Peachtree 2015 Annual Report Download - page 103

The Sage Group plc | Annual Report & Accounts 2015 101
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
The scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
component within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account
size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment and other factors
such as recent Internal Audit results when assessing the level of work to be performed at each entity.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, of the 45 reporting components of the Group, we selected 12 components covering entities within
UK and Ireland, France, Germany, Spain, North America, South Africa, and Brazil which represent the principal business units within the Group.
Of the 12 components selected, we performed an audit of the complete financial information of 6 components (“full scope components”) which were
selected based on their size or risk characteristics. For the remaining 6 components (“specific scope components”), we performed audit procedures
on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial
statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 90% of the Group’s adjusted Profit before tax measure used to
calculate materiality and 90% of the Group’s Revenue. For the current year, the full scope components contributed 63% of the Group’s adjusted Profit
before tax measure used to calculate materiality and 58% of the Group’s Revenue. The specific scope components contributed 27% of the Group’s
adjusted PBT measure used to calculate materiality and 32% of the Group’s Revenue. The audit scope of these components may not have included
testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group. We
instructed a component team to undertake specified procedures over certain cash balances at one location. The Group audit risk in relation to
revenue recognition was subject to audit procedures at each of the full and specific scope locations with revenue. The Group audit risk in relation
to the carrying value of goodwill was subject to audit procedures by the primary audit team on the entire balance. The Group audit risk in relation
to taxation was subject to full scope audit procedures in 5 components and limited scope procedures in 3 components.
Of the remaining 33 components that together represent 10% of the Group’s adjusted Profit before tax, none are individually greater than 4% of the
Group’s adjusted Profit before tax. For 5 components, including 2 in Asia and Australia, we performed review scope procedures. For the remaining
components, we performed other procedures, including analytical review procedures and testing of consolidation journals, intercompany eliminations
and foreign currency translation recalculations to respond to any potential risks of material misstatement to the Group financial statements.
The charts below illustrate the coverage obtained from the work performed by our audit teams.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the components
by us, as the primary audit engagement team, or by component auditors from other EY global network firms operating under our instruction. Of the
6 full scope components, audit procedures were performed on 3 of these directly by the primary audit team and 3 by component audit teams. For the
6 specific scope components, work was performed by component auditors. We determined the appropriate level of involvement with the component
teams to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole.
At the start of the audit, a Global Team Planning Event was held in the UK with representatives from all full and specific scope component audit
teams in aendance. In addition, the Group audit team established a programme of planned visits that has been designed to ensure that as a first
year audit the Senior Statutory Auditor, or her designate, would visit all full and specific scope audit locations. During the current year’s audit cycle,
visits were undertaken at least once by the primary audit team to the component teams in the UK, France, Germany, Spain, North America, South
Africa, and Brazil. These visits involved discussing the audit approach with the component team and any issues arising from their work, meeting
with local management, aending closing meetings, and reviewing key audit working papers on the Group risk areas. The primary team interacted
regularly with the component teams where appropriate during various stages of the audit, reviewed key working papers and were responsible for
the scope and direction of the audit process. This, together with the additional procedures performed at Group level, gave us appropriate evidence
for our opinion on the Group financial statements.
Adjusted Profit before tax
63%
27%
10%
Revenue
58%
10%
32%
Full scope components
Specific scope components
Other procedures
Full scope components
Specific scope components
Other procedures