Page 42 - Hardide-Annual-Report-2021
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 42
Independent Auditor's Report
and a provision for an onerous lease of £4,000 (2020: £51,000). The assessment of these provisions requires judgement and estimations to be made by the Group. The estimates have been made based on
the anticipated costs to restore the premises to their original condition and project timetables which are inherently uncertain.
How the scope of our audit responded to the risk
To assess the appropriateness and completeness of provisions recognised in the year we performed the following procedures:
• gained an understanding through walkthroughs performed and discussions with management of the process in place for calculating provisions;
• examined the lease agreement for the Group’s contractual obligations on termination of the lease;
• assessed the estimations and inputs included in the calculations, reviewing the appropriateness of the assumptions made;
• performed recalculations on the provisions to check the accuracy of the calculations;
• reviewed for additional sources of documentation to assess for completeness of the provision; and
• considered the disclosures in the financial statements regarding the provisions.
Key observations
The results of our testing were satisfactory and we consider the disclosures surrounding provisions to be appropriate.
GOING CONCERN
Risk description
Management are required to prepare the financial statements on the going concern basis unless they either intend to liquidate the Group, or to cease trading, or have no realistic alternative but to do so. In assessing going concern, management make estimates and judgements relating to the future that are considered to be reasonable but that are inherently uncertain.
How the scope of our audit responded to the risk
During the course of our audit we performed the following procedures to address the risk of going concern:
• gained an understanding through walkthroughs performed and discussions with management of the process in place for reviewing going concern;
• reviewed budgets and forecasts prepared by management and considered the assumptions made for reasonableness;
• considered a range of severe but plausible downside scenarios and reviewed the impact on management’s assessment of the Group being a going concern; and
• reviewed the adequacy of the disclosures in respect of going concern.
Key observations
The results of our testing were satisfactory and we consider the disclosures surrounding going concern to be appropriate.
OUR APPLICATION OF 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.
On the basis the Group focus is on increasing sales significantly and transitioning from significant losses, towards break-even and profitability, a turnover rather than loss-based measure was deemed the most appropriate benchmark to use to calculate materiality. Having regard to both the size of the business and
its performance, 1.5% of turnover was viewed as an appropriate level to set materiality. Based on our professional judgement materiality was set at £54,000 (2020: £71,000). Performance materiality of £38,000 (2020: £50,000) was applied for testing and it was agreed with the Board that we would report on all audit differences in excess of £2,700 (2020: £3,500), as well
as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report on disclosure matters that we identified when assessing the overall presentation of the financial statements.
Materiality in the prior year was based on a turnover based benchmark.
The parent company does not generate significant sales and incurs significant expenditure. As a result,
we believe a loss-based measure to be the most appropriate benchmark to use to calculate materiality. Having regard to both the size of the company and
its performance, 5% of the loss before tax, after adjusting for foreign exchange gains and losses on intercompany balances and intercompany charges, was viewed as an appropriate level to set materiality, capped at an allocation of Group materiality. Based
on our professional judgement materiality was set at £54,000 (2020: £66,000). Performance materiality of £38,000 (2020: £46,000) was applied for testing and it was agreed with the Board that we would report on
all audit differences in excess of £2,700 (2020: £3,300), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report on disclosure matters that we identified when assessing the overall presentation of the financial statements.
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 £30,000 and £54,000.
Materiality in the prior year was based on a pre-tax loss-based benchmark.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the parent Company's ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.























































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