158 John Lewis Partnership plc Annual Report and Accounts 2016 Independent auditors’ report to the members of John Lewis Partnership plc (continued)


How we 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 geographic structure of the Partnership, the accounting processes and controls, and the industry in which the Partnership operates.


The Partnership is structured along three segments being Waitrose, John Lewis and Partnership Services and Group. 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.


The audits of these reporting units were performed using materiality levels lower than that of the Partnership as a whole, established by reference to size of, and risks associated with, the business concerned.


Of the Partnership’s 15 reporting units, we have audited the financial information of 12 reporting units, which accounted for 97% (2015: 97%) of Profit before Partnership Bonus, tax and exceptional item.


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 PwC Channel Islands 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 and appropriate audit evidence had been obtained as basis for our opinion on the Partnership financial statements as a whole. We held regular meetings with component audit teams during the year. The majority of our audit work was focussed on the main operating entities – John Lewis plc and Waitrose Limited – supported by work performed at the Partnership Services shared service centre. This work was all performed by PwC London in close collaboration with the Group audit team. The Group audit team focussed on Partnership-wide areas including the post-retirement benefit obligation, long leave provision and unredeemed gift vouchers.


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 on the financial statements as a whole.


Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall Partnership materiality


£15 million (2015: £18.5 million). How we determined it Rationale for benchmark applied 5% of Profit before Partnership Bonus, tax and exceptional item.


We applied this benchmark because in our view this is the most relevant measure of underlying performance and the measure on which management and users of the financial statements focus.


We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £1.0 million (2015: £1.0 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.


Going concern


The Directors have voluntarily complied with Listing Rule 9.8.6(R)(3)(a) of the Financial Conduct Authority and provided a statement in relation to going concern, set out on page 107, required for companies with a premium listing on the London Stock Exchange.


The Directors have requested that we review the statement on going concern as if the company were a premium listed company. We have nothing to report having performed our review.


The Directors have chosen to voluntarily report how they have applied the UK Corporate Governance Code (the “Code”) as if the company were a premium listed company. Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the Directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements. We have nothing material to add or to draw attention to.


As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the group and company have adequate resources to remain in operation, and that the directors intend them to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the group’s and company’s ability to continue as a going concern.


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