267694 EdinburghIT AR 2024 WEB - Flipbook - Page 55
THE EDINBURGH INVESTMENT TRUST PLC / FINANCIAL REVIEW / 53
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the
industry in which it operates.
The Company’s accounting is delegated to the Administrator who maintains the Company’s accounting records and who has
implemented controls over those accounting records. We obtained our audit evidence from substantive tests. However, as part
of our risk assessment, we understood and assessed the internal controls in place at both the Manager and the Administrator
to the extent relevant to our audit. This assessment of the operating and accounting structure in place at both organisations
involved obtaining and analysing the relevant controls reports issued by the independent service auditor of the Manager and
the Administrator in accordance with generally accepted assurance standards for such work. Following this assessment, we
applied professional judgement to determine the extent of testing required over each balance in the financial statements.
The impact of climate risk on our audit
In conducting our audit, we made enquiries of the Directors and the Portfolio Manager to understand the extent of the
potential impact of climate change risk on the Company’s financial statements. The Directors and Portfolio Manager concluded
that the impact on the measurement and disclosures within the financial statements is not material because the majority of
the Company’s investment portfolio is made up of level 1 quoted securities which are valued at fair value based on market
prices. We found this to be consistent with our understanding of the Company’s investment activities. We also considered
the consistency of the climate change disclosures included in the Strategic Report and Portfolio Manager’s Report with the
financial statements and our knowledge from our audit.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Company materiality
£11,350,470 (2023: £11,392,000).
How we determined it
1% of Net Assets
Rationale for benchmark applied
We have applied this benchmark, which is a generally accepted auditing practice for
investment trust audits.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope
of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example
in determining sample sizes. Our performance materiality was 75% (2023: 75%) of overall materiality, amounting to £8,512,853
(2023: £8,544,000) for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £567,524
(2023: £569,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
