AUDIT
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 the Companies Act 1985. 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 balance sheet and profit and loss 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 1985 requires us to disclose such matters in our report.
Our report will be made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. 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. 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.
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.
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 transactions and of the existence, ownership and valuation of assets and liabilities, as we consider necessary. 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 judgement 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. 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.
2.3 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 connection with representations and the supply of information to us generally, we draw your attention to section 389A of the Companies Act 1985 under which it is an offence for an officer of the company to mislead the auditors.
2.4 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.
2.5 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 yourselves. However, we shall endeavour 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.
2.6 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).
2.7 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 that of the Annual General Meeting which may affect the financial statements.
2.8 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.
2.9 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.