Carphone Warehouse 2015 Annual Report Download - page 81

Dixons Carphone plc Annual Report and Accounts 2014/15
Financial statements
79
Last year our report included one other risk which is not included in our report this year and related to the Group’s
announcement of its planned exit from the French retail market in April 2013. The Dixons Retail plc audit report also included
risks related to non-underlying items, defined benefit pension assumptions and customer support agreement revenue
recognition. In the new enlarged Group, these risks do not represent areas that had the greatest effect on our audit strategy,
the allocation of resources in the audit and directing the efforts of the engagement team.
The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee
discussed on page 49 and 50.
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 £14.0 million, which is below 5% of adjusted Headline profit before tax, and below
1% of equity. In using adjusted headline profit before tax, we have followed the Group’s definition of Headline results in note 1a)
and adjusted this to include the impact of the amortisation of acquisition intangibles and pension finance costs due to their
recurring nature. 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.
In 2013/14 materiality was £6.0 million, below 5% of Headline profit before tax and below 2% of equity.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £500,000
(2013/14: £120,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report 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
We have reassessed our group audit scope following the acquisition of Dixons Retail plc and accordingly have no longer
performed full scope audits in Portugal or Ireland.
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 the audit work of the retail operations operating under the Dixons and Carphone brands in the UK, and those
operations in the Nordics, Germany, Spain and the Netherlands. Each of these components requires a local statutory audit.
These locations represent the principal business units and account for approximately 93% of the Group’s revenue arising from
continuing operations (2013/14: 95%). In addition, an audit of specified account balances was performed in Greece. Each
location was selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement
identified above. Our audit work at these locations was executed at a level of materiality applicable to each individual entity
which was lower than group materiality and ranged from £1.0 million to £8.0 million.
At the Dixons Carphone plc parent entity 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 of the aggregated financial information of the
remaining components not subject to audit or audit of specified account balances.
The Group audit team is closely involved in the audit of the two UK components, being the largest part of the Group, throughout
the year including attendance at key audit planning and closing meetings. 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. For the period ended 2 May 2015, a senior member of the Group audit team
visited Norway, Spain, and Germany. 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.