AUDIT OF THE FINANCIAL STATEMENTS (PENSIONS)
The purpose of this schedule to our engagement letter is to set out the basis on which we are to audit the financial statements of the pension scheme and the respective areas of responsibility of the trustees and of ourselves.
1. RESPONSIBILITIES OF AUDITOR AND TRUSTEES
1.1We will conduct our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs”). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. In addition, we read all the non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
1.2Because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with ISAs.
1.3In making our risk assessments, we consider internal control relevant to the scheme’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the scheme’s internal control. However, we will communicate to you in writing concerning any significant deficiencies in internal control relevant to the audit of the financial statements that we have identified during the audit.
1.4 Our audit will be conducted on the basis that the Trustees and, where appropriate, those charged with governance acknowledge and understand that they have responsibility:
• for the preparation and fair presentation of the financial statements in accordance with the financial reporting framework set out below;
• for such internal controls as the Trustees determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and
• to provide us with:
•access to all information of which the Trustees are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;
• additional information that we may request from the Trustees for the purpose of the audit; and
•unrestricted access to persons responsible for the operation of, and other advisers to, the scheme from whom we determine it necessary to obtain audit evidence.
1.5 Your responsibility for preparation of the financial statements extends to the application of exemptions and options on transition to, and application of, new accounting standards. As Trustees of the scheme you should also consider the impact of new accounting standards on the scheme.
1.6 As part of our audit process, we will request from the Trustees and, where appropriate, those charged with governance, written confirmation concerning representations made to us in connection with the audit. In particular, where we bring misstatements in the financial statements to your attention that are not adjusted, we shall require written representation as to whether you believe the effects of the uncorrected misstatements are immaterial, individually and in aggregate, to the financial statements as a whole.
1.7 In order to assist us with the examination of your financial statements, we shall request sight of all documents or statements which are to be incorporated into the annual report of which the financial statements will form part, including the trustees’ report, the actuarial statements, summary of contributions, the compliance statement and the investment report. We have a professional responsibility to satisfy ourselves that they are consistent with and do not undermine the credibility of the financial statements. However, our responsibility in relation to reports by the scheme’s actuary and other scheme advisers is limited to understanding the implications of those reports for the scheme’s financial statements.
We look forward to full cooperation from your staff during our audit.
1.8As trustees of the scheme, you are responsible for maintaining records of trustees’ meetings and proper accounting records and preparing financial statements which give a true and fair view and have been prepared in accordance with the financial reporting framework specified below. You are responsible for making available to us, as and when required, all the scheme’s accounting records and all other records and related information, including minutes of all management and trustees’ meetings and for providing us with unrestricted access to any persons from whom we deem it necessary to obtain audit evidence.
You are also responsible for such internal control as you determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. [Your accounting records are kept by (name) and we shall require direct access to those records.] We shall, subject to compliance with ethical standards, be pleased to assist with accountancy and administrative matters if requested to do so, but such services are distinct from our function as auditors.
1.9 Sponsoring employers and their auditors also have statutory obligations to disclose information to both the trustees and ourselves. The Occupational Pension Schemes (Scheme Administration) Regulations 1996 (“Scheme Administration Regulations”) require any sponsoring employer to notify the trustees of events relating to the employer which they believe to be of material significance to the trustees or managers or professional advisers. You hereby undertake to notify us of matters which may be relevant to the financial affairs of the scheme which have been notified to you by the sponsoring employers or have otherwise come to your attention.
1.10 We confirm that we are a Statutory Auditor, eligible to conduct audits under the Scheme Administration Regulations. We confirm that we will notify you immediately we become aware of the existence of any conflict of interest to which we are subject in relation to the scheme.
1.11The provision of audit services is a business in the regulated sector under the Proceeds of Crime Act 2002 and, as such, partners and staff in audit firms have to comply with this legislation which includes provisions that may require us to make a money laundering disclosure in relation to information we obtain as part of our normal audit work. It is not our practice to inform you when such a disclosure is made or the reasons for it because of the restrictions imposed by the ‘tipping off’ provisions of the legislation.
2.1 We have a responsibility to report to the trustees on whether in our opinion the financial statements:
•show a true and fair view of the financial transactions of the scheme during the scheme year and of the amount and disposition at the year-end of its assets and liabilities, other than the liabilities to pay pensions and benefits after the end of the scheme year;
• are prepared in accordance with United Kingdom Generally Accepted Accounting Practice;
•contain the information specified in the Schedule to the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995.
We have a professional responsibility to report if the financial statements do not comply in any material respect with applicable accounting standards.
