Aer Lingus 2014 Annual Report Download - page 79

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Our audit approach
Overview
Materiality
Overall group materiality: €4 million (2013: €4 million) which represents approximately
5% of operating profit before net exceptional items.
Audit scope
An audit of the complete financial information was conducted on all companies within the
Group.
Areas of focus
 Pensions – accounting and disclosure;
 Treasury – presentation, valuation and disclosure;
 Exceptional Items – presentation and disclosure;
 Aircraft Maintenance Provisions – presentation, completeness and valuation; and
 Taxation – valuation of deferred tax assets.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In
particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias
by the Directors that may represent a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort,
are identified as “areas of focus” in the table below together with an explanation of how we tailored our audit to address these
specific areas. This is not a complete list of all risks identified by our audit.
Area of focus
How our audit addressed the area of focus
Pensions – accounting and disclosure
As explained in Note 26 significant deficits in the Irish Airlines
(General Employees) Superannuation Scheme “IASS” and the
Irish Airlines (Pilots) Scheme “IALP” existed during the year.
During the year the Trustees of the IASS agreed a funding
proposal with the Pensions Authority whereby the IASS was
frozen with effect from 1 January 2015 and all contributions to
it ceased. Following shareholder approval the Group agreed to
a once-off contribution of €190.7 million to two new Defined
Contribution pension schemes for IASS members. Proposals in
relation to IALP, which do not require any additional
contributions by the Group, were approved as explained in
Note 26.
We focused on this area due to the significant developments
during the year, the number of elements involved and the
resulting accounting complexities.
We obtained an understanding of key developments in respect
of the IASS for the current year, in particular the Expert Panel
Report issued on 16 June 2014, the Circular to Shareholders
issued on 18 November 2014 and the conditions related to the
once-off payment of €190.7 million. We read relevant
background papers and considered the effect of the once-off
payment for the financial statements, both in relation to
accounting and disclosure. We assessed the impact of the
once-off contribution on other post-retirement benefits which
are calculated by reference to benefits payable under the IASS.
We also considered developments in respect of the IALP and
the funding proposal agreed by the Trustees of the IALP and
approved by the Pensions Authority on 3 December 2014
which did not require any additional contributions by the
Group and developments through to the date of signing of the
financial statements.
We considered the disclosures in relation to the IASS and
IALP including the disclosure of the risk of litigation.