AUDIT (updated June 2009)
1 Responsibilities of auditors and directors
1.1 Our function as auditors is to examine the financial statements of the company presented to us by yourselves in your capacity as directors. We have a statutory responsibility to report to the members whether in our opinion the financial statements give a true and fair view and whether they have been properly prepared in accordance with UK GAAP and the Companies Act 2006. In arriving at our opinion, we are required to consider the following matters, and to report on any in respect of which we are not satisfied:
(a) whether proper accounting records have been kept by the company and proper returns adequate for our audit have been received from branches not visited by us;
(b) whether the company’s accounts are in agreement with the accounting records and returns;
(c) whether we have obtained all the information and explanations which we consider necessary for the purposes of our audit;
(d) whether the information in the directors’ report is consistent with the audited financial statements.
In addition, there are certain other matters which, according to the circumstances, may need to be dealt with in our report. For example, where the financial statements do not give details of directors’ remuneration or of their transactions with the company, the Companies Act 2006 requires us to disclose such matters in our report. If the company prepares accounts and reports in accordance with the small companies regime when in our opinion it is not entitled to do so we are required to state that fact in our report.
Our report will be made solely to the company’s members, as a body, in accordance with section 495 of the Companies Act 2006. Our audit work will be undertaken so that we might state to the company’s members those matters that we are required to state to them in an auditor’s report and for no other purpose. In those circumstances, to the fullest extent permitted by law, we will not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for the audit report, or for the opinions we form.
1.2 As auditors we are not responsible for the preparation of the financial statements nor for the maintenance of the accounting records of the company, which duties which are imposed on yourselves as directors of the company by the Companies Act.
As directors of the company you are responsible for preparing financial statements which give a true and fair view and which have been prepared in accordance with the Companies Act 2006. As directors you must not approve the financial statements unless you are satisfied that they give a true and fair view of the assets, liabilities, financial position and profit and loss of the company.
In preparing the financial statements, you are required to:
-select suitable accounting policies and then apply them consistently;
-make judgments and estimates that are reasonable and prudent; and
-prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
You are responsible for keeping adequate accounting records that are set out with reasonable accuracy at any time the company’s financial position, and for ensuring that the financial statements comply with United Kingdom Generally Accepted Accounting Practice (UK GAAP) and with the Companies Act 2006.
You are also responsible for making available to us, as and when required, all the company’s accounting records and all other relevant records and related information, including minutes of all management and shareholders’ meetings. Each director is required to take all steps that he ought to take as a director in order to make himself aware of any relevant audit information and to establish that we are aware of that information.
1.3 We have a professional responsibility to report if the financial statements do not comply in any material respect with applicable accounting standards, unless in our opinion the non-compliance is justified in the circumstances. In determining whether or not the departure is justified, we consider:
(a) whether the departure is required in order for the financial statements to give a true and fair view; and
(b) whether adequate disclosure has been made concerning the departure.
1.4 Our professional responsibilities also include:
(a) Incorporating in our report a description of the directors’ responsibilities for the financial statements where the financial statements or the accompanying information do not include such a description; and
(b) Considering whether other information in documents containing audited financial statements is consistent with those financial statements.
1.5 The Senior Statutory Auditor under s504 Companies Act 2006 can be confirmed by reference to your contact partner at Ward Williams. In the event that we cease to act as statutory auditors for the company we are required by paragraph 9(3) of Schedule 10 to the Companies Act 2006, to make available, if requested, all relevant information concerning the audit of the company to our successors as statutory auditors. You agree to cover any reasonable costs of making such information available that we may incur in fulfilling our statutory duty.
2 Scope of Audit
2.1 Our audit will be conducted in accordance with International Standards on Auditing (UK & Ireland) issued by the Auditing Practices Board, and will include such tests of evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.. We shall obtain an understanding of the accounting system and internal control systems in order to assess their adequacy as a basis for the preparation of the financial statements and to establish whether proper accounting records have been maintained by the company. We shall expect to obtain such appropriate evidence, as we consider sufficient to enable us to draw reasonable conclusions there from.
