Independent auditor’s and assurance report

General

Our assurance procedures consisted of an audit of the company’s financial statements, and a combination of reasonable assurance procedures (audit procedures) over the safety information, business conduct and transparency information (scope extension 2015) and the section material themes and limited assurance procedures (review procedures) over the other sustainability information in the company’s integrated report. 

Our scope can be summarised as follows:

* As included in section 1 to 3 of Royal BAM nv’s annual report

Independent auditor’s report

To: the general meeting and Supervisory Board of Royal BAM Group nv

Report on the financial statements 2015

Our opinion

In our opinion:

  • the accompanying consolidated financial statements give a true and fair view of the financial position of Royal BAM Group nv as at 31 December 2015 and of its result and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code;
  • the accompanying company financial statements give a true and fair view of the financial position of Royal BAM Group nv as at 31 December 2015 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.

What we have audited

We have audited the accompanying financial statements 2015 of Royal BAM Group nv, Bunnik (‘the company’). The financial statements include the consolidated financial statements of Royal BAM Group nv and its subsidiaries (together: ‘the Group’) and the company financial statements.

The consolidated financial statements comprise:

  • the consolidated statement of financial position as at 31 December 2015;
  • the following statements for 2015: the consolidated income statement and the consolidated statements of comprehensive income, changes in equity and cash flows; and
  • the notes, comprising a summary of significant accounting policies and other explanatory information.

The company financial statements comprise:

  • the company statement of financial position as at 31 December 2015;
  • the company income statement for the year then ended; and
  • the notes, comprising a summary of the accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements.

The basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report.

We are independent of Royal BAM Group nv in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA).

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our audit approach

Overview and context

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates about the valuation of projects, project related claim receivables and land and building rights, which are directly related to the core activities of Royal BAM Group nv. We also paid specific attention to the valuation of deferred tax assets relating carry forward losses and the goodwill impairment testing. These estimates involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that may represent a risk of material misstatement due to fraud.

We ensured that the audit teams both at group and at component levels included the appropriate skills and competences which are needed for the audit of a construction company. We therefore included specialists in the areas of IT, construction projects, tax, actuarial valuations, financial instruments and accounting and valuations in our team.

Materiality

  • We determined an overall  financial audit materiality of € 10 million. Our materiality for 2015 represents 0.15% of the 2015 net revenues. 

Audit scope

  • We conducted audit work primarily in the five home countries (the Netherlands, Germany, United Kingdom, Ireland and Belgium) and at BAM International. 
  • All operating companies are covered by the audit work of the group engagement team or component auditors.

Key audit matters

  • Valuation of large and complex construction projects.
  • Valuation of claims receivables
  • Valuation of land held for residential property development.
  • Valuation of deferred tax assets.

 Materiality

The scope of our audit is influenced by the application of materiality which is further explained in the section ‘Our responsibility for the audit of the financial statements’. 

We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements on our opinion. 

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

   

Overall group
materiality

€10 million (2014: €10 million).

   

How we determined it

0.15% of the net revenues for 2015 (rounded to €10 million).

   

Rationale for benchmark applied

We have applied this benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of users of the  financial statements. Profit before tax is not considered to be an appropriate benchmark, given the volatility of results over the years. We used net revenue as alternative benchmark which is also an appropriate metric. We used a relatively low percentage against the revenue benchmark to reflect the relative low profit margins on projects. Considering the users of the financial statements and their needs we estimate that a relative low threshold of 0.15% is appropriate.

Component materiality

To each component in our audit scope, we, based on our judgement, allocate materiality that is less than our overall group materiality. The range of materiality allocated across components was between €2.0 million and €7.6 million. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality.

We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.

The scope of our group audit

Royal BAM Group nv is the parent company of a group of entities. The financial information of this group is included in the consolidated financial statements of Royal BAM Group nv. In our view, due to their significance and/or risk characteristics, each of the operating companies required an audit of their complete financial information. We used component auditors from other PwC network firms and other audit firms who are familiar with the local laws and regulations of the countries in which the components operate to perform this audit work. Where the work was performed by component auditors, we determined the level of involvement we needed to have in their audit work to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. The group engagement team attended all clearance meetings of the component teams with local management and the Executive Board. The group team engagement leader and the other senior members of the group engagement team were also directly involved in the audit of a significant part of the operating companies. In addition they reviewed all reports about the audit approach and findings of the other component auditors in detail, especially on how management of the operating companies made their judgments involved in the construction contracts, land and building rights and property development projects. Two operating companies in the UK are audited by another ‘big four’ audit firm. We reviewed their audit files and for some high risk projects and claim receivables we assessed management’s estimates against legal opinions ourselves as well.

