QinetiQ Annual Report 2017

98 Governance QinetiQ Group plc Annual Report and Accounts 2017
Independent auditor’s report to the
members of QinetiQ Group plc only continued
Assessing disclosures: Assessing whether the Group’s
tax disclosures are appropriate and in accordance with
relevant accounting standards.
Retirement benefits – surplus £156.0 million
(2016: deficit £37.7 million)
PBT Continuing Operations
£116.1m (2016: £108.7m)
Materiality
£5.5m (2016: £5.2m)
£5.5m
Whole financial
statements
materiality
(2016: £5.2m)
Refer to page 61(Report of the Audit Committee),
page 109 (accounting policy note) and page 138
(financial disclosures).
£3.9m
Materiality at
components
(2016: £3.6m)
£0.275m
Misstatements reported
to the Audit Committee
(2016: £0.250m)
The risk:
Subjective valuation
Significant estimates are made in valuing the Group’s
retirement obligation included in the net surplus in
respect of the pension scheme, including mortality,
price inflation and discount rates. Small changes
in the assumptions and estimates used to value the
net pension surplus would have a significant effect
on the Group’s financial position.
PBT Continuing Operations
Group materiality
Group revenue
22%
78%
19%
81%
Our response:
Our procedures included:
Benchmarking assumptions: Challenging, with the
support of our own actuarial specialists, the key
assumptions applied being the discount rate, inflation
rate and life expectancy assumptions used against
externally derived data;
Group profit before tax
Assessing disclosures: Considered the adequacy of
disclosures in respect of the sensitivity of the surplus
to changes in the key assumptions.
13%
87%
10%
90%
3. Our application of materiality and an overview
of the scope of our audit
Materiality for the Group financial statements as a whole
was set at £5.5 million (2016: £5.2 million), determined
with reference to a benchmark of Group profit before
taxation, normalised to exclude this year’s specific
adjusting items as disclosed in note 4, of £116.1 million
(2016: £108.7 million), of which it represents 4.7% (2015:
4.8%). The Group audit team performed procedures on
those items excluded from normalised Group profit
before taxation.
We reported to the Audit Committee any corrected or
uncorrected misstatements exceeding £0.275 million
(2016: £0.250 million), in addition to other identified
misstatements that warranted reporting on qualitative
grounds. The audit of QinetiQ Limited, the main UK
trading company, and goodwill arising on consolidation
accounted for the following percentages of the Group’s
results: 78% of total Group revenue (2016: 81%); 87% of
the total profits and losses that made up the Group’s
underlying profit before taxation (2016: 90%); and 81%
of total Group assets (2016: 69%). For the remaining
components, we performed analysis at an aggregate
Group level to re-examine our assessment that there
were no significant risks of material misstatement
within these.
Group total assets
19%
81%
31%
Full scope for Group audit purposes 2017
Full scope for Group audit purposes 2016
Residual components
69%