RWS Annual Report 2022 web - Flipbook - Page 97
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate. Our evaluation of the directors’ assessment
of the Group and parent company’s ability to continue to
adopt the going concern basis of accounting included:
•
understanding management’s process and controls
related to the assessment of going concern;
•
assessing the adequacy of the going concern
assessment period until 31 March 2024, considering
whether any events or conditions foreseeable after
the period indicated a longer review period would be
appropriate;
•
obtaining management’s going concern models which
included a base case and downside scenarios of the
going concern assessment period. These forecasts
include an assessment of liquidity including assessment
of compliance with the covenant requirements of the
Group’s external debt;
•
checking the arithmetical accuracy of the cash flow
forecast models and assessing the Group’s historical
forecasting accuracy, comparing these conclusions to
the downside scenarios prepared by management;
•
confirming the continued availability of debt facilities by
examining executed documentation including clauses
relating to covenants;
•
considering the downside scenarios identified by
management and independently assessing whether
there are any other scenarios which should be
considered, and recalculated the impact on the available
cash flows of the downside scenarios in the going
concern period;
•
considering whether the Group’s forecasts in the
going concern assessment were consistent with other
forecasts used by the Group in its accounting estimates,
including goodwill impairment and deferred tax asset
recognition;
•
evaluating, based on our own independent analysis,
what reverse stress testing scenarios could lead either
to a breach of the Group’s banking covenants or liquidity
shortfall, and considering whether these scenarios were
plausible;
•
challenging management’s assumptions within the cash
flow forecasts in relation to the forecast growth rates
in the going concern period, including comparison to
internal and external economic forecasts;
•
comparing management’s forecasts to actual results
through the subsequent events period and performing
enquiries to the date of this report; and
•
assessing if the going concern disclosures in the
financial statements are appropriate and in accordance
with the revised ISA UK 570 going concern standard.
We observed that the adjusted operating profit for
the Group continues to grow (2022: £138.5 million,
2021: £118.5 million) and the Group generates positive
operating cashflows (2022: £127.5 million, 2021: £84.9
million). The Group has access to a committed revolving
credit facility of $220 million, which doesn’t expire until
2026. The covenant compliance necessary under both
covenant test ratios within the RCF have been modelled as
part of the going concern forecast.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group and parent company’s
ability to continue as a going concern for the period to 31
March 2024.
Our responsibilities and the responsibilities of the
directors with respect to going concern are described in
the relevant sections of this report. However, because
not all future events or conditions can be predicted, this
statement is not a guarantee as to the Group’s ability to
continue as a going concern.
OVERVIEW OF OUR AUDIT APPROACH
Audit scope
Key audit matters
Materiality
•
We performed an audit of the complete financial information of 8 components and audit
procedures on specific balances for a further 6 components.
•
The components where we performed full or specific audit procedures accounted
for 74% of profit before tax adjusted for exceptional items, acquisition costs and
amortisation of acquired intangibles, 87% of Revenue and 96% of Total assets.
•
•
•
Revenue recognition
•
Overall Group materiality of £6.0m which represents 4.5% of Profit before tax adjusted for
exceptional items, acquisition costs and amortisation of acquired intangibles.
Impairment of goodwill and acquired intangibles
Capitalisation and impairment of development costs
INDEPENDENT AUDITOR’S REPORT
RWS — Annual Report 2022
97
