HSBC 2015 Annual Report Download - page 325

Report of the independent auditors to the members of HSBC Holdings plc
Audit Report
HSBC HOLDINGS PLC
323
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Report of the independent auditors to the members of
HSBC Holdings plc
Report on the financial statements1
Our opinion on the financial statements
In our opinion HSBC Holdings plc’s (‘HSBC’) Group financial statements and Parent Company financial statements:
• give a true and fair view of the state of the Group’s and Parent Company's affairs at 31 December 2015 and of the Group’s
and Parent Company’s profit and cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European
Union (‘IFRS’); and
• have been prepared in accordance with the requirements of the Companies Act 2006, and as regards the Group financial
statements, Article 4 of the IAS Regulation.
Performing the audit
On behalf of PricewaterhouseCoopers LLP (‘PwC’), it is my responsibility to form these opinions. This was the first year that you
have appointed PwC as HSBC’s auditors, and I have therefore provided more information on how PwC prepared for the audit
together with an explanation of the audit approach applied and details of the significant discussions on accounting issues I, and
my colleagues, have had with the Group Audit Committee (‘GAC’).
Preparing to change auditors
Before commencing audit work in September 2014, PwC member firms, their partners and staff took 12 months to ensure that
we were independent of HSBC. This involved ceasing commercial relationships and changing financial arrangements for our
partners and more than 2,000 staff who work on the audit of HSBC and its subsidiaries worldwide. During this period, members of
my team took the opportunity to meet with HSBC’s management team to understand the issues faced by the business, and to
gather information which we required to plan our audit.
From September 2014 and throughout the 31 December 2014 year-end process, we worked alongside the former auditors,
attending their key meetings with HSBC and understanding the complex or significant audit judgements which they made.
We also observed the GAC and Group Risk Committee meetings and met with the primary regulators of HSBC.
In September 2014, I chaired a two day meeting of the partners and staff from PwC member firms who undertake audits of the
most significant HSBC subsidiaries. This meeting ensured that we would have one approach to the audit globally, assisted in
our determination of the most significant audit risks and provided an opportunity for those partners and staff to hear directly
from HSBC management.
We also reviewed the working papers of the former auditors, to help familiarise ourselves with the controls on which they
relied for the purposes of issuing their opinion, and to understand the evidence they obtained over key judgements.
How the audit approach was structured
I structured the audit approach to reflect how HSBC is organised. It incorporated four important aspects.
(i) Risk assessment and audit planning at a Group level, having regard to both regions and HSBC’s global businesses
In addition to having partners coordinate the audit in each region, I appointed partners for each global business. These
global business partners met regularly with the relevant HSBC management to understand strategy and matters which
arose throughout the year that could have impacted the financial reporting. These partners are specialists in the nature
of the relevant businesses and were best placed to design an appropriate audit approach for that part of HSBC. They
oversaw each PwC member firm involved in the audit of that global business and assisted me in my review of their work.
(ii) Audit work performed at global shared service centres
A significant amount of HSBC’s operational processes which are critical to financial reporting are undertaken in offshore
shared service centres across 11 sites in five countries. Working closely with me, a partner coordinated our audit work on
shared service centres, building up an end to end picture of the key processes that supported material balances, classes of
transactions and disclosures within the HSBC financial statements. We then evaluated the effectiveness of controls over
these processes and considered the implications for the remainder of our audit work.
1 HSBC Holdings plc’s financial statements comprise the consolidated and Parent Company balance sheets as at 31 December 2015, the consolidated
and Parent Company income statements and the consolidated statement of comprehensive income for the year then ended, the consolidated and
Parent Company cash flow statements for the year then ended; the consolidated and Parent Company statements of changes in equity for the year
then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.