30 | AUDIT COMMITTEES’ AND AUDITORS’ REPORTS
30 | AUDIT COMMITTEES’ AND AUDITORS’ REPORTS
Some examples explain how the auditor
made our risk assessment and how it
broke the group down into components.
affected the scope of the audit and
We feel that this text could be useful to a
determined our key audit risks. We
reader of the annual report, but may
should welcome investors’ feedback on
appear to be semi-standard when
the usefulness of this approach, which,
compared with other companies,
admittedly, does add significantly to the
reducing its value.
length of the report.
We also field tested, in two examples, a slightly different model: additional explanatory narrative setting out how we
Audit report extract
Board Risk and Group Risk Committees
more precisely. In particular w e
identifi ed the follow ing issues: “ The starting point for our audit w as a
and the many discussions w e have w ith
economic difficulties in India caused consideration of the inherent risks to the
senior management in different
some stress in the Group’s w holesale Group’s business model and how these
countries.
have been mitigated. This included portfolio; high consumer debt levels plus
We also considered the Group’s control
an economic slow dow n in South Korea understanding the strength of the
environment and in particular w hether
caused some stress in the Group’s Group’s capital and liquidity position, the
its systems w ere processing
diversification of its assets, the fl exibility
transactions completely and faithfully,
consumer portfolio; more generally
these factors in South Korea continued and tenor of its balance sheet and the
and included appropriate controls
to depress profitability there; and, w hile management of its cost base. We
designed to prevent fraud .
Our w ork
the UAE economy is recovering and assessed and challenged the inherent
included testing the key controls over
property prices are rising, risk in the risks w ith reference to independent
the processing of transactions and the
key inter-system, bank and custodial
portfolio does remain from the debt overhang that arose in the fi nancial
economic forecasts and commentary,
the perspectives of our in-country audit
reconciliations as w ell as trade confirmations. In addition w e sought to
crisis.
teams on their local economies and banking industries, the view s of our
Having addressed the going concern specialists in a number of areas
apply industry lessons learned from
assumption and w hether the Group’s including bank regulation, IT, tax and
recent dealing room issues at other
database of transactions w as a suffi cient financial crime prevention, the view s of
banks in our testing of controls.
underlying basis for the accounts, the the Prudential Regulatory Authority, the
These assessments enabled us to form
risks of material misstatement lay in significant changes taking place in
a judgment on going concern and also
decisions over loan and goodw ill banking regulation, both in the UK and in
highlighted the key areas of fi nancial
impairments and the valuation of the other jurisdictions in w hich the
statement risk on w hich our audit has
fi nancial instruments.” Group operates, [and] checking for
focused. By looking at both broad risk
( KPM G Audit Plc, report to Standard consistency betw een (among others)
themes across the Group and particular
Chartered PLC shareholders) the Group’s budgets, regular forecasts,
concerns in specifi c geographies and
businesses, w e w ere able to calibrate
stress testing, reporting to the Audit,
our w ork to financial statement risk
© 2014 KPM G LLP, a UK limited liability partnership, is a subsidiary of KPM G Europe LLP and a member fi rm of the KPM G netw ork of independent member fi rms affi liated w ith KPM G International Cooperative, a Sw iss entity. All rights reserved.