RWS Annual Report 2022 web - Flipbook - Page 103
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.
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 £6.0 million
(2021: £5.0 million), which is 4.5% (2021: 4.3%) of Profit
before tax adjusted for exceptional items, acquisition costs
and amortisation of acquired intangibles. We believe that
Profit before tax adjusted for exceptional items, acquisition
costs and amortisation of acquired intangibles provides us
with an appropriate basis for materiality as it represents
the primary measure used by shareholders in assessing
the performance of the Group, as it is a reflection of the
underlying performance of the Group.
We determined materiality for the Parent Company to be
£9.3 million (2021: £9.3 million), which is 1.0% (2021: 1.0%)
of total assets.
Starting
basis
Adjustments
Materiality
•
Profit before tax - £83.2m
•
•
•
Exceptional items - £12.5m
•
•
Totals £132.2m
Acquisition costs - £2.1m
Amortisation of acquired intangibles - £34.4m
Materiality of £6.0m (4.5% of materiality basis)
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%
(2021: 50%) of our planning materiality, namely £3.0m
(2021: £2.5m). We have set performance materiality at this
percentage due to a combination of risk factors.
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 components was £0.6m to £1.3m
(2021: £0.5m to £1.1m).
Reporting threshold
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit Committee that we would
report to them all uncorrected audit differences in excess
of £0.3m (2021: £0.25m), 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.
INDEPENDENT AUDITOR’S REPORT
RWS — Annual Report 2022
103
