Independent auditor’s report continued to the members of NCC Group plc
2 Key audit matters: our assessment of risks of material misstatement continued The risk Our response Assurance revenue recognition in the cut off period Contract assets – accrued income £21.3m; (2020: £17.6m) Contract liabilities – deferred income 2021/2022 sales Incentives and pressures to meet market expectations, increase the risk of fraudulent revenue recognition. There is a specific risk around the cut-off
Our procedures included: • Tests of detail: We agreed a sample of revenue transactions within the cut off period pre and post year end to supporting documentation to assess whether these have been recorded in the correct accounting period. This also included specific item testing of a sample of items held in accrued and deferred income at the year end. We performed an assessment of whether over and under statements of revenue, accrued income and deferred income identified through these procedures were material • Analytic Sampling: We also used data & analytics tools to identify journals with unusual account combinations involving revenue and performed testing over the identified items. This included procedures to understand the nature and substance of the transaction and obtaining supporting documentation Our results We found the recognition of Assurance revenue in the cut-off period to be acceptable (2020 result: acceptable). Our procedures included: • Tests of detail: We compared the carrying amount of investments and intercompany receivables with the relevant subsidiaries’ draft balance sheet as at 31 May 2021 to identify whether their net assets, being an approximation of their minimum recoverable amount, were in excess of their carrying amount and assessing whether those subsidiaries have historically been profit-making • Assessing subsidiary audits: We assessed the work performed by the group and subsidiary audit team on a sample of those subsidiaries and considering the results of that work, on those subsidiaries’ profits and net assets Our results We found the Group’s assessment of the recoverability of the parent company’s investment in subsidiaries to be acceptable (2020 result: acceptable).
period at the year end, with regards to ensuring revenue, including accrued and deferred income are recognised in the correct accounting period. This is a particular risk for projects in the assurance business, where projects are ongoing at the year end and there are judgements taken in determining completion and progress to date.
£32.6m; (2020: £29.7m) Refer to pages 144–149 (accounting policy) and pages 166 and 171 (financial disclosures)
Recoverability of parent company’s investments in subsidiaries and intercompany receivables Investments – £151.8m (2020: £78.3m) Intercompany receivables £162.6m (2020: £142.0m) Refer to page 144 and 151 (accounting policy) and pages 166 and 182 (financial disclosures)
Low risk, high value The carrying amount of the Parent Company’s investments in subsidiaries and intercompany receivables represents 48% (2020: 34%) and 52% (2020: 63%) respectively of the Company’s total assets. Their recoverability is not at a high risk of significant misstatement or subject to significant judgement. However, due to their materiality in the context of the Parent Company financial statements, this is the area that had the greatest effect on our overall Parent Company audit.
For each of the key audit matters reported, we performed the detailed tests above rather than seeking to rely on any of the Group’s controls. This is because our knowledge of the design of these controls indicated that we would not be able to obtain the required evidence to support reliance on controls. We continue to perform procedures over going concern and the impact of uncertainties due to the UK exiting the European Union on our audit. However, following the Group’s trading in the period, as well as the UK’s departure from the European Union and the end of the transition period in January 2021, we have not assessed these as one of the most significant risks in our current year audit and, therefore, they are not separately identified in our report this year.
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NCC Group plc — Annual report and accounts for the year ended 31 May 2021
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