2.2 When conducting the audit we will consider materiality and its relationship to risk. Materiality is an expression of the relative significance or importance of a particular matter in the context of the financial statements as a whole, or within any of the individual statements making up the whole.
For each assignment we will use our judgment to assign a monetary value to materiality and we will assess the relative risk in each area of the assignment. The amount of the work we perform area by area will be directly influenced by the value that we assign to materiality as adjusted by our perception of the risk applicable to that area. Generally the greater the perceived risk the more work is required.
Materiality is not capable of general mathematical definition and the assigned value will be arrived at after considering both qualitative and quantitative aspects of the financial statements.
2.3 The nature and extent of our procedures will vary according to our assessment of the company’s accounting system and, where we wish to place reliance on it, the internal control system, and may cover any aspect of the business operations that we consider appropriate. And if applicable we appreciate that the present size of your business makes it uneconomical to create a system of internal control based on the segregation of duties for different functions within each are of the business. In the running of your company, we understand that the directors are closely involved with the control of the company’s transactions. In planning and performing our audit work we shall take account of this supervision. Our audit is not designed to identify all significant weaknesses in the company’s systems but, if such weaknesses come to our notice during the course of our audit which we think should be brought to your attention, we shall report them to you. Any such report may not be provided to third parties without our prior written consent. Such consent will be granted only on the basis that such reports are not prepared with the interests of anyone other than the company in mind and that we accept no duty or responsibility to any other party as concerns the reports. Because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, there is an unavoidable risk that even some material misstatements may remain undiscovered.
2.4 As part of our normal audit procedures, we may request you to provide written confirmation of certain oral representations which we have received from you during the course of the audit on matters having material effect in the financial statements. In particular, where misstatements in the financial statements that we bring to your attention are not adjusted, you must state your reasons in writing. In connection with representations and the supply of information to us generally, we draw your attention to section 501of the Companies Act 2006 under which it is an offence for an officer of the company to mislead the auditors recklessly or knowingly or fail to promptly provide information requested.
2.5 In order to assist us with the examination of your financial statements, we shall request sight of all documents or statements, including as appropriate the chairman’s statement, operating and financial review and the directors’ report, which are due to be issued with the financial statements. We are also entitled to attend all general meetings of the company and to receive notice of all such meetings.
2.6 The responsibility for safeguarding the assets of the company and for the prevention and detection of fraud, error and non-compliance with law or regulations rests with you. However, we shall endeavor to plan our audit so that we have a reasonable expectation of detecting material misstatements in the financial statements or accounting records (including those resulting from fraud, error or non-compliance with law or regulations), but our examination should not be relied upon to disclose all such material misstatements or frauds, errors or instances of non-compliance which may exist.
2.7 We shall not be treated as having notice, for the purposes of our audit responsibilities, of information provided to members of our firm other than those engaged on the audit (for example information provided in connection with accounting, taxation and other services).
2.8 Once we have issued our report we have no further direct responsibility in relation to the financial statements for that financial year. However, we expect that you will inform us of any material event occurring between the date of our report and the date the financial statements are sent out in accordance with section 423 Companies Act 2006 which may affect the financial statements.
2.9 Where audited information is published on the company’s website or by other electronic means, it is your responsibility to advise us of any intended electronic publication before it occurs and to ensure that any such publication properly presents the financial information and auditor’s report. We reserve the right to withhold consent to the electronic publication of our report if, in our opinion, it or the financial statements are to be published in an inappropriate manner.
3.0 Further, it is your responsibility to ensure that there are controls in place to prevent or detect quickly any changes to that information. We are not required to review such controls nor to carry out ongoing reviews of the information after it is published. The maintenance and integrity of the company’s website is your responsibility and we accept no responsibility for changes made to audited information after it is first posted.
3.1 To ensure that there is effective two-way communication between us and to comply with the requirements of International Standards on Auditing (UK and Ireland) we will:
- Contact you prior to the audit to discuss any relevant matters and to agree any required action; and
- Contact you after the audit to discuss any matters arising from the audit and to confirm any agreed action.
We will of course contact you more frequently and regularly about audit and other matters during the course of the audit.