Independent auditor’s report continued to the members of NCC Group plc
• the related statement under the Listing Rules set out on pages 128–129 is materially consistent with the financial statements and our audit knowledge. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will continue in operation. 6 Fraud and breaches of laws and regulations – ability to detect Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: • Enquiring of directors, the audit committee and internal audit; and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud. • Reading Board, audit committee and remuneration committee minutes. • Considering remuneration incentive schemes and performance targets for directors including the EPS target for management remuneration. • Using analytical procedures to identify any unusual or unexpected relationships. We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication from the Group to the component audit team of relevant fraud risks identified at the Group level and request to the component audit team to report to the Group audit team any instances of fraud that could give rise to a material misstatement at Group level. As required by auditing standards, and taking into account possible pressures to meet expectation of third parties, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition, in particular the risk that assurance revenue is recorded in the wrong period and the risk that Group and component management may be in a position to make incorrect accounting entries. On this audit we do not believe there is a fraud risk related to software resilience revenue recognition because there is minimal opportunity for manipulation since the revenue stream is relatively straightforward and is typically based on annual agreements which set out the period over which revenue is to be recognised. We did not identify any additional fraud risks. Further detail in respect of assurance revenue recognition is set out in the key audit matter disclosures in section 2 of this report.
5 Going concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial resources, and metrics relevant to debt covenants, over this period were: • A material and unexpected reduction in revenue and increase in customer attrition due to future events, such as economic downturn. • Further inflationary pressures arising, due to future events such as economic downturn. We also considered less predictable but realistic second order impacts, such as the erosion of customer confidence. We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks, individually and collectively, against the level of available financial resources and covenants indicated by the Group’s financial forecasts. Our procedures also included: • A review of the availability of cash and the cash flow forecasts to determine whether the assumptions are realistic, achievable and consistent with the external and internal environment; we assessed loan covenant compliance to consider the headroom forecast for each financial covenant. • An evaluation of sensitivities over the level of financial resources indicated by the Group’s financial forecasts, taking account of reasonably possible (but not unrealistic) adverse effects that could arise from the risks identified individually and collectively. • An assessment of the adequacy of the going concern disclosure • we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; • we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company’s ability to continue as a going concern for the going concern period; • we have nothing material to add or draw attention to in relation to the directors’ statement in note 1 to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s use of that basis for the going concern period, and we found the going concern disclosure in note 1 to be acceptable; and in note 1 to the financial statements. Our conclusions based on this work:
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NCC Group plc — Annual report and accounts for the year ended 31 May 2022
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