The group consolidation, financial statement disclosures and a number of complex items are audited by the group engagement team at the head office. These include goodwill, deferred tax assets, pensions, derivative financial instruments and share based payments. 

By performing the procedures mentioned at components, combined with additional procedures at group level, we have obtained sufficient and appropriate audit evidence regarding the financial information of the group to provide a basis for our opinion on the financial statements.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the Supervisory Board, but they are not a comprehensive reflection of all matters that were identified by our audit and that we discussed. We described the key audit matters and included a summary of the audit procedures we performed on those matters.

The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters or on specific elements of the financial statements. Any comments we make on the results of our procedures should be read in this context. 

Key audit matter

 

How our audit addressed the matter

Valuation of large and complex construction contracts

   

Refer to pages 28-30 (Executive Board Report), page 140 (Significant accounting estimates) and pages 145-146 (notes).  

The group’s result for 2015 is significantly influenced by the results of large and complex construction projects. The valuation of these construction projects is considered a key audit matter because the valuation of these projects is subject to uncertainty as a result of the complexity of underlying contracts as well as the  complexity concerning assessment of the costs to complete and settlement of significant amounts of variation orders and claims on principals. 

Because of the increase of risks being transferred to construction companies in combination with the low margins in the construction sector, the group has procedures in place which are designed to reduce the risk that loss making projects are acquired. During 2015, the group implemented a stage gate tender approval process.

 

Our audit procedures and the audit procedures of our component auditors on these projects included an assessment of BAM Group nv’s project control, site visits and substantive testing of management’s positions against underlying documentation. We also analysed differences with prior project estimates and assessed consistency with the developments during the year. We verified that the claims and variation orders on these projects meet the recognition criteria and are valued accurately based on expert opinions of lawyers or other supporting documentation. We challenged management’s assumptions at the project, local entity and group management levels in order to evaluate the reasonableness and consistency of the valuation of the variation orders and claims within these projects and the final forecast project result. 

Based on request of Royal BAM Group nv we particularly considered the newly implemented stage gate approval process in our audit. We involved our specialists and assessed the design and the effectiveness of the group’s stage gate process in detail. 

Valuation of claim receivables

   

Refer to pages 28-30 (Executive Board Report), page 141 (Significant accounting estimates) and pages 156-157 (notes).    

As at year-end BAM has a number of claims receivable on principals relating finished projects and insurance claims as reimbursement for certain loss events on projects. Project related claims on principals can be recognised as far as it is probable that the claim amounts will be received. Insurance claims can be recognised only if it is virtually certain that the amounts recognised will be received. The recognition and valuation of these claims receivable is considered a key audit matter because the assessment whether they meet the virtually certain or probable criterion as well as the valuation in itself is subject to a high degree of judgment.

 

Our audit procedures and the audit procedures of our component auditors on these claims receivable included testing management’s positions against underlying documentation including expert opinions and confirmations of lawyers, quantity surveyors and insurance companies. We also analysed differences with prior estimates and valuations and assessed consistency with the developments during the year. We verified that the claims receivable meet the recognition criteria. We challenged management’s assumptions at local entity and group management levels in order to evaluate the reasonableness and consistency of the valuation.

Valuation of land held for residential property development  

   

Refer to page 30 (Executive Board Report), page 141 (Significant accounting estimates) and pages 154-155 (notes).    

The valuation of land held for residential property development (‘land’) is based on cost or lower net realisable value. The calculations of the net realisable value are based on assumptions relating to future market developments, decisions of governmental bodies, interest rates and future changes in costs and price. Because these estimates relate to terms which vary from one year to more than thirty years, the estimation uncertainty relating to the valuation of land held for residential property development is significant. 

 

During our audit, amongst others, we have assessed the calculations of the land’s net realisable values and challenged the reasonableness and consistency of the assumptions used by management. We verified that management’s assumptions around the possibilities for future residential property development are consistent with documentation which include the plans and decisions of government bodies and with the information included in external appraisals. 

We also compared management’s assumptions concerning the development of house prices with independent expectations of external parties and institutions. Expected future costs and interest expenses are assessed based on underlying documentation and assessed based on reasonableness. A part of the land portfolio has also been appraised by external appraisers and we have involved our own appraisers as audit experts to assess the underlying assumptions and methodology of the appraisals.

