Carphone Warehouse 2014 Annual Report Download - page 60

Carphone Warehouse Group plc
Annual Report 2014
58
FINANCIAL STATEMENTS
Independent auditors’ report continued
Risk How the scope of our audit responded to the risk
Closure of French operations
The Group announced its planned exit from the French retail
market in April 2013. As part of this exit, the Group has completed
necessary restructuring activities and a disposal programme in
respect of its store portfolio, for which consideration of onerous
lease contracts and asset impairment was required. As this process
is ongoing, this requires significant judgement and use ofassumptions
by management in respect ofthe quantum oftheassociated provisions.
We tested the design and implementation of the controls operating
around the accounting for the closure. We reviewed the associated
contractual agreements as part of this disposal as well as substantively
testing a sample of costs incurred through the year. For those
provisions remaining at year end, we have compared management
assumptions to contractual agreements and recent market data.
Taxation
The Group operates in a number of different tax jurisdictions.
Thenature of the Group’s operations and related transactions
cangive rise to uncertain tax treatments, including with respect
totransfer pricing, thereby requiring the use of estimates and
assumptions which may be subsequently challenged by the
relevant tax authorities.
We used our internal tax specialists to evaluate and test
management’s assumptions in respect of tax-related provisions,
including assessment against local tax legislation and review
ofsupporting documentation.
The Audit Committee’s consideration of these risks is set out on page .
Our audit procedures relating to these matters were designed in the
context of our audit of the financial statements as a whole, and not
to express an opinion on individual accounts or disclosures. Our
opinion on the financial statements is not modified with respect to
any of the risks described above, and we do not express an opinion
on these individual matters.
OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
We determined materiality for the Group to be £m, which is below %
of Headline profit before tax, and below % of equity. In using Headline
profit before tax, we have followed the Group’s definition ofHeadline
and non-Headline results on page . We have assessed the use
ofa Headline measure to be appropriate as this continues tobe a
key driver of business value, is a critical component of the financial
statements and the main measure which management uses
tomonitor the performance of the business and communicate
thistoshareholders.
We agreed with the Audit Committee that we would report to the
Committee all audit differences identified in excess of £,, as
well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also reported to the Audit
Committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit was scoped by obtaining an understanding of
theGroup and its environment, including Group-wide controls,
andassessing the risks of material misstatement at the Group
level. Based on that assessment, we focused our Group audit scope
primarily on audit work at eight locations, being the retail operations
in the UK, France, Spain, Germany, the Netherlands, Ireland and
Portugal and the insurance operations in Ireland. Each of these
components requires a local statutory audit. In addition, a full scope
audit was completed on the Group’s joint venture, Virgin Mobile France.
These eight locations, and Virgin Mobile France, represent the principal
business units and account for approximately % of the Group’s
revenue. They were also selected to provide an appropriate basis for
undertaking audit work to address the risks of material misstatement
identified above. Our audit work at the eight locations was executed
at levels of materiality applicable to each individual entity which
were lower than Group materiality.
At the Company level we also tested the consolidation process
andcarried out analytical procedures to confirm our conclusion
thatthere were no significant risks of material misstatement
intheaggregated financial information of the remaining
components not subject to audit.
The Group audit team is directly responsible for the audit of the UK
component, which is the largest. In addition, the Group audit team
continued to follow a programme of planned visits to overseas
components that has been designed so that a senior member of
theGroup audit team visits the most significant locations each year.
In the year ended  March , the three largest overseas component
locations were visited by a senior member of the Group audit team.
In years when we do
not visit a particular significant component we will
include the component
audit team in our team briefing, discuss their
risk assessment, and review documentation of the findings from
their work.
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES
ACT 2006
In our opinion:
— the part of the Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act ; and
— the information given in the Strategic Report and the Other
Statutory Information on page  for the financial year for which
the financial statements are prepared is consistent with the
financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BYEXCEPTION
ADEQUACY OF EXPLANATIONS RECEIVED
ANDACCOUNTINGRECORDS
Under the Companies Act  we are required to report to you if,
inour opinion:
— we have not received all the information and explanations we
require for our audit; or
— adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from
branches not visited by us; or
— the Company financial statements are not in agreement
withtheaccounting records and returns.
We have nothing to report in respect of these matters.
OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT continued