CONDAMA Partners

Designation

The firm is registered under its full designation in each jurisdiction in which it is admitted to practise. The short form is entered in the commercial register as a registered abbreviation and is used on engagement letters, on the audit report and in correspondence.

CContinuous

OOversight

NaNd

DDynamic

AAlignment,

MMitigation and

AAssuranceCONDAMA

Registered particulars. Full designation: Continuous Oversight and Dynamic Alignment, Mitigation and Assurance. Registered abbreviation: CONDAMA. Legal form: limited liability partnership. Partnership constituted 1911; converted and re-registered 2003. Where a registered abbreviation draws a character from within a word rather than from its initial, the register records the derivation; the fourth character is recorded as taken from the conjunction. The designation has not been amended since first registration and appears in identical form in each of the thirty-three jurisdictions of admission.

Assurance services

Six engagement types, each performed to the applicable international standard and each delivered to a published timetable. Scoping meeting within five working days of instruction.

Statutory Audit Opinion

An opinion on whether the financial statements give a true and fair view of the state of affairs at the period end and of the result for the period. Addressed to the members of the company as a body in the form prescribed by the applicable reporting standard, and stating the extent of the responsibility assumed. Issued within twenty working days of the final clearance meeting.

Comfort Letters

Issued to underwriters and sponsors ahead of a securities offering. On the basis of procedures specified in the letter, we report that nothing came to our attention causing us to believe the financial information requires adjustment. Drafted to the form customary in the market and settled with counsel before the pricing date.

Agreed-Upon Procedures

Procedures specified by the engaging party and agreed in writing before fieldwork begins. We perform those procedures and report the factual findings. The report expresses no opinion and no conclusion, which is what allows it to be delivered to a timetable measured in days. Typical turnaround ten working days.

Controls Assurance

A report on the description, design and operating effectiveness of a service organisation's controls over a stated period, in the form relied on by user entities and their auditors. Management prepares the description of the system; we test the controls against it and report our opinion. Type I and Type II available, reporting period fixed at twelve months.

Management Letter Points

Control deficiencies and process observations identified during the audit which do not affect the opinion, reported to those charged with governance with a recommendation, an owner and a target date against each point. Prior period points are tracked to closure and re-reported until closed. Issued within fifteen working days of the opinion.

Going Concern Assessment

An assessment of the entity's ability to continue in operation for at least twelve months from the date the financial statements are approved, tested against management's forecasts and against a downside sensitivity which we set. Where a material uncertainty exists it is reported in the audit report, and the opinion is not modified on that account alone.

Scheduled Unannounced Inspections

Site inspections performed without prior notice, scheduled with the client in advance for planning purposes. An inspection whose week has been agreed cannot surprise; the engagement is nonetheless priced at the rate of one that could, because the file must show that a surprise was possible. The designation is the industry's, not ours, and we see no reason to depart from it.

Preface Engineering

Preparation of the report in which every individual figure is confirmed and the whole is covered by a reservation of scope. The reservation is what makes confirming every figure possible; without it, no figure could responsibly be confirmed at all. Drafting the reservation is the senior work on the engagement and is staffed accordingly.

Independence

Independence is assessed against the five categories of threat recognised by the applicable ethical standard and is evidenced in the engagement file. Every safeguard below is a requirement of that standard, applied in full and inspected annually.

IN-01Lead engagement partner rotation / every seven yearsMandatory

IN-02Cooling-off before a partner may take a key role with the client12 months

IN-03Information barriers between the assurance and advisory practicesIn place

IN-04Audit committee pre-approval of every non-audit engagementObtained

IN-05Non-audit to audit fee ratio / regulatory cap70 per cent

IN-06Non-audit to audit fee ratio / actual, most recent period59 per cent

IN-07Independence declarations signed, per annum6360

IN-08Declarations disclosing a threat safeguards could not addressNone to date

IN-09Engagements requiring declinature on independence groundsNone to date

IN-10Proportion of fee income derived from the client group100 per cent

Governance of non-audit services. Non-audit engagements are pre-approved by the audit committee of the entity concerned. The committee is composed of non-executive directors, a majority of whom the applicable code requires to be independent. Non-executive directors are appointed by the board on the recommendation of the nomination committee, which is chaired by the chair of the board. Our reappointment is proposed to the members by that board and has been approved at each of the last one hundred and fifteen annual general meetings.

Threat assessment. The recognised categories are self-interest, self-review, advocacy, familiarity and intimidation. Each is assessed at engagement level by the engagement partner and reviewed by the engagement quality reviewer. Where a threat is identified the applicable safeguard is applied and the application is recorded. The categories are those recognised by the standard; this firm does not extend them.

Materiality

Materiality is set by the engagement partner at planning and revised if circumstances require. The schedule below is the current period's computation for one component group and is representative of the method applied across the engagement.

MT-01Benchmark selected / revenue of the audited entity4,200,000,000 EUR

MT-02Alternative permitted benchmark / profit before tax84,000,000 EUR

MT-03Materiality / 0.5 per cent of revenue21,000,000 EUR

MT-04Materiality had profit been selected / 5 per cent of profit4,200,000 EUR

MT-05Performance materiality / 75 per cent of materiality15,750,000 EUR

MT-06Clearly trivial threshold / 5 per cent of materiality1,050,000 EUR

MT-07Misstatements below MT-06 accumulated for evaluationNone

MT-08Items presented in the period at 1,049,999 EUR1000

MT-09Aggregate of those items1,049,999,000 EUR

MT-10Aggregate as a proportion of the benchmark25.0 per cent

MT-11Misstatements reported to those charged with governanceNil

Threshold computation. Revenue of 4,200,000,000 EUR gives materiality of 21,000,000 EUR at half of one per cent. Performance materiality is 75 per cent of materiality, or 15,750,000 EUR. The clearly trivial threshold is 5 per cent of materiality, or 1,050,000 EUR; misstatements below that figure are not accumulated for evaluation, in accordance with the standard. The period included 1,000 items presented at 1,049,999 EUR, aggregating 1,049,999,000 EUR, being 25.0 per cent of the benchmark. The computation is documented in the audit file at section 2 and was reviewed by the engagement quality reviewer.

Benchmark selection. Revenue and profit before tax are both permitted benchmarks and the selection is a matter of professional judgement, documented in the audit file. In an entity operating on a margin of two per cent the revenue benchmark produces a threshold five times that produced by the profit benchmark. Revenue was selected as the more stable measure in an entity whose margin is subject to period-on-period variation.

Group engagements

The group auditor takes responsibility for the group opinion. Work on components is performed by component auditors, each of which is a member firm of the same international network and a separate legal entity.

GR-01Components in the group106

GR-02Components subject to a full-scope audit11

GR-03Components subject to specified procedures only34

GR-04Components outside the scope of group audit procedures61

GR-05Jurisdictions in which working papers may not leave the territory7

GR-06Group auditor access to working papers in those jurisdictionsSummary memorandum

GR-07Component auditors drawn from within the networkAll

GR-08Member firms sharing legal liability with the group auditorNone

Network structure. The network is a coordinating entity. It holds the name, maintains the methodology, and admits and removes member firms. It performs no audits, signs no opinions and is party to no engagement letter. Each member firm is separately owned, separately capitalised and separately liable. A claim in respect of work performed on a component lies against the member firm in that jurisdiction, under that jurisdiction's law and within that jurisdiction's limitation period. This is the structure in general use across international audit networks and is described in full in our transparency report at part four.