34 Finsbury Food Group Annual Report & Accounts 2017

Independent Auditor’s Report to the Members of Finsbury Food Group Plc

1. Our opinion is unmodified

We have audited the Financial Statements of Finsbury Food Group Plc (“the Company”) for the 52 week period ended 01 July 2017 which comprise the Consolidated Statement of Profit and Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement, Company Balance Sheet, Company Statement of Changes in Equity, and the related Notes, including the accounting policies in Notes 1 and 30.

In our opinion: • The Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 01 July 2017 and of the Group’s profit for the 52 week period then ended;

• The Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU);

• The Parent Company Financial Statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and

• The Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

2. Key Audit Matters: Our Assessment of Risks of Material Misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the Financial Statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows (unchanged from 2016):

The risk

Revenue (£314.3m;

2016: £319.7m)

Refer to page 25 (Audit Committee Report), page 45 (accounting policy) and page 47 (financial disclosures).

Accounting application: Revenue is significant to the Group due to its size and the presumed fraud risk that the entity may overstate revenue to meet targets and budgets. This fraud risk may occur through recognition of revenue in advance of the correct date or through the exercise of bias in the recognition of over-riders and rebates provided to customers or promotional expenditure.

Our response Our procedures included:

• Control reperformance: We tested the design, implementation and operating effectiveness of manual controls including those controls in place over the matching of sales invoices to sales orders and delivery notes.

• Test of detail: For key customers at a number of the sites we reconciled revenue recognised through the year to cash receipts.

• Test of detail: For smaller customers and other sites we agreed a sample of sales transactions to invoice and cash received.

• Test of detail: We agreed a sample of revenue recorded around the year end to proof of delivery. For a sample of post-year end credit notes we assessed whether these indicated a reversal of in-year revenue. For a sample of debit notes and bank payments we evaluated whether these represented unrecognised deductions against in year revenue.

• Expectation vs outcome: An expectation was developed for sales rebate expenses and accruals based on sales volumes and rebate contracted rates or promotional terms and this was compared to actual sales rebate expenses recognised. We challenged management’s explanation of any significant differences arising.

Investments (£100.7m;

2016: £100.7m)

Refer to page 25 (Audit Committee Report), page 44 (accounting policy) and page 58 (financial disclosures).

Forecast-based valuation (Parent Company key audit matter): The Parent Company holds significant investments in subsidiaries and whilst the valuation of these is not a significant risk it is an area of audit focus within the Parent as there is a risk that the value of the subsidiaries is less than the investment value.

Our procedures included:

• Tests of detail: We compared the carrying amount of the investments with the net assets value of the respective subsidiary, being an approximation of their minimum recoverable amount, to identify whether the net asset values were in excess of the carrying amounts.

• Our sector experience: Where the investment value was not supported by the net assets of the subsidiary we obtained the forecasts used by the Directors’ in their assessment of the recoverability of their investments. We challenged the forecasts by agreeing the brought forward position to actual results and, based on our understanding of the Company and sector, assessed whether expected future conditions had been incorporated.

• Benchmarking assumptions: We challenged the discount rate used in the forecasts by benchmarking this against similar companies.

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