each CGU for goodwill purposes and in each model for the impairment assessment for intangible brand assets. For all models, we assessed the historical accuracy of management’s estimates, corroborated key assumptions and benchmarked growth assumptions to external economic forecasts.
We challenged management’s sensitivity analyses and performed our own sensitivity calculations to assess the level of excess of value-in-use over the goodwill and intangible brand carrying amount and whether a reasonable possible change in assumptions could cause the carrying amount to exceed its recoverable amount.
We considered the adequacy of management’s disclosures in respect of impairment testing and whether the disclosures appropriately communicate the underlying sensitivities, in particular the requirement to disclose further sensitivities for CGUs and intangible brands where a reasonably possible change in a key assumption would cause an impairment.
The above procedures were performed by the Group audit team.
Key observations communicated to the Audit Committee
We completed our planned audit procedures with no exceptions noted.
Our observations included our assessment of management’s impairment model methodology and then for each CGU and intangible brand model:
- where the discount rates lay within an acceptable range
- the headroom level
- analysis of the 5-year forecast EBIT growth rate when viewed against the prior year and current year actual growth
- the results of our sensitivity analysis
- the amount recorded as an impairment charge for the period
- all disclosures materially comply with the applicable requirements of IAS 36
Risk
New in 2020
IFRS 16 Implementation (Right of use asset: €76.7m, lease liability 2020: €93.3m)
The Group transitioned to IFRS 16 ‘Leases’ on 1 March 2019.
Consequently, there was an impact on both measurement and disclosures in the current year financial statements. Misstatements could occur in relation to recognition of the right of use asset and lease liability. A right of use asset and lease liability were recognised as a result of the implementation of IFRS 16.
There is a risk these balances may be incorrect as a result of an incomplete lease population or inaccuracies in the IFRS 16 lease model.
Refer to the Audit Committee Report (page 70); Statement of Accounting Policies (pages 115 to 116); and Note 18 of the Consolidated Financial Statements (pages 160 to 161).
Our response to the risk
We have tested lease samples to the input sheets used for populating the lease model.
We considered the appropriateness of the Group’s lease policy and assessed management’s documentation for the effect of implementing IFRS 16 Leases.
We assessed the completeness and accuracy of the Group’s population of leases assessed under IFRS 16 through testing lease agreements and expenses.
We tested the model used by management to calculate the right of use asset and lease liability.
Valuation specialists within our team performed an independent assessment against external market data of the incremental borrowing rate used to calculate the lease liability and right of use asset.
We considered the adequacy of management’s disclosures in respect of IFRS 16 and whether the disclosures appropriately communicate the underlying data.
Key observations communicated to the Audit Committee
We completed our planned audit procedures with no ex-ceptions noted.
Our observations included our assessment of the incremental borrowing rate used by the Group, results of our testing of the lease agreements and model used to calculate right of use assets and lease liabilities and all applicable disclosures.
Risk
Assessment of the valuation of property, plant and equipment (PP&E) (2020: €146.7m, 2019: €144.5m)
The Group carries its land and buildings at estimated fair value, its plant and machinery using a depreciated replacement cost approach and motor vehicles and other equipment at cost less accumulated depreciation and impairment losses.
During the year, all land and buildings and plant and machinery were subject to independent expert valuations.
We considered the valuation of these assets to be a risk area due to the size of the balances and the lack of comparable market data and observable inputs such as market-based assumptions, plant replacement costs and plant utilisation levels due to the specialised nature of the Group’s assets. The valuation of PP&E involves significant judgement and therefore is susceptible to management override.
Refer to the Audit Committee Report (page 69); Statement of Accounting Policies (pages 114 to 115); and note 11 of the Consolidated Financial Statements (pages 143 to 147).
Our response to the risk
We inspected the independent expert valuation reports in order to assess the integrity of the data and key assumptions underpinning the valuations.
Our specialist valuation team performed an independent assessment on the reasonableness of the key assumptions and judgements underlying the valuations.
We corroborated the key assumptions and considered consistency to market data and observable inputs.
We considered the adequacy of management’s disclosures in respect of the valuation and whether the disclosures appropriately communicate the underlying sensitivities.
The above procedures were performed predominantly by the Group audit team.
Key observations communicated to the Audit Committee
We completed our planned audit procedures with no exceptions noted.
Our observations included an overview of the risk, outline of the procedures performed, the judgements we focused on, the results of our testing and all related disclosures.
Risk
Revenue recognition (2020: €1,719.3m, 2019: €1,574.9m)
The Group generates revenue from a variety of geographies and across a large number of separate legal entities spread across the Group’s four business segments.
