AUDIT AND RISK COMMITTEE REPORT CONTINUED
Standing items The following matters were covered at all of the above Audit and Risk Committee meetings: ■ Private session with the external auditor without management presence ■ Update on internal audits conducted and progress with management’s implementation of actions ■ Update on alignment of newly acquired businesses to Group policies and procedures ■ Review of regulatory updates ■ Update on progress in complying with the revised requirements of Provision 29 of the UK Corporate Governance Code ■ Update on risk management projects ■ Update on fraud and whistleblowing reports After each meeting of the Committee, the Chair of the Committee reports to the Board, to enable the Board to discharge its responsibilities. Fair, balanced and understandable The Committee has, at the request of the Board, reviewed this year’s Annual Report and Accounts to assess whether
Preparation for changes in audit and governance reform
it presents a fair, balanced and understandable view of the Company’s position and prospects. The Committee’s review took account of the process by which the Annual Report and Accounts are prepared, which includes analysis of changes to applicable reporting requirements and standards, and a robust schedule of review and verification by senior management and external advisers to ensure disclosures are accurate. The Committee is satisfied that, taken as a whole, the Annual Report and Accounts is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group’s position and performance, business model and strategy, and has advised the Board accordingly.
The Committee was satisfied that each of the matters set out above had been fully and adequately addressed by the Executive Directors and then reviewed by the external auditor, and that the disclosures made in this Annual Report and Accounts were appropriate. In respect of each significant matter reviewed, the Committee considered the assumptions made, the reasonableness of judgements made and how such matters have been presented. The Committee evaluated and challenged each of these to ensure that the Annual Report and Accounts are complete and accurate in all material respects. Tax and Treasury The Committee typically meets annually with the Head of Tax and the Group Treasurer to review the key tax and financing matters affecting the Group and to understand the areas of focus in the forthcoming year. Risk management and internal controls The Board has overall responsibility for the Group’s risk appetite and risk management strategy, including determining the nature and extent of the risks it is willing to take in achieving the Group’s strategy and objectives. In order to discharge these duties effectively, the Board is also required to ensure the effectiveness of the risk management strategy and framework, and internal controls systems. Oversight of risk management is undertaken by the Committee, in accordance with its terms of reference. In order to ensure the effectiveness of the risk management and internal control systems, the Committee undertook a number of key activities during the year, including: ■ Consideration of the risk management activities during the year, including a particular focus on cyber security, and any related incidents, including how those incidents were handled and whether any action was required, either in response to the specific incident itself or in the business more widely in response to lessons learnt from any such incident ■ Review of risk management and reporting to ensure effectiveness and that the balance between risk and opportunity was in keeping with the Group’s risk appetite ■ Regular meetings with members of senior management and the Group Internal Audit function ■ Review of reports on control matters and challenge of management’s response to any matters raised ■ Review of the maturity assessment conducted against the Group’s Risk Management function to ensure that it continues to align with best practice ■ Evaluation and challenge of the results and recommendations of audits undertaken by the Group Internal Audit function and the external auditor ■ Review of the resource requirements of the Group Internal Audit function ■ Review of the annual Audit and Risk Committee agenda
The Audit and Risk Committee, on behalf of the Board, has continued to oversee the Group’s preparations for compliance with Provision 29 of the UK Corporate Governance Code, which will require the Board to make an explicit declaration on the effectiveness of the Group’s material internal controls from 2027. During the year, the Committee has reviewed and agreed the Group’s approach to identifying and documenting its material controls, together with the supporting assurance and reporting mechanisms required to underpin the Board’s future declaration. This builds on the Group’s established risk management and internal control framework and supports a structured and robust basis for ongoing monitoring and review. Further enhancements to the Group’s internal control and risk management processes have been implemented during the year, and the Committee is encouraged by the continued progress in enhancing the maturity of the Group’s control environment. Key activities undertaken include: ■ Embedding critical controls aligned to the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) 2013 framework, including completion of associated remediation actions ■ Issuing updated Group Accounting and Internal Controls Manuals to all Group companies ■ Issuing an updated Group Reporting Manual ■ Rolling out and embedding a revised Cyber Security Framework aligned to the Center for Internet Security (“CIS Critical Security Controls v8”) ■ Further embedding the Group’s governance, risk and compliance (“GRC”) system to support the documentation, testing and evidencing of internal controls ■ Defining a target operating model for risk, control and internal audit ■ Receiving regular and detailed updates at each Committee meeting on progress against the internal controls enhancement programme In line with its oversight responsibilities, the Committee also requested a full dry run of the processes supporting the Provision 29 declaration. This exercise was completed following the year end and provided valuable insight into the operation of the Group’s control framework, including the effectiveness of reporting and assurance processes. The Committee has reviewed the outcomes of this exercise and is monitoring the implementation of identified improvements, which will further strengthen the Group’s readiness for compliance. The Committee will continue to engage closely with management and monitor developments in best practice and regulation to ensure the Group’s approach to internal controls remains robust and appropriate.
Significant accounting matters considered and decisions taken
As part of the monitoring of the integrity of the financial statements, the Committee assesses whether suitable accounting policies have been adopted and whether management has made appropriate estimates and judgements. The viewpoint of the external auditor is sought when undertaking these assessments. During the year, the Committee’s review of significant accounting and financial reporting issues included a focus on the following key areas:
Impairment of goodwill
Consideration of the carrying value of goodwill and the assumptions underlying the impairment review. The judgements in relation to goodwill impairment largely relate to the assumptions underlying the calculations of the recoverable amount of each of the Group’s four operating units being tested for impairment, primarily the achievability of long-term plans and macroeconomic assumptions underlying the valuation process. The assumptions are sensitised to ensure that there is adequate headroom between the recoverable amount and the carrying value of the four operating units being tested for impairment. A review of the accounting for acquisitions in FY 2025/26, including the appropriateness of the assumptions used in assessing the fair value of the assets and liabilities acquired, as well as assumptions used to estimate the fair value of the contingent consideration at its initial recognition and its subsequent measurement, including discount rate and trading forecasts. A review of the appropriateness of the assumptions used in the valuation of the legacy defined benefit pension scheme under IAS 19 – Employee Benefits. A review of the appropriateness of the assumptions used in the recognition and valuation of judgemental provisions, which relate mainly to onerous contracts, inventory, severance, indemnities, acquisition earn-out arrangements, long-term incentive plans, restructuring and integration. A review of the appropriateness of items disclosed as acquisition and disposal-related costs/ (credit) (including amortisation of acquired intangibles and acquisition and disposal expenses) in the Supplementary Statement of Profit or Loss Information and notes to the Group Financial Statements, in line with the Group’s stated policy. An evaluation of the impact of climate change on the Group in accordance with the TCFD framework. The process involved a review of risks and opportunities from climate change and evaluating the quantifiable financial impact on the Group under different climate change scenarios. A review of the paper prepared by management on the Group’s going concern and viability assessment, including underlying forecasts, cash flow assumptions and downside scenarios.
Accounting for acquisitions
Valuation of the legacy defined benefit pension scheme The recognition and valuation of judgemental provisions
Presentation of adjusted profit adjustments
Climate-related financial disclosures
Going concern and viability-related financial disclosures
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discoverIE Group plc Innovative Electronics
Annual Report and Accounts for the year ended 31 March 2026
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