104 JUST GROUP PLC Annual Report and Accounts 2020
INDEPENDENT AUDITORS’ REPORT continued
Howwe tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate. Decisions regarding scoping require a significant degree of professional judgement based on quantitative and qualitative considerations, including the size and nature of business activities in each operating entity. The Group is predominantly based in the United Kingdom and writes business across four main product lines, being Defined Benefit risk transfers, Individual Annuities, Lifetime Mortgages and Long-term Care Plans. The Group consists of the parent Company, Just Group plc, and a number subsidiary companies, of which the most significant are Just Retirement Limited and Partnership Life Assurance Company Limited, which conduct substantially all the insurance business on behalf of the Group. We have determined three components which were subject to full scope audits. This included Just Group plc, Just Retirement Limited and Partnership Life Assurance Company Limited. In addition, we performed a limited scope audit covering specific financial statement line items for a further four components. For the residual components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatements. Our scoping resulted in 90% coverage of consolidated Total assets, 98% coverage of consolidated Total liabilities and 93% coverage of consolidated Profit before tax. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate, on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows Financial statements – Group Financial statements – Company Overall materiality £24.9 million £13.0 million Howwe determined it 1% of Total equity 1% of Total equity Rationale for benchmark applied Based on the benchmarks used in the Annual Report, we consider total equity to be the most appropriate benchmark for our materiality. It represents the
In determining our materiality, we considered financial metrics which we believed to be relevant and concluded that total equity was the most appropriate benchmark. The primary use of the financial statements is to determine the entity’s ability to pay dividends and the users will therefore be focussed on distributable reserves, a balance captured using a total equity benchmark.
residual interest that can be ascribed to shareholders after policyholder assets and corresponding liabilities have been accounted for and is aligned to the primary focus of the business and users of the financial statements, being the capital position of the Group. We compared our materiality against other relevant benchmarks, such as total assets, total revenue and profit before tax to ensure the materiality selected was appropriate for our audit.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £5.7 million and £17.8 million. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to £18.7 million for the consolidated financial statements and £9.8 million for the Company financial statements. In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit Committee that we would report to themmisstatements identified during our audit above £1.25 million (Group audit) and £0.7 million (Company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. CONCLUSIONS RELATING TO GOING CONCERN Our evaluation of the directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of accounting included: • Obtained the directors’ going concern assessment and challenged the rationale for downside scenarios adopted and material assumptions made using our knowledge of the Group’s business performance, review of regulatory correspondence and obtaining further corroborating evidence; • Considered management’s assessment of the regulatory solvency coverage and liquidity position in the forward looking scenarios considered; • Assessed the impact of severe, but plausible, downside scenarios which removed certain actions which are not necessarily within management’s control; • Assessed the impact of the factors outlined in note 35, which could erode the Group’s capital resources and / or the quantum of risk to which the Group is exposed; • Assessed liquidity of the Group and Company, including the Group’s ability to pay policyholder obligations, suppliers and creditors as amounts fall due; • Assessed the ability of the Group and the Company to comply with covenants;
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