MCB Group Limited Financial Statements 30Th June 2017 Independent Auditor’S Report
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MCB Group Limited Financial Statements 30th June 2017 Independent Auditor’s Report To the Shareholders of MCB Group Limited Report on the Audit of the Consolidated and Separate Financial Statements Our Opinion In our opinion, the accompanying consolidated and separate financial statements give a true and fair view of the financial position of MCB Group Limited (the “Company”) and its subsidiaries (together the “Group”) and of the Company standing alone as at 30 June 2017, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards and in compliance with the Mauritian Companies Act 2001. What we have audited MCB Group Limited’s accompanying consolidated and separate financial statements comprise: the consolidated and separate statements of financial position as at 30 June 2017; the consolidated and separate statements of profit or loss for the year then ended; the consolidated and separate statements of comprehensive income for the year then ended; the consolidated and separate statements of changes in equity for the year then ended; the consolidated and separate statements of cash flows for the year then ended; and the notes, comprising significant accounting policies and other explanatory information. Certain required disclosures have been presented elsewhere in the risk management report, rather than in the notes to the consolidated and separate financial statements. These disclosures are cross- referenced from the consolidated and separate financial statements and are identified as audited. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements” section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. PricewaterhouseCoopers, 18 CyberCity, Ebène, Réduit 72201, Republic of Mauritius T: +230 404 5000, F:+230 404 5088/89, www.pwc.com/mu Business Registration Number : F0700530 PricewaterhouseCoopers is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. 2 Independent Auditor’s Report To the Shareholders of MCB Group Limited (Continued) Report on the Audit of the Consolidated and Separate Financial Statements (Continued) Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. 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. Key audit matters relating to the How our audit addressed the key audit consolidated financial statements matters relating to the consolidated financial statements Impairment loss on loans and advances We assessed and tested the design and operating effectiveness of the controls over Impairment loss on loans and advances impairment data and calculations. These represents management’s best estimates of the controls included those over the identification losses incurred within the loan portfolio at the of which loans and advances were impaired, end of the reporting period. They are calculated the granting of forbearance, the data transfer on a collective basis for portfolios of loans of a from source systems to impairment models similar nature and on an individual basis for and model output to the general ledger and significant loans. The calculation of both the calculation of the impairment provisions. collective and individual impairment allowances We have tested the IT controls for impairment is inherently judgemental. systems and determined that we could rely on these controls for the purposes of our audit. Collective impairment losses are calculated We performed detailed testing on the using historical loan loss ratios, adjusted for calculation of the collective and individual management estimates relating to the impact of impairment. This testing varied by portfolio, current economic conditions. but typically included re-performance of the For specific impairments, judgement is required calculation and testing the extraction of data to determine when an impairment event has used in the models including the‘bucketing’ occurred and then to estimate the amount and into delinquency bandings. timing of expected future cash flows related to We tested a sample of adjustments made to that loan. the actual loan loss ratios, by considering the basis for the adjustments, the logic applied, The audit was focused on impairment due to the the source data used, the key assumptions materiality of the balances and the subjective adopted. nature of the calculations. See Notes 2 and 6 to the financial statements. 3 Independent Auditor’s Report To the Shareholders of MCB Group Limited (Continued) Report on the Audit of the Consolidated and Separate Financial Statements (Continued) Key Audit Matters (Continued) Key audit matters relating to the How our audit addressed the key audit consolidated financial statements matters relating to the consolidated financial statements Where impairment was individually calculated, we tested controls over the timely identification of potentially impaired loans and concluded that we could rely on these controls for the purposes of our audit. For a sample of loans and advances, we ascertained whether the loss event (that is the point at which impairment is recognised) had been identified in a timely manner including, where relevant, how forbearance had been considered. Where impairment had been identified, we examined the forecasts of future cash flows prepared by management to support the calculation of the impairment, challenging the assumptions and comparing estimates to external evidence where available. We found no material exceptions in these tests. We examined a sample of loans and advances which had not been identified by management as potentially impaired and formed our own judgements as to whether these were appropriate, using external evidence in respect of the relevant counterparties. We found no material exceptions in these tests. In respect of some impairment provisions, we arrived at a different conclusion than management, but in our view, the differences were within a reasonable range of outcomes in the context of the overall loans and advances and the uncertainties disclosed in the financial statements. 4 Independent Auditor’s Report To the Shareholders of MCB Group Limited (Continued) Report on the Audit of the Consolidated and Separate Financial Statements (Continued) Key Audit Matters (Continued) Key audit matters relating to the How our audit addressed the key audit consolidated financial statements matters relating to the consolidated financial statements Valuation of unquoted financial assets We assessed the design and operating held at fair value effectiveness of the Group’s key controls The valuation of the Group’s unquoted financial supporting the identification, measurement assets held at fair value was a key area of audit and oversight of valuation risk of financial focus due to their significance. assets. For the more judgemental valuations, which The Directors make significant judgements may depend on unobservable inputs, we because of the complexity of the techniques and evaluated the assumptions, methodologies assumptions used in valuing some of the level 3 and models used by the Group. We performed investment securities given the limited external an independent valuation of a sample of evidence and unobservable market data positions which in some cases resulted in a available to support the Group’s valuations. different valuation compared to management. In our view, the differences were within a See Notes 2, 3 and 7 to the financial statements. reasonable range of outcomes in the context of the inherent uncertainties disclosed in the financial statements. We also involved our valuation experts to check the appropriateness of the methodologies used and found that these are reasonable in the context of the relevant investment securities held. In connection with the separate financial statements, we have determined that there are no Key Audit Matters to communicate in our report. 5 Independent Auditor’s Report To the Shareholders of MCB Group Limited (Continued) Report on the Audit of the Consolidated and Separate Financial Statements (Continued) Other information The directors are responsible for the other information. The other information comprises the following: navigating this annual report, the highlights, the corporate profile, delivering value to our stakeholders, the board of directors and committees of the board, the chairperson statement, the chief executive statement, the corporate governance report, the statement of compliance, the company secretary’s certificate, the business and financial review, the risk management report and the administrative information but does not include the consolidated and separate financial statements and our auditor’s report