5. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These 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. 5.1. Appropriateness of revenue recognised in the correct accounting period (revenue ‘cut-off’) INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF discoverIE Group plc CONTINUED
6. Our application of materiality 6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Materiality
£2.3 million (2025: £2.3 million)
£2.0 million (2025: £2.0 million)
Key audit matter description
The Group recognised revenue of £443.3 million in 2026 (2025: £422.9 million) of which the significant majority is earned through sale of goods in the form of a range of customised electronics for industrial applications. Refer to notes 4 and 5 to the Group financial statements for analysis by nature and operating segment. The Group recognises revenue from sale of goods at a point in time on shipment, on delivery, or when goods are accepted by the customer, depending on the incoterm used for the sale transaction. Revenue should be recognised once control of goods has passed to the customer in line with the relevant incoterms and the Group’s revenue recognition policy. The Group is highly disaggregated and operates in a number of different jurisdictions, trading under a range of incoterms, and utilises different IT infrastructure in different businesses. That leads to a risk that revenue is recognised at an inappropriate time due to an incorrect determination of when control has passed. There could be an incentive to recognise revenue in one period or another, in order to meet budgets or targets, and so we consider the cut-off of revenue to represent a key audit matter and a potential fraud risk. Refer to note 2 for the Group’s revenue recognition policy and note 5 for the Group’s segmental reporting showing revenue by operating segment. We have performed the following procedures to address this key audit matter: ■ obtaining an understanding of the revenue cycle and relevant controls in place to address the risk of inappropriate cut-off; ■ identified a pre- and post- year end ‘risk period’ for sales transactions for which there may be judgement as to whether control has passed as at the year-end and assessing a sample of those sales transactions against purchase orders, despatch documentation, and sales invoices, as necessary in order to determine whether revenue is recognised in the correct period; and ■ testing credit notes issued post year end and assessing the appropriateness of the reason for the credit note while also evaluating whether it aligns with the Group’s revenue recognition policy. We concluded that the revenue recognition policies of the Group, relating to the timing of revenue recognition and the point at which control passes, are reasonable, and that they are applied appropriately.
Basis for determining materiality
We determined materiality on the basis of 5% of forecasted adjusted profit before tax, this represents 4.4% of final adjusted profit before tax, as disclosed in note 6 to the financial statements. (2025: represented 4.6% of final adjusted profit before tax). We have used adjusted profit before tax for determining materiality. Adjusted profit before tax is defined as profit before tax excluding acquisition and disposal related costs. This is considered to be a key benchmark as this metric is important to the users of the financial statements (investors and analysts being the key users for a listed entity) because it provides a means of evaluating performance of the business on a consistent basis and hence its ability to pay a return on investment to the investors.
Company materiality equates to 1% of net assets (2025: 0.5% of net assets), which is capped at 90% of Group materiality.
Rationale for the benchmark applied
As the ultimate holding company of the Group we consider net assets to be an appropriate benchmark for our materiality determination.
How the scope of our audit responded to the key audit matter
£2.3m
Group materiality
Component performance materiality range Audit and Risk Committee reporting threshold
£0.7m - 1.3m
Key observations
£0.12m
Adjusted PBT (£51.9m) Group materiality
142
143
discoverIE Group plc Innovative Electronics
Annual Report and Accounts for the year ended 31 March 2026
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