Tesco 2014 Annual Report Download - page 68

Report on the Group financial statements
Our opinion
In our opinion the Group financial statements, defined below:
• give a true and fair view of the state of the Group’s affairs as
at 22 February 2014 and of the Group’s profit and cash flows
for the 52 weeks then ended;
• have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union; and
• have been prepared in accordance with the requirements of
the Companies Act 2006 and Article 4 of the IAS Regulation.
This opinion is to be read in the context of what we say in the
remainder of this report.
What we have audited
The Group financial statements, which are prepared by Tesco
PLC, comprise:
• the Group balance sheet as at 22 February 2014;
• the Group income statement and statement of comprehensive
income for the 52 weeks then ended;
• the Group statement of changes in equity and cash flow
statement for the 52 weeks then ended; and
• the notes to the Group financial statements, which include
a summary of significant accounting policies and other
explanatory information.
The financial reporting framework that has been applied in their
preparation comprises applicable law and IFRSs as adopted by
the European Union.
Certain disclosures required by the financial reporting framework
have been presented elsewhere in the Annual Report and
Financial Statements (the ‘Annual Report’), rather than in the
notes to the financial statements. These are cross-referenced
from the financial statements and are identified as audited.
What an audit of financial statements involves
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).
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 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 to identify material inconsistencies with
the audited Group 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.
Overview of our audit approach
Materiality
We set certain thresholds for materiality. These helped us to
determine the nature, timing and extent of our audit procedures
and to evaluate the effect of misstatements, both individually
and on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the Group financial statements as a whole to be £150 million.
This represents approximately 5% of profit before tax adjusted
for restructuring and one-off items.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above £7 million
as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Overview of the scope of our audit
The Group is primarily structured as three geographic regions,
being UK, Asia and Europe, and Tesco Bank. The Group financial
statements are a consolidation of nineteen reporting units,
comprising the Group’s operating businesses and centralised
functions, within these regions.
In establishing the overall approach to the Group audit,
we determined the type of work that needed to be performed
at reporting units by us, as the Group engagement team,
or component auditors within PwC UK and from other PwC
network firms operating under our instruction. Where work
was performed by component auditors, we determined the
level of involvement we needed to have in the audit work at
those reporting units to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis for
our opinion on the Group financial statements as a whole.
Accordingly, we identified three reporting units which, in our
view, required an audit of their complete financial information,
either due to their size or their risk characteristics. These three
reporting units accounted for 92% of the Group’s profit before
tax adjusted for restructuring and one-off items, of which the
main UK trading business contributed 73%. Audits of their
complete financial information were also performed for a
further eight overseas reporting units where there are local
statutory reporting requirements and specific audit procedures
on certain balances and transactions were performed at a
further two reporting units. Our audit work at these reporting
units, together with additional procedures performed at the
Group level, gave us the evidence we needed for our opinion
on the Group financial statements as a whole.
Other information
Governance Financial statementsStrategic report
Tesco PLC Annual Report and Financial Statements 2014 65
Independent auditors’ report to the members of Tesco PLC