The following text is incorporated by reference into the audit report of KPMG LLP or KPMG Audit Plc that cross-refers to this page.

The purpose of our audit work and to whom we owe our responsibilities

Our report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and the terms of our engagement by the company. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and any further matters we are required to state to them in accordance with the terms agreed with the company and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members, as a body, for our audit work, for our report, or for the opinions we have formed.   

Respective responsibilities of directors and auditor 

The directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the UK Ethical Standards for Auditors. 

Scope of an audit of financial statements performed in accordance with ISAs (UK and Ireland) 

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. 

The risks of material misstatement detailed in the section of our report titled “Our assessment of risks of material misstatement”, are those risks that, in our professional judgement, had the greatest effect on: the overall audit strategy; the allocation of resources in our audit; and directing the efforts of the engagement team. Our audit procedures relating to these risks were designed in the context and solely for the purposes of our audit of the financial statements in accordance with the requirements of the Companies Act 2006. 

Any findings with respect to these risks are therefore limited by the scope of our audit and are incidental to our opinion on the financial statements as a whole. We do not express discrete opinions on individual risks or the separate elements of the financial statements to which these individual risks relate. Our opinion on the financial statements is not modified with respect to any of these risks.

Materiality is a term used to describe the acceptable level of precision in financial statements. We identify a monetary amount of ‘materiality for the financial statements as a whole’ based on our judgement as to the quantitative amount of a misstatement or an omission that could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. The concept of materiality is applied both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in our report. 

When planning and performing the audit, materiality is used in evaluating the risk of material misstatement for each financial statement caption, and therefore the extent and persuasiveness of audit evidence required by us. In turn, materiality will also define the level of precision applied to individual audit procedures.

Materiality is also used in the calculation of the quantitative level below which individual misstatements are considered to be clearly trivial and do not need to be reported to those charged with governance or corrected. If, in the specific circumstances of the entity, there is one or more particular classes of transaction, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements, we also determine the materiality level or levels to be applied to those particular classes of transaction, account balances or disclosures.

When evaluating the effect of identified misstatements on the audit, and of uncorrected misstatements on the financial statements, we request that misstatements are corrected and then apply judgement in identifying whether an uncorrected misstatement or omission is material. To do so we make reference to the monetary amount of ‘materiality for the financial statements as a whole’ determined when planning the audit. The materiality determined when planning the audit does not necessarily establish an amount below which uncorrected misstatements, individually or in the aggregate, will always be evaluated as immaterial. We also consider the impact of misstatements on individual account balances or classes of transaction. 

Furthermore, the qualitative circumstances related to some misstatements may cause us to evaluate them as material even if they are below the relevant quantitative materiality level. Similarly, the circumstance related to some misstatements (for instance those relating to classification or presentation) may cause us to evaluate them as not material to the financial statements as a whole even if they are above the relevant quantitative materiality level.

Whilst the audit process is designed to provide reasonable assurance of identifying material misstatements or omissions it is not guaranteed to do so. Rather we plan the audit to determine the extent of testing needed to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements does not exceed materiality for the financial statements as a whole. This testing requires us to conduct significant depth of work on a broad range of assets, liabilities, income and expenses as well as devoting significant time of the most experienced members of the audit team, in particular the senior statutory auditor, to subjective areas of the accounting and reporting process.