Valuation of deferred tax assets 

   

Refer to page 44 (Executive Board Report), page 141 (Significant accounting estimates) and pages 173-174 (notes).   

The valuation of deferred tax assets relating to carry forward tax losses  (which mainly relate to the fiscal unity in The Netherlands) is based on the expected future tax profits for 9 subsequent years. We considered this as a key audit matter because of the degree of estimation uncertainty about the company’s future taxable profits within the maximum off-set period and tax optimisation possibilities. 

 

Our audit approach included, amongst others, an assessment of the company’s assumptions underlying the estimated future tax profits for their reasonable-ness and consistency with internal budgets and strategic plans for future years.

We challenged management’s expectations on the improvements of the tax results for next years compared to 2015. This expectation is based on the fact that this year’s tax loss relates to exceptional costs for the group’s Back in Shape program and impairments of land held for property development. We also assessed the status of tax optimisation measures and management plans to improve project control improve project results. We also involved our tax specialists to verify that the possibilities for tax optimisation are consistent with applicable tax laws.

 

Responsibilities of the Executive Board and the Supervisory Board

The Executive Board is responsible for:

  • the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the Executive Board report in accordance with Part 9 of Book 2 of the Dutch Civil Code; and for
  • such internal control as the Executive Board determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the Executive Board is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Executive Board should prepare the financial statements using the going concern basis of accounting unless the Executive Board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The Executive Board should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the company’s financial reporting process.

Our responsibilities for the audit of the financial statements

Our responsibility is to plan and perform an audit engagement to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our audit opinion aims to provide reasonable assurance about whether the financial statements are free from material misstatement. Reasonable assurance is a high but not absolute level of assurance which makes it possible that we may not detect all misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A more detailed description of our responsibilities is set out in the appendix to our report.

Report on other legal and regulatory requirements

Pursuant to the legal requirements of Part 9 of Book 2 of the Dutch Civil Code (concerning our obligation to report about the Executive Board report and other information):

  • We have no deficiencies to report as a result of our examination whether the Executive Board report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required by Part 9 of Book 2 of the Dutch Civil Code has been annexed. 
  • We report that the Executive Board report, to the extent we can assess, is consistent with the financial statements.

Our appointment

We were appointed as auditors of Royal BAM Group nv on 22 April 2015 by the passing of a resolution by the shareholders at the annual meeting, following such a proposal at 18 February 2015 by the Supervisory Board. This appointment has been renewed annually by shareholders representing a total period of uninterrupted engagement appointment of over 25 years.
This year is our last year as auditor of Royal BAM Group nv.

Independent assurance report

To: the general meeting and supervisory board of Royal BAM Group nv

The Board of Directors of Royal BAM Group nv (‘the company’), Bunnik, engaged us to provide assurance on certain information (‘Sustainability Information’) in the Integrated Report 2015 (‘the report’). We believe our engagement fulfils a rational objective as disclosed by the company in chapter 7.1 Sustainability reporting process and methods.

Our engagement consisted of a combination of limited assurance and reasonable assurance procedures. We performed limited assurance (review) procedures on the Sustainability Information as presented in chapters 2.1, 2.2, 2.3, 3.2, 3.3 and 7, leading to a conclusion. We performed reasonable assurance (audit) procedures on the sections material themes, safety and business conduct & transparency, leading to an opinion.

Our conclusion

Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that the Sustainability Information for the year ended 31 December 2015 does not provide a reliable and appropriate presentation of the company’s policy for sustainable development, or of the activities, events and performance of the organisation relating to sustainable development during the reporting year, in accordance with the company’s reporting criteria.

Our opinion

Based on the procedures we have performed and the evidence we have obtained, in our opinion the sections ‘material themes’ on page 8, ‘safety’ as included on pages 54-55 and ‘business conduct & transparency’ as included on page 56 for the year ended 31 December 2015 are, in all material respects, presented reliably and adequately, in accordance with the company’s reporting criteria.

This conclusion and opinion are to be read in the context of the following content of our report.

What we are assuring 

We have reviewed the Sustainability Information included in the following chapters:

  • 2 Value creation (2.1 until 2.3);
  • 3.2 Social performance;
  • 3.3 Environmental performance;
  • 7.1 Sustainability reporting process and methods;
  • 7.2 GRI Disclosures; and
  • 7.3 Charters, memberships and certifications.

