Company regulated by the Financial Conduct Authority

Engagement objectives

Our primary responsibility as your auditor is to form and express an opinion as to whether the financial statements show a true and fair view in accordance with the reporting framework and comply with the Companies Act 2006.

We also report to you whether, in our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and the Directors’ Report is consistent with the financial statements and the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. We are also required to state, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, whether or not we identified material misstatements in the Strategic Report and the Directors’ Report.

Our other responsibilities comprise:

Reporting to you where the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate or where the directors have not disclosed in the financial statements any material uncertainties that may cast significant doubt about the group or company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Reporting to you if, in our opinion:
- adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or
- the financial statements [and the part of the Directors’ Remuneration Report to be audited] are not in agreement with the accounting records and returns; or
- certain disclosures of directors’ remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit; or
- [if small] - the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies exemption from the requirement to prepare a strategic report or in preparing the directors’ report.

Reporting to the Financial Conduct Authority on client money and assets

We are required to report to the Financial Conduct Authority (FCA) in accordance with its SUP (Supervision Manual) rules in respect of engagements that involve evaluating and reporting on a regulated firm’s compliance with the FCA’s CASS (Client Asset) rules and other rules relevant to the holding of client assets.

For reasonable assurance engagements

The assurance report that we are required to prepare, and submit for investment business, to the FCA is to provide reasonable assurance as to whether a firm’s systems are adequate to enable it to comply with the custody rules, the collateral rules, and the client money rules, the mandate rules, and the debt management client money rules, as appropriate throughout the period, and as to whether it was in compliance at the end of the period with the CASS rules. We are required to include a breaches schedule as specified in the FCA’s Rules. For insurance intermediaries, the FCA’s rules require the report to be submitted to the firm.
For CASS 5 engagements, we will also provide a confirmation to the firm whether it has, and maintains, adequate systems and controls over non-statutory client money trusts under CASS 5.

For limited assurance engagements

The assurance report that we are required to prepare and submit to the FCA is to provide limited assurance that the firm did not hold client money or client assets during the period.

In addition, we will coordinate the work performed by other firms of auditors who are responsible for the audits of subsidiary companies.

We will plan our work with a view to ensuring:

minimum disruption to your staff and operations;
that reports submitted to you are constructive and clear, focusing on the issues that matter;
that surprises are avoided and that good communications are maintained with you throughout the assignment.

Our engagement letter sets out in detail our respective responsibilities.

Reliance on internal controls

During the planning phase of our audit we will re-confirm our understanding of the business environment established by the directors, including internal controls, relevant to the audit. Where we plan to place reliance on internal controls, we will test the operation of those controls. If our examination of internal controls leads us to believe there may be significant deficiencies therein, we will report our findings to you.

Qualitative aspects of accounting practices and financial reporting

We will discuss with you any areas where our experience as auditor leads us to believe that accounting practices and financial reporting could be improved.

Implication of changes within financial reporting framework, environment, financial condition or activities

We will discuss with you any changes in our planned approach to address the implications on the financial statements and disclosures of any significant changes within the applicable financial reporting framework or in the entity’s or group’s environment, financial condition or activities.

Materiality

The directors, or members of a limited liability partnership, have primary responsibility for ensuring that annual financial statements are free from material misstatement or error. In accounting terms, a material error is one that, if it were unadjusted, would cause a user of the financial statements to alter his view of those statements or the results or the financial position of the entity being reported on. Materiality, therefore, is incapable of monetary definition, since it has both quantitative and qualitative elements. It is necessary to consider not only the impact of an error on the financial statements as a whole, but also on the individual accounting items affected. Additionally, the cumulative impact of all unadjusted errors must be considered.

Auditors examine financial statements on a test basis. The level of testing we will carry out is based on our assessment of the risk that an item in the financial statements may be materially misstated (see below). As such, as well as for the reasons stated in the preceding paragraph, it is neither practical nor appropriate to give an indication of the value of an item we would consider to be material although, clearly, we do relatively more work in areas where the risk of misstatement is considered to be high.

A key element of our annual audit planning is to make an assessment of the risk that the financial statements might contain material errors. We base this assessment on our knowledge of the entity or group and understanding of its business and of the industry in which it operates. We assess risk both at the overall financial statement and at the individual item levels. Risk assessments may be amended as the audit progresses. The nature and volume of audit work we will conduct are directly related to the outcome of our risk assessments.

Going Concern

The economic difficulties of recent years and the subsequent paucity of available credit have resulted in far greater focus, by both directors or members of a limited liability partnership, and auditors, on the appropriateness of adopting the going concern assumption used in the preparation of financial statements. As auditor it is our responsibility to consider management’s assessment of the entity’s or group’s ability to continue as a going concern together with any relevant disclosures in the financial statements in order for them to show a true and fair view.

