John Lewis Partnership plc Annual Report and Accounts 2014
123
Overview of our audit approach
Materiality We set certain thresholds for materiality. These helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the Partnership financial statements as a whole to be £18.5 million. This represents approximately 5% of Profit before Partnership Bonus, tax and exceptional item because, in our view, this is the most relevant measure of underlying performance.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £0.5 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Overview of the scope of the audit The Partnership is structured along three business lines being Waitrose, John Lewis, and Partnership Services and Corporate. The Partnership financial statements are a consolidation of 15 reporting units within these business lines, each of which is a statutory entity based in the UK or Channel Islands, comprising the Partnership’s operating businesses and centralised functions.
In establishing the overall approach to the Partnership audit, we determined the type of work that needed to be performed at the reporting units by us, as the Partnership engagement team, or component auditors within PwC UK and from other PwC network firms operating under our instruction. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those reporting units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Partnership financial statements as a whole.
Accordingly, of the Partnership’s 15 reporting units, we have audited the complete financial information of 12 reporting units, providing us with coverage of 96.1% of Profit before exceptional item, Partnership Bonus and tax. The audits of these reporting units were performed using materiality levels lower than that of the Partnership as a whole, established by reference to the size of, and risks associated with, the businesses concerned.
Areas of particular audit focus In preparing the financial statements, the directors made a number of subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We primarily focussed our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.
In our audit, we tested and examined information, using sampling and other auditing techniques, to the extent we considered necessary to provide a reasonable basis for us to draw conclusions. We obtained audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.
We considered the following areas to be those that required particular focus in the current year. This is not a complete list of all risks or areas of focus identified by our audit. We discussed these areas of focus with the Audit and Risk Committee. Their report on those matters that they considered to be significant issues in relation to the financial statements is set out on pages 70 to 73.
THE JOHN LEWIS PARTNERSHIP
OUR PERFORMANCE
GOVERNANCE
FINANCIAL STATEMENTS
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