We have audited the following sections in the report:

  • Material themes (page 8);
  •  Safety information (pages 54-55); and
  • Business conduct & transparency (page 56).


The Sustainability Information comprises a representation of the policy, the activities, and performance of the company relating to sustainable development during the reporting year 2015. The disclosures made by management with respect of the scope of the Sustainability Information are included in chapter 7.1 Sustainability reporting process and methods.

Limited assurance, leading to the above-mentioned conclusion, is substantially less in scope than reasonable assurance in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks.

Reasonable assurance, leading to the above-mentioned opinion, is expressed on the figures as well as the assertions in the surrounding text on the scope in the sections material themes, safety and business conduct & transparency.

The basis for our opinion and conclusion

Professional and ethical standards applied

We conducted our engagement in accordance with Dutch law, including Standard 3810N ‘Assurance engagements relating to sustainability reports’.

We are independent of the company in accordance with the “Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten” (ViO) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the “Verordening gedrags- en beroepsregels accountants” (VGBA).

Limitations in our scope

The Sustainability Information, sections material themes, safety and business conduct & transparency contain prospective information, such as ambitions, strategy, targets, expectations and projections. Inherent to this information is that actual future results may be different from the prospective information and therefore it may be uncertain. We do not provide any assurance on the assumptions and feasibility of this prospective information.

The auditor is not expected to, and cannot, reduce audit risk to zero and cannot therefore obtain absolute assurance that the Sustainability Information is free from material misstatement due to fraud or error. This is because there are inherent limitations of an assurance engagement, which result in most of the audit evidence on which the auditor bases the auditor’s opinion being persuasive rather than conclusive.

Reporting criteria

The company developed its sustainability reporting criteria (including criteria to report on material themes safety and business conduct & transparency) on the basis of the G4 Guidelines of the Global Reporting Initiative (GRI), which are disclosed together with detailed information on the reporting scope in chapter 7.1 Sustainability reporting process and methods (pages 215-217). We consider the sustainability reporting criteria to be relevant and appropriate for our examination.

Understanding reporting and measurement methodologies

The information in the scope of this engagement needs to be read and understood together with the reporting criteria, which the company is solely responsible for selecting and applying. The absence of a significant body of established practice on which to draw, to evaluate and measure non-financial information allows for different, but acceptable, measurement techniques and can affect comparability between entities and over time.

Our assurance approach

Materiality

We set thresholds for materiality at the planning stage and reassessed them during the engagement. These helped us to determine the nature, timing and extent of our procedures and to evaluate the effect of identified misstatements on the information presented, both individually and in aggregate. Based on our professional judgment, we determined specific materiality levels for each element of the Sustainability Information. When determining our materiality thresholds, we considered the relevance of information for both the stakeholders and the company based on the materiality assessment of the company.

Area of particular focus

We considered the following areas to be one that required our particular focus and discussed this area with the company’s management. This is not a complete list of all areas of focus identified by our work. 

Area of focus

 

How the scope of our work addressed the area of focus

The maturity of the sustainability reporting process at the local entities varies and in general is lower than the financial reporting processes.

 

As a result, our assurance approach for the sustainability information focused more on substantive procedures and less on internal controls reliance. As part of our assurance procedures we traced reported information back to underlying source documentation, reperformed calculations and assessed estimates by challenging underlying assumptions and comparing estimates with actual data for comparable periods or projects.

We challenged the company to further align and integrate its sustainability related internal controls with the internal control environ-ment relating to the financial reporting. Some improvements were made during the year, but progress was limited due to the unfilled vacancy for a CSR Director. The company acknowledges this area of focus and aims to improve the maturity of the sustainability reporting process in the coming years.

The process of registration of hours worked on construction sites highly depends on manual input and is fragmented. In addition, limited level of internal controls exist. 

 

Our assurance approach towards sustainability information, including worked hours is more substantive in nature. The company concluded that the data collection process and level of internal controls for the worked hours of the company’s subcontractors needs further improvement in order to reach the required maturity level to obtain assurance. The company acknowledges the importance of this information and aims to improve the level of internal control in order to obtain reasonable assurance in the near future.

As an outcome of the materiality analysis, the company focused on the aspect of business conduct & transparency. The company requested reasonable assurance on this key material aspect and redefined the quantitative performance indicator. We believe the indicator and related qualitative disclosures provide meaningful information in the report.

 

The company identified business conduct & transparency as a key material topic and requested PwC to provide reasonable assurance on this aspect for the first time. We have evaluated the policies, control activities and outcomes and discussed meaningful reporting on business conduct & transparency based on reliable information with management.

