Page 184 - Sigmaroc Annual-Report 2023

SIGMAROC ANNUAL REPORT 2023 GOVERNANCE REPORT
Independent Auditor’s report to the members of SigmaRoc plc
OUR APPLICATION OF 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,
£5.80 million
(2022: £5.20 million)
1% (2022: 0.97%) of turnover
We considered revenue to be the most relevant performance indicator of the Group as it is a significant driver of profit or loss for the year.
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 to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole.
£3.30 million
(2022: £3.00 million)
1% (2022: 0.86%) of net assets
The Company operates primarily as a holding company which holds the main debt facility for the Group and as such, we consider net assets as the key metric.
Group financial statements
Company financial statements
Materiality for the financial statements as a whole (‘overall materiality’)
Basis of materiality
Rationale Benchmark
Rationale Percentage
The percentage applied to the benchmark has been selected to bring into scope all significant classes of transactions, account balances and disclosures relevant for the shareholders, and also to ensure that matters that would have a significant impact on the results were appropriately considered.
£4.06 million £2.31 million
(2022: £3.64 million) (2022: £2.10 million)
In determining performance materiality, we considered the following factors:
• the number and quantum of identified misstatements in the prior year audit;
• management’s attitude to correcting misstatements identified;
• our cumulative knowledge of the Group and Company and their environment, including industry specific trends;
• the consistency in the level of judgement required in key accounting estimates;
• the stability in key management personnel; and
Performance materiality
70% (2022: 70%) of overall materiality
• the level of centralisation in
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.
For each significant component in the scope of our audit, we allocated a materiality based on the maximum aggregate component materiality. The range of materiality allocated across components was between £4.50 million and £1.90 million (2022: between £3.30 million and £2.00 million). Materiality for material non-significant components of £3.14 million (2022: £2.86 million) was calculated based on a percentage of the Group’s revenue.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £290,000 (2022: £260,000) as well as misstatements below
the Group’s financial reporting controls and processes.
those amounts that, in our view, warranted reporting for qualitative reasons.
OUR APPROACH TO THE AUDIT
In designing our audit, we determined materiality, as above, and assessed the risk of material misstatement in the financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors and considered future events that are inherently uncertain. We note that the Group has made acquisitions of subsidiary undertakings and has performed a purchase price allocation during the year on the goodwill asset recognised in the prior year. Both of these areas are inherently complicated and require a significant amount of judgement by management. We also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by management that represented a risk of material misstatement due to fraud.