INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF discoverIE Group plc CONTINUED
6.2. Performance materiality We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.
7.2. Our consideration of the control environment The Group operates a range of IT systems which underpin the financial reporting processes. These vary in complexity and can vary by geography and/or reporting entity. For certain components subject to audit procedures, we identified relevant IT systems for the purpose of our audit work. These were typically the principal Enterprise Resource Planning (ERP) systems for each relevant component that govern the general ledger and transaction accounting balances, and also included the Group’s consolidation system. Our approach was principally designed to inform our risk assessment and, as such, with the involvement of our IT specialists we obtained an understanding of relevant IT controls and tested the general IT controls for some operating entities. Consistent with the prior year, we did not plan to rely on the operating effectiveness of controls (automated or otherwise). This strategy reflected our knowledge of the control environment and in particular the disaggregated nature of the business which brings inherent segregation of duty challenges in certain smaller businesses; limited formality of the control environment with regards to retention of evidence of a control’s operation sufficient for our testing purposes; and our understanding of the Group’s ongoing programme to upgrade legacy systems. Management continue to assess and monitor the effectiveness of the Group’s control environment, along with reporting to and oversight from the Audit and Risk Committee as explained in their report on page 107. This includes consideration of developments in controls in the context of the FRC guidance and changes to the Corporate Governance Code. As the Group develops, we expect our audit approach to evolve in future years alongside developments in the internal control environment. 7.3. Our consideration of climate-related risks In planning our audit we considered the potential impact of climate change on the Group’s business and on the balances in the financial statements. The Group has assessed the risks and opportunities of climate change and has summarised the outputs of that assessment on pages 60 to 68 of this Annual Report. We have considered whether the outputs of the assessment, as disclosed in the basis of preparation, on page 155 of the Annual Report, are consistent with our understanding of the business and with the forecasts which are used to support account balances (including goodwill), the use of the going concern assumption, and the explanations given in the viability statement. We did not identify any additional risks of material misstatement as a result of the assessment and have considered it as part of our wider response to forecasts, and audit of related account balances.
In considering the disclosures presented as part of the Strategic Report, we engaged our Environmental, Social and Governance (“ESG”) specialists to assist in evaluating whether appropriate disclosures have been made in the financial statements with reference to the Task Force on Climate-Related Financial Disclosures (“TCFD”) and Climate- related Financial Disclosure (“CFD”) requirements. We have also assessed whether these disclosures are materially consistent with the financial statements and reflect our understanding of the Group’s approach to climate. 7.4. Working with other auditors The audit work completed by our component audit teams was performed under the direction and supervision of the Group audit team. We were directly involved in planning discussions, including holding partner-led discussions related to fraud, and risk assessment conclusions. We provided our component teams with detailed instructions and maintained frequent communication throughout the planning, interim, and final audit stages. We reviewed component audit working papers which were significant to the Group audit conclusions, and challenged findings and observations based on reporting we received. Senior members of our Group audit team visited seven component locations across the UK, the US, India, Sri Lanka, and Germany. We attended all audit close meetings either in-person or via conference calls. 8. Other information The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
Group financial statements
Company financial statements
Performance materiality
65% of Group materiality (2025: 65%)
65% of Company materiality (2025: 65%)
Basis and rationale for determining performance materiality
In determining performance materiality, we considered the following factors: a. the quality of the control environment and whether we were able to rely on controls; b. the disaggregated nature of the Group and relative size of individual businesses; c. the nature, volume and size of misstatements in the previous audit; and d. low turnover of management and key accounting personnel.
6.3. Error reporting threshold We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of £115,000 (2025: £115,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. 7. An overview of the scope of our audit 7.1. Identification and scoping of components The Group is highly disaggregated and operates in 20 countries, with 40 manufacturing locations. Our definition of component is aligned to the reporting unit structure within the Group. Our audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group and component level. Our determination of which components to include in our audit scope considered: ■ qualitative and quantitative risk factors, in consideration of the Group materiality of £2.3 million; ■ the structure of internal reporting within the Group; ■ changes to the Group arising from acquisitions, disposals, or restructuring events; and ■ the outcome of recent internal audit reports, or other indications of increased risk identified by management or the directors. 71% 29% Revenue
The parent company is located in the UK and is audited directly by the Group audit team. The Group audit team also executed the in-scope component audits in the UK and US. As each of the components maintains separate financial records, we have engaged component auditors from the Deloitte member firms in China, Denmark, France, Germany, India, Norway, Poland, Slovakia, Sri Lanka and Sweden to perform procedures under our direction and supervision as further described in section 7.4 below. For the purposes of our Group audit we have performed audit procedures on one or more classes of transactions, or account balances, on components which represent 71% (2025: 72%) of revenue, 82% (2025: 84%) of profit before tax, and 84% (2025: 79%) of net assets. We used component auditors to test specific account balances in 25 (2025: 28) reporting units across 13 countries and the Group engagement team performed audits on 7 (2025: 7) reporting units at group level including the Company. Our work on the components, including the parent company, was executed at levels of performance materiality applicable to each individual component, which were lower than Group performance materiality and ranged from £0.7 million to £1.3 million (2025: £0.6 million to £1.3 million). At a Group level we have tested the consolidation processes, and have performed a review at group level on components and balances that were not subject to audit procedures. 18% Profit before tax 16% Net assets 71% 29% Revenue 71% 29% Revenue 82% 18% Profit before tax
84%
82%
Specified account balances and transactions Review at group level
16%
18%
29%
We have nothing to report in this regard.
Profit before tax
Revenue
Net assets
71%
84%
82%
Specified account balances and transactions Review at group level
16%
18%
144
145
discoverIE Group plc Innovative Electronics
Annual Report and Accounts for the year ended 31 March 2026
Profit before
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