When making its assessment, if management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the ability to continue as a going concern, those uncertainties shall be disclosed. Management’s assessment must cover a period of at least twelve months from the date of approval of the financial statements. As auditor we shall consider the appropriateness of management’s use of the going concern assumption and related disclosures.

“Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks - Guidance for directors of companies that do not apply The UK Corporate Governance Code” was issued by the Financial Reporting Council (FRC) in April 2016. The guidance is intended to assist directors of ‘non-Code’ companies in applying the relevant requirements in accounting standards and company law, including the requirements of new UK and Ireland GAAP and the strategic report.

Small and Micro entities

Small and micro entities must assess whether the going concern basis of accounting is appropriate in preparing their financial statements. However, they are excluded from the scope of the FRC guidance on the basis that:

micro entities applying FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime are not required to provide any disclosures on the going concern basis of accounting, as their financial statements are presumed, in law, to give a true and fair view if the (minimal) legal disclosure requirements are met
small entities applying Section 1A Small Entities of FRS 102 The Financial Reporting Standard applicable in the UK and the Republic of Ireland are not required to provide disclosures on the going concern basis of accounting, although their directors or members of a limited liability partnership are encouraged to provide such disclosures, where appropriate, in meeting their responsibility to prepare financial statements that give a true and fair view; and
they are not required to prepare a strategic report.

Dealing with errors

We will record and investigate all potential errors that we discover during our work and, except for matters which we judge to be clearly trivial, communicate our findings to management directly responsible for the preparation of the company’s financial statements. These matters will include the adequacy of disclosures made within the financial statements. Management must decide which errors are material and therefore require adjustment if the financial statements are to show a true and fair view. We will ask management to provide us with written explanations supporting any decision not to make adjustments, which we will discuss with them. If we cannot agree with management’s decisions, we will consider the implications for our audit opinion.

In accordance with the requirements of ISA (UK) 260 ‘Communication with those charged with governance’, we are required to report to you all known adjusted and unadjusted errors (including those relating to disclosures within the financial statements) unless they are considered ‘clearly trivial’. We will request written representation that you are comfortable with any unadjusted errors and the reasons for adjustment not being made.

Fraud

In accordance with the requirements of ISA (UK) 240, we will consider the susceptibility of the entity or group to fraud, taking account of the business and control environment established and maintained by the directors, as well as the nature of transactions, assets and liabilities recorded in the accounting records. However, the principal responsibility for the prevention and detection of fraud rests with management, who should not rely on the audit to discharge those functions. We will request a written representation that you have disclosed to us the results of your assessment of the risk that the financial statements may be materially misstated as a result of fraud.

We will report, as soon as practicable, any suspected or discovered fraud which comes to our attention, even if the potential effect on the financial statements is immaterial, unless there is a legal or regulatory requirement to report direct to a third party.

Compliance with law and regulations

We will report, as soon as practicable, any suspected or actual non-compliance with law or regulations which comes to our attention, unless there is a legal or regulatory requirement to report direct to a third party.

Audit scope limitations

Should any factors arise during the course of our audit that may limit our scope, we will inform you immediately and seek to have the limitation removed.

Information and access

We will request a written representation that you have provided us with all relevant information and access as set out in the current letter of engagement, and that all transactions have been recorded and are reflected in the financial statements.

Audit Report and auditor’s responsibilities for the audit of the financial statements

ISA (UK) 700 (Revised June 2016) ‘Forming an opinion and reporting on financial statements’ provides auditors with options as to the location in the audit report of the description of the auditor’s responsibilities for the audit of the financial statements. Those options are:

Cross refer to the applicable version of a “Description of the Auditor’s Responsibilities for the Audit of the Financial Statements” that is maintained on the Financial Reporting Council website; or
Include the description within an appendix to the auditor’s report and include a reference to the location of the appendix within the auditor’s report; or
Include the description within the body of the auditor’s report.

It is RSM policy to adopt option (1) unless there is a compelling reason why an alternative should be adopted. We believe this policy achieves the objective of brevity within the audit report whilst at the same time providing members with the option to review the detailed description of the auditor’s responsibilities for the audit of the financial statements as promulgated by the Financial Reporting Council on its website.

Quality reviews

Independent quality reviews are carried out by our Quality Assurance Department on a rotational basis as recommended by the Risk Advisory Group and agreed by the Board of RSM UK Audit LLP. The reviews are undertaken by experienced principals and staff not connected with the audit. The inspection includes testing of the effectiveness and quality of our audits and a continuous improvement programme exists to ensure that standards are maintained and improved.

Company regulated by the FCA