The Group’s revenue particularly on supply, complex and non-standard customer contracts agreements may not have been accounted for correctly. In this regard we focused our risk on revenue generated in connection with certain of the Group’s arrangements with third parties entered into in order to utilise excess capacity and other material complex arrangements with customers
Revenue is an important element of how the Group measures its performance, and revenue recognition is therefore inherently susceptible to the risk of management override.
Refer to the Audit Committee Report (page 70); Statement of Accounting Policies (page 119); and note 1 of the Consolidated Financial Statements (pages 126 to 129).
Our response to the risk
We considered the appropriateness of the Group’s revenue recognition accounting policies; in particular, those related to supply, complex and non-standard customer contracts.
For the purpose of our audit, the procedures we carried out included the following:
We have evaluated the systems and key controls, designed and implemented by management, related to revenue recognition
We considered the appropriateness of the Group's revenue recognition policy
We discussed with management the key assumptions, estimates and judgements related to recognition, measurement and classification of revenue in accordance with IFRS 15: Revenue
In addition, we performed substantive procedures. We have discussed significant and complex customer contracts, discounts and the treatment of marketing contribution to ensure that accounting policies are applied correctly
We performed journal entry testing and verification of proper cut-off at year-end
Key observations communicated to the Audit Committee
We completed our planned audit procedures with no exceptions noted.
Our observations included an overview of the risk, outline of the procedures performed, the judgements we focused on and the results of our testing.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group and Company to be €4.8 million, which is approximately 5% of the Group’s profit before tax before non-recurring exceptional items. We believe that profit before tax before non-recurring exceptional items provides us with the most appropriate performance metric on which to base our materiality calculation as we consider it to be the most relevant performance measure to the stakeholders of the Group.
During the course of our audit, we reassessed initial materiality and considered that no further changes to materiality were necessary.
Performance materiality
Performance materiality is the application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality was 50% of our planning materiality, namely €2.38 million. We have set performance materiality at this percentage based on our assessment of the risk of misstatements, both corrected and uncorrected, consistent with the prior year.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of €0.24 million, which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.
An overview of the scope of our audit report
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the Consolidated Financial Statements.
In determining those components in the Group to which we perform audit procedures, we utilised size and risk criteria when assessing the level of work to be performed at each entity.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, we selected 20 (2019: 20) components covering entities across Ireland, UK, Luxembourg and the US, which represent the principal business units within the Group.
Of the 20 (2019: 20) components selected, we performed an audit of the complete financial information of 10 (2019: 9) components (“full scope components”) which were selected based on their size or risk characteristics. For the remaining 10 (2019: 11) components (“specific scope components”), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.
In addition to the 20 components discussed above, we selected a further 6 (2019: 2) components where we performed procedures at the component level that were specified by the Group audit team in response to specific risk factors.
The reporting components where we performed audit procedures accounted for 99.6% (2019: 98.5%) of the Group’s profit before tax, 98.6% (2019: 97.7%) of the Group’s revenue and 99.4% (2019: 98.9%) of the Group’s total assets.
For the current year, the full scope components contributed 85.0% (2019: 81.3%) of the Group’s profit before tax before non-recurring exceptional items, 97.1% (2019: 90.7%) of the Group’s revenue and 93.3% (2019: 89.6%) of the Group’s total assets. The specific scope component contributed 12.6% (2019: 15.3%) of the Group’s profit before tax before non-recurring exceptional items, 0.0% (2019: 5.6%) of the Group’s revenue and 0.4% (2019: 3.1%) of the Group’s total assets. The components where we performed specified procedures that were determined by the Group audit team in response to specific risk factors contributed 1.9% (2019: 1.9%) of the Group’s profit before tax before non-recurring exceptional items, 1.5% (2019: 1.4%) of the Group’s revenue and 5.7% (2019: 6.2%) of the Group’s total assets. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant tested for the Group.
Of the remaining components that together represent 0.4% (2019: 1.5%) of the Group’s profit before tax before non-recurring exceptional items, none are individually greater than 5% (2019: 5%) of the Group’s profit before tax before non-recurring exceptional items. For these components, we performed other procedures, including analytical review, testing of consolidation journals and intercompany eliminations and foreign currency translation recalculations to respond to any potential risks of material misstatement to the Group financial statements.
The charts below illustrate the coverage obtained from the work performed by our audit teams.
PBT before exceptional items
| 85.0% | Full scope components | |
| 12.6% | Specific scope components | |
| 1.9% | Specified procedures | |
| 0.5% | Other procedures |
Revenue
| 97.1% | Full scope components | |
| 0.0% | Specific scope components | |
| 1.5% | Specified procedures | |
| 1.4% | Other procedures |
Total Assets
| 93.3% | Full scope components | |
| 0.4% | Specific scope components | |
| 5.7% | Specified procedures | |
| 0.6% | Other procedures |
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the components by us, as the primary audit engagement team, or by component auditors from other EY network firms operating under our instruction. Where the work was performed by component auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole.
