RBS 2013 Annual Report Download - page 370
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Independent auditor’s report to the members of The Royal Bank of Scotland Group plc
368
Our assessment of the risks of material misstatement Our response to those risks
The assessment of the appropriateness of the carrying value of deferred
taxation, goodwill, and other intangible assets, is highly judgemental as
these valuations depend upon assumptions on the future profitability of the
divisions of the Group as described in more detail in notes 17 and 23 to the
financial statements.
For each cash generating unit or legal entity as appropriate, we critically
assessed the forecasts of the cash flows and the appropriateness of the key
assumptions used; including forecast taxable profits, growth rates and
discount rates, in order to challenge management’s calculation of the
recoverable amount of deferred taxation, goodwill and intangible assets.
The Audit Committee’s consideration of these risks is set out on page 54.
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express an
opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks described above,
and we do not express an opinion on these individual matters.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit and in evaluating the effect of misstatements on our audit and on the
financial statements. For the purposes of determining whether the financial statements are free from material misstatement we define materiality as the
magnitude of misstatements that make it probable that the economic decisions of a reasonably knowledgeable person relying on the financial
statements would be changed or influenced.
We determined planning materiality for the Group to be £350 million, which was calculated as 0.6% of the total equity of the Group which also
represented 4% of the Group’s loss for the year. Our materiality was based on the equity of the Group as this was considered to provide a more
normalised basis given the significant volatility over recent years in the Group’s profits and losses.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £10 million, as well as differences below
that threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit scope is based on an analysis of required work in each of the Group’s divisions. Within each division an assessment is made by
geography and legal entity of those operations where full scope audits are required and those where the extent of our testing is more limited and
focused on the risks of material misstatement in the Group financial statements. As a result of these assessments audit work was undertaken in 19
countries, which accounted for 98% of the Group’s total assets and 85% of its total revenue.
The Group audit team continued to follow a programme of planned visits that has been designed so that the Senior Statutory Auditor or his designate
visits each division at least once a year.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.