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84
MARKS AND SPENCER GROUP PLC
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
CONTINUED
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
We performed a full scope audit on
seven components representing 99%
of the Group’s revenue, 90% of the
Group’s profi t before tax and 90% of
the Group’s net assets.
During our fi rst year as auditor of
the Group, we visited all signifi cant
locations. For our second year, we have
implemented a rotational approach to
these visits.
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.
A summary of the Group’s retail operations
is set out below (including the UK business).
No. of territories 2015/16 2014/16
Wholly owned retail businesses 17 20
Retail joint ventures 22
Retail franchise operations* 33 34
Website only territories 74
Total 59 60
* includes two territories where wholly owned businesses
also operate
Based on our assessment we focused
our Group audit scope primarily on the
audit work at seven wholly owned locations:
United Kingdom, Republic of Ireland,
Czech Republic, France, Greece, China and
Hong Kong, and the joint venture in India.
All of these were subject to a full audit,
with the exception of China where specifi c
audit procedures were performed on
signifi cant balances. Last year, a full scope
audit was performed in Turkey; however
analytical review procedures were
completed for the current year as Turkey
is not a signifi cant element of the Group’s
business. This year, the Group audit team
conducted a full scope audit in France
due to the increasing signifi cance of the
business in the Group’s reported results.
These components were selected to
provide an appropriate basis for
undertaking audit work to address the
risks of material misstatement identifi ed
above. All other wholly owned and joint
venture businesses were subject to
analytical review procedures. Whilst we
audit the revenues received by the Group
from franchise operations, which account
for 3% (2015: 3%) of the Group’s revenue,
we do not audit the underlying franchise
operations as part of our Group audit.
At the parent entity level we also tested
the consolidation process and carried
out analytical procedures to confi rm our
conclusion that there were no signifi cant
risks of material misstatement of the
aggregated fi nancial information of the
remaining components not subject to a
full audit.
REVENUE PROFIT
BEFORE TAX
NET ASSETS
Full scope
audit
Specific audit
procedures
Analytical
procedures
Revenue
Profi t
before
tax
Net
assets
Full scope audit 99% 90% 90%
Specifi c audit
procedures 0% 1% 2%
Analytical procedures 1% 9% 8%
The most signifi cant component of the
Group is its retail business in the United
Kingdom, which accounts for 90% (2015:
89%) of the Group’s reported revenue of
£10,555 million, and generates operating
profi t of £627 million (2015: £641 million)
which is o set by operating losses from the
international segment resulting in a Group
operating profi t of £584 million (2015: £701
million). The Group audit team performs
the audit of the UK business without the
involvement of a component team.
During the course of our audit, the Group
audit team conducted 13 distribution
centre and 18 retail store visits in the UK
to understand the current trading
performance and, at certain locations,
perform tests of internal controls and
validate levels of inventory held.
As part of our fi rst year audit, last year a
senior member of the Group audit team
visited each of the signifi cant components.
For this year, and going forwards, we have
developed a programme of planned visits
so that a senior member of the Group audit
team visits each of the components subject
to a full audit or specifi c audit procedures
at least once every two years, and the most
signifi cant of them at least once a year.
The programme of visits are set out below,
with future years subject to change as the
Group’s operations continue to evolve.
Component
2015
(Last
year)
2016
(This
year) 2017 2018
China
Hong Kong
India
Republic of
Ireland
Czech
Republic
Greece
In addition to our programme of planned
visits, we send detailed instructions to our
component audit teams, include them in
our team briefi ngs, discuss their risk
assessment, attend closing meetings,
and review their audit working papers.
IN OUR OPINION:
> The part of the Directors’ Remuneration
Report to be audited has been properly
prepared in accordance with the
Companies Act 2006; and
> The information given in the Strategic
Report and the Directors’ Report for the
fi nancial year for which the fi nancial
statements are prepared is consistent
with the fi nancial statements.