The Company decided to focus its reporting about business conduct & transparency on creating awareness within the company. As a result, Royal BAM Group nv reports quantitative information about the roll-out of the company’s business conduct & transparency training program, which started in the Netherlands. The company acknowledges the importance of business conduct & transparency and confirmed to take further steps in rolling out the program across the entire company. Furthermore, management is evaluating the options to report more detailed quantitative information in this respect. Next to assessing the quantitative information we assessed the qualitative business conduct & transparency disclosures through interviews with management and compliance officers as well as corroborating disclosures with underlying evidence.

Work done

We are required to plan and perform our work in order to consider the risk of material misstatement of the information in the sections material themes, safety, business conduct & transparency information and of the Sustainability Information in the other chapters.

Our work was carried out by an independent and multi-disciplinary team (which is part of the group audit engagement team) with experience in sustainability reporting and assurance and was performed at the head office in Bunnik and during conducted visits to the significant operating companies.

Our most important procedures related to the Sustainability Information were amongst others:

  • making enquiries of Royal BAM Group nv management, including the CSR team and those with responsibility for CSR management and group CSR reporting
  • performing an external environment analysis and obtaining insight into the industry, relevant social issues, relevant laws and regulations and the characteristics of the organisation;
  • assessing the acceptability of the reporting policies and consistent application of this, such as assessment of the outcomes of the stakeholder dialogue and the process for determining the material subjects, the reasonableness of estimates made by management, as well as evaluating the overall presentation of the sustainability information;
  • understanding the systems and processes for data gathering, internal controls and processing of other information, such as the aggregation process of data to the information as presented in the sustainability information;
  • reviewing internal and external documentation to determine whether the sustainability information, including the disclosure, presentation and assertions made in the report, is substantiated adequately; 
  • assessing the consistency of the sustainability information and the information in the Integrated Reporting 2015 not in scope for this assurance report; and
  • assessing whether the sustainability information has been prepared ‘in accordance’ with the GRI G4 Guidelines.

In addition to the procedures mentioned above, for the sections material themes, safety and business conduct & transparency we performed the following:

  • assessing the systems and processes for data gathering, including testing the design, existence and the effectiveness of the relevant internal controls during the reporting year;
  • conducting analytical procedures and substantive testing procedures on the relevant data;
  • assessing the processing of other information, such as the aggregation process of data to the information as presented in the sustainability information; and
  • corroborating internal and external documentation to determine whether the sustainability information is substantiated adequately. 

Responsibilities

The Board of Directors’ responsibilities

The Board of Directors of the company is responsible for the preparation of the Report in accordance with the company’s Reporting Criteria, including the identification of the stakeholders and the determination of material subjects. Furthermore, the Board of Directors is responsible for such internal control as the Board of Directors determines is necessary to enable the preparation of the Report that is free from material misstatement, whether due to fraud or error.

Our responsibilities

Based on our assurance engagement in accordance with Standard 3810N, our responsibility is to:

  • express a conclusion on the Sustainability Information in the Report; and
  • express an opinion on the section material themes, the safety information and the business conduct & transparency information in the report.

This requires that we comply with ethical requirements and that we plan and perform our work to obtain limited assurance about whether the report is free from material misstatement.

The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant for the preparation of the report in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An assurance engagement aimed on providing limited and reasonable assurance also includes evaluating the appropriateness of the reporting framework used and the reasonableness of estimates made by management as well as evaluating the overall presentation of the report.

Rotterdam, 18 February 2016

PricewaterhouseCoopers Accountants N.V.


Drs J.G. Bod RA  

Appendix to our auditor’s report on the financial statements 2015 of Royal BAM Group nv

In addition to what is included in our auditor’s report we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.

The auditor’s responsibilities for the audit of the financial statements

We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Our audit consisted, among others of:

  • Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
  • Obtaining an understanding of internal control relevant to the audit 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 company’s internal control.
  • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Executive Board.
  • Concluding on the appropriateness of the Executive Board’s use of the going concern basis of accounting, and based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the company to cease to continue as a going concern.
  • Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Considering our ultimate responsibility for the opinion on the company’s consolidated financial statements we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the group, the significance and/or risk profile of group entities or activities, the accounting processes and controls, and the industry in which the group operates. On this basis, we selected group entities for which an audit or review of financial information or specific balances was considered necessary. 

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Supervisory Board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

 

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