We issued detailed instructions to each component auditor in scope for the Group audit, with specific audit requirements and requests across key areas. The Group audit team continued to perform a review of all key component files across the Group, reviewing 10 component files during 2020. The file reviews conducted during the year involved discussing with the component team the audit approach and any issues arising from their work, discussions held with local management, attending planning and closing meetings and reviewing key audit working papers on risk areas. The Group audit team interacted regularly with all component teams where appropriate during various stages of the audit, reviewed key working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the Consolidated Financial Statements.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (Ireland) require us to report to you whether we have anything material to add or draw attention to:
- the disclosures in the annual report (set out on pages 13 to 21) that describe the principal risks and explain how they are being managed or mitigated;
- the directors’ confirmation (set out on page 13) in the annual report that they have carried out a robust assessment of the principal risks facing the group and the parent company, including those that would threaten its business model, future performance, solvency or liquidity;
- the directors’ statement (set out on page 20) in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the directors’ identification of any material uncertainties to the group’s and the parent company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
- whether the directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule 6.8.3(3) is materially inconsistent with our knowledge obtained in the audit; or
- the directors’ explanation (set out on page 20) in the annual report as to how they have assessed the prospects of the group and the parent company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the group and the parent company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
- Fair, balanced and understandable (set out on page 70) – the statement given by the Directors that they consider 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 and the parent company’s performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
- Audit Committee reporting (set out on pages 67 to 72) – the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee is materially inconsistent with our knowledge obtained in the audit; or
- Directors’ statement of compliance with the UK Corporate Governance Code (set out on page 60) – the parts of the Directors’ statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 6.8.6 do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2014
Based solely on the work undertaken in the course of the audit, we report that:
- in our opinion, the information given in the Directors’ Report, other than those parts dealing with the non-financial statement pursuant to the requirements of S.I. No. 360/2017 on which we are not required to report in the current year, is consistent with the financial statements; and
- in our opinion, the Directors’ Report, other than those parts dealing with the non-financial statement pursuant to the requirements of S.I. No. 360/2017 on which we are not required to report in the current year, has been prepared in accordance with the Companies Act 2014
We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
In our opinion the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited and the Company statement of financial position is in agreement with the accounting records.
Matters on which we are required to report by exception
Based on the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors’ report.
The Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of directors’ remuneration and transactions required by sections 305 to 312 of the Act are not made. We have nothing to report in this regard.
We have nothing to report in respect of section 13 of the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 (as amended), which require us to report to you if, in our opinion, the Company has not provided in the non-financial statement the information required by Section 5(2) to (7) of those Regulations, in respect of year ended 29 February 2020.
Respective responsibilities
Responsibilities of directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement set out on page 93, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and Company’s ability to continue as going concerns, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or Company or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
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 (Ireland) 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 objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
Our approach was as follows:
- We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group across the various jurisdictions globally in which the Group operates. We determined that the most significant are those that relate to the form and content of external financial and corporate governance reporting including company law, tax legislation, employment law and regulatory compliance.
- We understood how the Group is complying with those frameworks by making enquiries of management, internal audit, those responsible for legal and compliance procedures and the company secretary. We corroborated our enquiries through our review of the Group’s Compliance Policy, board minutes, papers provided to the Audit Committee and correspondence received from regulatory bodies.
- We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur, by meeting with management, including within various parts of the business, to understand where they considered there was susceptibility to fraud. We also considered performance targets and the potential for management to influence earnings or the perceptions of analysts. Where this risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included testing manual journals and were designed to provide reasonable assurance that the financial statements were free from fraud or error.
- Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures included a review of board minutes to identify any noncompliance with laws and regulations, a review of the reporting to the Audit Committee on compliance with regulations, enquiries of internal general counsel and management.
A further description of our responsibilities for the audit of the financial statements is located on the IAASA’s website at: http://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf. This description forms part of our auditor’s report.
Other matters which we are required to address
We were appointed by the Audit Committee following an AGM held on 6 July 2017 to audit the financial statements for the year ending 28 February 2018 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 3 years.
The non-audit services prohibited by IAASA’s Ethical Standard were not provided to the Group and we remain independent of the Group in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
The purpose of our audit work and to whom we owe our responsibilities
Our report is made solely to the Company’s members, as a body, in accordance with section 391 of the Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Pat O’Neill
for and on behalf of
Ernst & Young
Chartered Accountants and Statutory Audit Firm
Dublin
3 June 2020