Peachtree 2015 Annual Report Download - page 104

The Sage Group plc | Annual Report & Accounts 2015
102
Independent auditor’s report to the members of The Sage Group plc continued
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in
forming our audit opinion.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance
materiality was 50% of our planning materiality, namely £8.5m, reflecting that this is our first year as auditor of The Sage Group plc.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based
on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and risk of the
component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of
performance materiality allocated to full and specific scope components was £0.9m to £4.3m.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Commiee that we would report to them all uncorrected audit differences in excess of £0.9m, which is set at 5% of
planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the Group’s and the Parent company’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Annual Report and Accounts 2015 to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider
the implications for our report.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 97, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the company’s members those maers we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permied by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined materiality for the Group to be £16.9 million, which
is 5% of Profit before tax adjusted for non-recurring items reported
by the Group. We believe that adjusted Profit before tax provides us
with a consistent year on year basis for determining materiality and
is the most relevant performance measure to the stakeholders of
the entity. Detailed audit procedures are performed on material
non-recurring items.
During the course of our audit, we reassessed initial materiality and
the only change in final materiality was to reflect the actual reported
performance of the Group in the year.
Starting
basis
– Totals £338.1m [materiality basis]
– Materiality of £16.9m (5% of materiality basis)
– Adjusted for non recurring items
– Goodwill impairment charge of £62.3m
– Profit before tax – £275.8m
Adjustments
Materiality