Independent Auditor's Report to the Members of Taylor Wimpey
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124 Independent auditor’s report to the members of Taylor Wimpey plc Report on the audit of the financial statements Scoping Based on our scoping assessment, our Group audit was focused on the UK Housing division (excluding joint ventures) Opinion which represented the principal segment within the Group In our opinion: and accounted for 98% of the Group’s net operating assets – the financial statements of Taylor Wimpey plc (the ‘Parent Company’) 97% of the Group’s revenue and 97% of the Group’s pre-tax and its subsidiaries (the ‘Group’) give a true and fair view of the state of profit before exceptional items. the Group’s and of the Parent Company’s affairs as at 31 December Significant In relation to the key audit matters, we have added the 2018 and of the Group’s profit for the year then ended; changes accounting for the cladding provision due to the judgement – the Group financial statements have been properly prepared in in our required in estimating the liability. accordance with International Financial Reporting Standards (IFRSs) as approach There have been no significant changes in our approach adopted by the European Union and IFRSs as issued by the International to scoping the audit and in determining materiality. Accounting Standards Board (IASB); – the Parent Company financial statements have been properly prepared in Conclusions relating to going concern, principal risks and accordance with United Kingdom Generally Accepted Accounting viability statement Practice including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and Going concern – the financial statements have been prepared in accordance with the We have reviewed the Directors’ statement in Note 1 to the financial requirements of the Companies Act 2006 and, as regards the Group statements about whether they considered it appropriate to adopt the financial statements, Article 4 of the IAS Regulation. going concern basis of accounting in preparing them and their identification We have audited the financial statements which comprise: of any material uncertainties to the Group’s and Company’s ability to continue to do so over a period of at least twelve months from the date of – the Consolidated Income Statement; approval of the financial statements. – the Consolidated Statement of Comprehensive Income; We considered as part of our risk assessment the nature of the Company, – the Consolidated and Parent Company Balance Sheets; its business model and related risks including where relevant the impact of – the Consolidated and Parent Company Statements of Changes in Equity; Brexit, the requirements of the applicable financial reporting framework and the system of internal control. We evaluated the Directors’ assessment of – the Consolidated Cash Flow Statement; and the Company’s ability to continue as a going concern, including challenging – Notes 1 to 33 relating to the Consolidated Financial Statements and the underlying data and key assumptions used to make the assessment, Notes 1 to 15 relating to the Parent Company Financial Statements. and evaluated the Directors’ plans for future actions in relation to their going The financial reporting framework that has been applied in the preparation concern assessment. of the Group Financial Statements is applicable law and IFRSs as adopted We are required to state whether we have anything material to add or draw by the European Union. The financial reporting framework that has been attention to in relation to that statement required by Listing Rule 9.8.6R(3) applied in the preparation of the Parent Company Financial Statements and report if the statement is materially inconsistent with our knowledge is applicable law and United Kingdom Accounting Standards, including obtained in the audit. FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice). We confirm that we have nothing material to report, add or draw attention to in respect of these matters. Basis for opinion We conducted our audit in accordance with International Standards on Principal risks and viability statement Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under Based solely on reading the Directors’ statements and considering whether those standards are further described in the auditor’s responsibilities for they were consistent with the knowledge we obtained in the course of the the audit of the financial statements section of our report. audit, including the knowledge obtained in the evaluation of the Directors’ We are independent of the Group and the Parent Company in accordance assessment of the Group’s and the Company’s ability to continue as a with the ethical requirements that are relevant to our audit of the financial going concern, we are required to state whether we have anything material statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) to add or draw attention to in relation to: Ethical Standard as applied to listed entities, and we have fulfilled our other – the disclosures on pages 44 to 51 that describe the principal risks and ethical responsibilities in accordance with these requirements. We confirm that explain how they are being managed or mitigated; the non-audit services prohibited by the FRC’s Ethical Standard were not – the Directors' confirmation on page 44 that they have carried out a provided to the Group or Parent Company. We believe that the audit evidence robust assessment of the principal risks facing the Group, including we have obtained is sufficient and appropriate to provide a basis for our opinion. those that would threaten its business model, future performance, Summary of our audit approach solvency or liquidity; or – the Directors’ explanation on page 51 as to how they have assessed the Key audit The key audit matters that we identified in the current prospects of the Group, over what period they have done so and why matters year were: they consider that period to be appropriate, and their statement as to – inventory costing and margin recognition; whether they have a reasonable expectation that the Group will be able – defined benefit pension scheme accounting; to continue in operation and meet its liabilities as they fall due over the – accounting for the leasehold provision; and period of their assessment, including any related disclosures drawing – accounting for the cladding provision. attention to any necessary qualifications or assumptions. Within this report, any new key audit matters are identified We are also required to report whether the directors’ statement relating to with and any key audit matters which are the same as the prospects of the Group required by Listing Rule 9.8.6R(3) is materially the prior year are identified with . inconsistent with our knowledge obtained in the audit. Materiality The materiality that we used for the Group Financial Statements We confirm that we have nothing material to report, add or draw attention Annual Report and Accounts 2018 was £42.0 million which was determined on the basis of 5% to in respect of these matters. of pre-tax profit for the year, excluding exceptional items. Taylor Wimpey plc 124 125 Independent auditor’s report to the members of Taylor Wimpey plc Report on the audit of the financial statements Scoping Based on our scoping assessment, our Group audit was Key audit matters Financial statements focused on the UK Housing division (excluding joint ventures) Opinion Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements in the period and which represented the principal segment within the Group include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which In our opinion: and accounted for 98% of the Group’s net operating assets had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. – the financial statements of Taylor Wimpey plc (the ‘Parent Company’) 97% of the Group’s revenue and 97% of the Group’s pre-tax 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 and its subsidiaries (the ‘Group’) give a true and fair view of the state of profit before exceptional items. provide a separate opinion on these matters. the Group’s and of the Parent Company’s affairs as at 31 December Significant In relation to the key audit matters, we have added the 2018 and of the Group’s profit for the year then ended; changes accounting for the cladding provision due to the judgement For each key audit matter we perform procedures to assess the design and implementation of key controls in mitigating the risk that the associated balances are misstated. – the Group financial statements have been properly prepared in in our required in estimating the liability. accordance with International Financial Reporting Standards (IFRSs) as approach There have been no significant changes in our approach Inventory costing and margin recognition adopted by the European Union and IFRSs as issued by the International to scoping the audit and in determining materiality. Refer to page 86 (Audit Committee report), page 139 (source of estimation uncertainty) and page 149 (financial statements disclosures). Accounting Standards Board (IASB); Key audit The value for inventory as at 31 December 2018 is £4,188.2 million (2017: £4,075.7 million) and as such is the most significant asset on the – the Parent Company financial statements have been properly prepared in Conclusions relating to going concern, principal risks and matter balance sheet (page 132). Inventory comprises land and work in progress (‘WIP’); WIP includes the construction cost of developing a site, accordance with United Kingdom Generally Accepted Accounting viability statement description and is transferred to cost of sales as each legal completion takes place.