united-utilities-annual-report-2015

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UNITED UTILITIES GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2015Stock Code: UU.unitedutilities.comIndependent auditor’s reportto the members of United Utilities Group PLC onlyDerivative financial instrument valuations (£477.4 million)Refer to page 80 audit committee report, page 126 accounting policies, and note A3 financial disclosures.The riskThe group has significant derivative financial instruments,the valuation of which is determined through the applicationof valuation techniques which often involve the exercise ofjudgement and the use of assumptions and estimates. Dueto the significance of financial instruments and the relatedestimation uncertainty, this is considered a key audit risk.Our responseOur audit procedures included the following:• we assessed controls over the identification,measurement and management of derivative financialinstruments and assessed the methodologies, inputs andassumptions used by the group in determining fair values;• we compared observable inputs into valuation modelssuch as quoted prices to externally available market data;and• we recalculated valuations utilising our own valuationspecialists.Additionally, we assessed whether the financial statementdisclosures of fair value risks and sensitivities appropriatelyreflect the group’s exposure to valuation risk.3. Our application of materiality and an overview of the scope of our auditIn establishing the overall audit strategy and performing the audit, materiality for the group financial statements as a wholewas set at £25.0 million, determined with reference to a benchmark of group profit before taxation, normalised to excludenet fair value losses on debt and derivative instruments, of £104.7 million, of which it represents 5.6 per cent.We report to the audit committee any corrected or uncorrected identified misstatements exceeding £0.5 million, in additionto other identified misstatements that warranted reporting on qualitative grounds.The group consists of five reporting components, of which the most significant is United Utilities Water Limited whichmakes up the vast majority of the assets, liabilities, income and expense of the group. Audits for group reporting purposeswere performed by the group audit team of four of the five components, using component materialities which ranged from£1.8 million for the smallest component to £24.0 million for United Utilities Water Limited, determined having regard to themix of size and risk profile of the group across the components. These audits covered 99 per cent of group revenue,100 per cent of group profit before taxation and 99 per cent of group total assets.4. Our opinion on the other matter prescribed by the Companies Act 2006 is unmodifiedIn our opinion:• the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the CompaniesAct 2006;• the information given in the strategic report and the directors’ report for the financial year for which the financialstatements are prepared is consistent with the financial statements; and• information given in the corporate governance statement set out on pages 58 to 103 with respect to internal control andrisk management systems in relation to financial reporting processes and about share capital structures is consistentwith the financial statements.116
UNITED UTILITIES GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2015Stock Code: UU.unitedutilities.com5. We have nothing to report in respect of the matters on which we are required to report by exceptionUnder International Standards on Auditing (UK and Ireland) (ISAs) we are required to report to you if, based on theknowledge we acquired during our audit, we have identified other information in the annual report that contains a materialinconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwisemisleading.In particular, we are required to report to you if:• we have identified material inconsistencies between the knowledge we acquired during our audit and the directors’statement that they consider that the annual report and financial statements taken as a whole is fair, balanced andunderstandable and provides the information necessary for shareholders to assess the group’s performance, businessmodel and strategy; or• the audit committee section of the corporate governance report does not appropriately address matters communicatedby us to the audit committee.Under the Companies Act 2006 we are required to report to you if, in our opinion:• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not beenreceived from branches not visited by us; or• the parent company financial statements and the part of the directors’ remuneration report to be audited are not inagreement 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• a corporate governance statement has not been prepared by the company.Under the Listing Rules we are required to review:• the directors’ statement, set out on page 75, in relation to going concern; and• the part of the corporate governance statement on pages 58 to 103 relating to the company’s compliance with the 10provisions of the 2012 UK Corporate Governance Code specified for our review.We have nothing to report in respect of the above responsibilities.Scope of responsibilitiesAs explained more fully in the directors’ responsibilities statement set out on page 111, the directors are responsiblefor the preparation of the financial statements and for being satisfied that they give a true and fair view. A descriptionof the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the company’s members as a body and is subject toimportant explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into this report as if set out in full and should be read to provide anunderstanding of the purpose of this report, the work we have undertaken and the basis of our opinions.John Luke (Senior Statutory Auditor)for and on behalf of KPMG LLPStatutory AuditorChartered AccountantsOne St Peter’s SquareManchesterM2 3AE20 May 2015STRATEGIC REPORTSHAREHOLDER INFORMATION FINANCIAL STATEMENTSGOVERNANCE117
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