As noted above, our report will be made solely to the trustees, as a body, in accordance with Regulation 3(c) of The Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996. Our audit work will be undertaken so that we might state to the trustees those matters we are required to state to them in an auditor’s report and for no other purpose. In those circumstances, to the fullest extent permitted by law, we will not accept or assume responsibility to anyone other than the scheme and the scheme trustees as a body, for our audit work, for the audit report, or for the opinions we form. The audit of the financial statements does not relieve you of your responsibilities.
2.2Our professional responsibilities also include considering whether other information in documents containing audited financial statements is consistent with those financial statements.
2.3In respect of the expected form and content of our report, we refer you to the most recent bulletin on auditors’ reports published by the Financial Reporting Council at www.frc.org.uk. The form and content of our report may need to be amended in the light of our audit findings.
2.4Once we have issued our report we have no further direct responsibility in relation to the financial statements for that financial year.
3. AUDITOR’S STATEMENT ABOUT CONTRIBUTIONS
3.1The trustees of the scheme are responsible for ensuring that there is prepared, maintained and from time to time revised a [Schedule of Contributions / Payment Schedule] (“the Schedule”) showing the rates of contributions payable to the scheme by or on behalf of the employer and the active members of the scheme and the dates on or before which such contributions are to be paid.
The trustees are also responsible for obtaining a statutory auditor’s statement about contributions.
3.2As auditors appointed under the Pensions Act 1995 we have and shall have a statutory responsibility to report to the trustees on whether in our opinion the contributions payable to the scheme have been made, in all material respects, at least in accordance with the Schedule (“our Statement”). In arriving at our opinion, we shall be required to consider whether we have obtained all the information and explanations which we consider necessary for the purposes of our work.
3.3Our work will include examination, on a test basis, of evidence relevant to the amounts of contributions payable to the scheme and the timing of those payments. Our work in relation to the Statement about Contributions will be separate from the audit of the scheme and will be performed solely for the purposes of giving the required statement about contributions. We will plan and perform our work so as to obtain all the information and explanations which we consider necessary in order to give reasonable assurance that contributions paid to the scheme under the Schedule have been paid, in all material respects, at least in accordance with that Schedule.
4. REPORTING TO THE PENSIONS REGULATOR
4.1We have a statutory duty under section 70 of the Pensions Act 2004 to report to The Pensions Regulator (“TPR”) if we have reasonable cause to believe that there is or has been some failure to comply with any duty relevant to the administration of the scheme imposed by any enactment or rule of law on the trustees or managers, the employer, any professional adviser or any prescribed person acting in connection with the scheme and that the failure to comply is likely to be of material significance to TPR. We may have to make this report without your knowledge and consent and we cannot undertake to you to fetter this discretion in any manner.
4.2 Section 70 does not require us to undertake work for the sole purpose of identifying breaches likely to be of material significance to TPR. We shall fulfil our duty under this section in accordance with the requirements and guidance published by the Financial Reporting Council. In considering the need to make a report, we may decide to consult the scheme actuary or other scheme advisers. You hereby authorise us to communicate directly with the scheme actuary or other scheme advisers.
5.1In order to promote effective two-way communication between us we set out below the expected form and timing of such communications.
•We shall contact you by telephone prior to each year-end for preliminary discussions concerning the audit. We will confirm in writing the matters discussed and any agreed action.
•We will arrange a meeting to discuss the forthcoming audit, including an overview of the planned scope and timing of the audit, prior to the expected start date. Again we will confirm in writing the matters discussed and any agreed action.
• We will arrange a meeting to discuss the significant findings from the audit following completing of the on-site work. Again we will confirm in writing the matters discussed and any agreed action.
The formal communications set out above are the minimum required to comply with auditing standards. We shall of course contact you on a more frequent and regular basis regarding both audit and other matters.
6. TERMINATION OF APPOINTMENT
6.1Our appointment as scheme auditor may only be terminated, by you or by us, by notice in writing. The notice shall state the date with effect from which the appointment terminates. In the case of a notice of resignation given by us, the notice shall contain either:
•a statement specifying any circumstances connected with our resignation which, in our opinion, significantly affect the interests of the members or prospective members of, or beneficiaries under, the scheme; or
• a declaration that we know of no such circumstances.
6.2In the case of a notice of termination given by you, we shall provide you with the aforementioned statement or declaration within 14 days of our receiving the written notice of termination of our appointment. You are required by the Scheme Administration Regulations to provide a copy of the statement or declaration to our successors or proposed successors as scheme auditors.
Updated December 2015