Philips 2015 Annual Report Download - page 179

Company nancial statements 13.5
Annual Report 2015 179
We agreed with the Supervisory Board that misstatements
in excess of EUR 3 million, which are identified during the
audit, would be reported to them, as well as smaller
misstatements that in our view must be reported on
qualitative grounds
.
Scope of our group audit
Koninklijke Philips N.V. is the parent company of the Philips
Group (the Group). The financial information of the Group is
included in the financial statements of Koninklijke Philips N.V
.
Considering our ultimate responsibility for the opinion, we
are also responsible for directing, supervising and performing
the group audit. In this context, we have determined the
nature and extent of the audit procedures to be performed
for group entities (components). Decisive factors were the
significance and / or the risk profile of the components. On
this basis, we selected the components for which an audit
of account balance or specified procedures had to be
performed. Furthermore, we have determined the nature and
extent of the audit procedures that we perform at group
level, sector level and in the accounting operations centers.
We scope components to be involved with the audits of
account balances into the group audit where account
balances are of significant size, have significant risks of
material misstatement to the Group associated with them or
are considered significant for other reasons. Where this does
not give adequate coverage we use our judgment to scope
additional procedures on account balances or request the
component auditors to perform specified procedures. As a
result of our scoping of account balances and the
performance of audit procedures at different levels in the
organization, our actual coverage varies per account balance
and the depth of our audit procedures per account balance
varies depending on our risk assessment.
Accordingly, our audit coverage per account balance
included in the key audit matters stated below, can be
summarized as follows:
Coverage in %
2015
Goodwill
81
89
11 23
15
2
88 98
7
62
19
Income
taxes1)
Revenue2) Legal Acquisitions
and disposals
Limited procedures
Central audit procedures
Local audit procedures
Combined central and
local audit procedures
5
1)
2)
The number of local entities in scope is 10
The number of local entities in scope is 37
Audits of account balances or specified procedures were
performed to materiality levels, the majority of which were
based on the relevant local statutory audit materiality which
is considerably lower than Group materiality. In the other
cases, component materiality was determined by the
judgment of the group auditor, having regard to the
materiality for the financial statements as a whole and the
reporting structure within the Group. Component materiality
did not exceed EUR 42 million and the majority of our
component auditors applied a component materiality that is
significantly less than this threshold.
We sent detailed instructions to all component auditors,
covering the significant areas that should be covered (which
included the relevant risks of material misstatement detailed
below) and set out the information required to be reported
to the group auditor. Based on our risk assessment, the group
auditor visited component locations in China, Poland, the
Netherlands, Saudi Arabia, the United Kingdom, Japan and
multiple component locations in the USA. Most of our
component auditors visited the Netherlands in 2014 to attend
our global audit conference, which is held every three years,
to discuss the Group audit, risks, audit approach and
instructions. Telephone calls were also held with the auditors
of components. During these visits and meetings, the audit
approach, findings and observations reported to the group
auditor were discussed in more detail. We have used to a
limited extent other (non-KPMG) auditors for audit
procedures on certain components outside the Netherlands.
By performing the procedures mentioned above at
components, combined with additional procedures at group
level, sector level and at accounting operations centers, we
have been able to obtain sufficient and appropriate audit
evidence regarding the group’s financial information to
provide an opinion on the financial statements.
Our key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements. We have communicated the key audit
matters to the Supervisory Board. The key audit matters are
not a comprehensive reflection of all matters discussed.
Key audit matters were addressed in the context of our audit
of the financial statements as a whole and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters.
Compared to last year the intended separation of the
Company into HealthTech and Lighting, the acquisition of
Volcano Corporation and the continued classification of the
Lumileds and Automotive business as Assets Held for Sale
and Discontinued operations have been included as a key
audit matter.