BP 2015 Annual Report Download - page 103

The group audit team continued to follow a programme of planned visits designed to ensure that the Senior Statutory Auditor or his designate visits
significant locations to ensure the audit is executed and delivered in accordance with the planned approach and to confirm the quality of the audit work
undertaken. During the current year’s audit cycle, visits were undertaken by the primary audit engagement team to the component teams in the US,
Angola, Azerbaijan, Germany and Russia. Part of the purpose of these visits is to confirm that appropriate procedures have been performed by the
auditors of the components and that the significant audit areas were covered as communicated in the detailed audit instructions, including the risks of
material misstatement as outlined above. The primary audit engagement team review included examining key working papers and conclusions where
these related to areas of management and auditor judgement with specific focus on the risks detailed above. The primary audit engagement team also
participated in the component teams’ planning, during visits made earlier in the audit period. Telephone and video meetings were held with the
auditors at locations which the primary audit engagement team did not visit in person. This, together with additional procedures performed at group
level, gave us appropriate evidence for our opinion on the group financial statements.
One of the significant locations is Russia, which includes Rosneft, a material associate not controlled by BP. We were provided with appropriate access
to Rosneft’s auditor in order to ensure they had completed the procedures required by ISA 600 on the financial statements of Rosneft, used as the
basis for BP’s equity accounting.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in
forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the group to be $0.5 billion (2014 $1 billion), which is 5.7% (2014 5%) of underlying replacement cost profit (as
defined on page 258) before interest and taxation. We believe that underlying replacement cost profit before interest and taxation is the most
appropriate measure upon which to calculate materiality, due to the fact it excludes the impact of both changes in crude oil and product prices and
items disclosed as non-operating items that can significantly distort the group’s results.
During the course of our audit, we re-assessed initial materiality in the context of the group’s performance and this resulted in no change from our
original assessment of materiality.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the group’s overall control environment, our judgement was that
performance materiality was 75% (2014 75%) of our materiality, namely $375 million (2014 $750 million). We have set performance materiality at
this percentage to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a
percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and risk of the
component to the group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of
performance materiality allocated to components was $75 million to $300 million (2014 $150 million to $640 million).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the audit committee that we would report to them all uncorrected audit differences in excess of $25 million (2014 $50 million),
which is set at 5% of materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, weread
all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements andto
identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of directors’ responsibilities set out on page 93, 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
Auditing Practices Board’s Ethical Standards for Auditors.
This 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. 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 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 this report, or for the opinions we have formed.
This page does not form part of BP’s Annual Report on Form 20-F as filed with the SEC.
BP Annual Report and Form 20-F 2015 99
Financial statements