Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
balance sheet flexibility and reduction and further improving
financial performance. As the ongoing transformation may
affect systems, processes and controls, we were particularly
focussed on areas where the financial statements could be
materially impacted. In the key audit matter section of this
report we have described where this was applicable during
our audit.
The group comprises of multiple components and therefore
we considered our group audit scope and approach as set out
in the scope of our group audit section. 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 Managing Board made
important judgements. In paragraph "Judgements and
estimates"in note 2.1 to the financial statements the company
describes the areas of judgement in applying accounting
policies and the key sources of estimation uncertainty. Given
the significant estimation uncertainty in the impairment
of loans and advances to customers, valuation of financial
instruments, litigation, regulatory and client care we considered
these to be key audit matters as set out in the key audit
matter section of this report. The reliability and continuity
of information processing was identified as key audit matter
since this is significant to the Bank's operational, regulatory
and financial reporting processes. Lastly we determined the
disclosure on the impact of IFRS 9 on the opening balance as
of 1 January 2018 to be an additional key audit matter in 2017
given the combination of the complexity of (new) models,
estimates, assumptions, potential impact of the new standard
on the 2018 opening balance and future years and the focus by
financial statement stakeholders about the effects of the new
standard. 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 senior management that
may represent a risk of material misstatement due to fraud.
We ensured that the audit teams, both at group and at
component levels, collectively contain the appropriate skills
and competences which are needed for the audit of a bank. We
therefore included specialists in the areas of IT, taxation, real
estate, hedge accounting, valuation of financial instruments,
employee benefits and valuation in our team.
The outline of our approach was as follows:
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AudiI «co/u
Key uudil
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Materiality
Overall materiality:€181 million
Audit scope
We conducted audit work in 20 components.
Site visits and meetings with the component
team by the Group Engagement Team were
carried out to the following locations - the
Netherlands, USA, the UK, Ireland and Brazil.
For the foreign locations we met with the
audit partner and local management team of
Australia/New Zealand when they visited the
Netherlands.
Audit coverage: 91% of total assets, 91% of
profit before tax and 86% of revenues.
Key audit matters
Impairment of loans and advances to
customers
Valuation of financial instruments
Litigation, regulatory and client care
Design and effectiveness of IT General
controls
Disclosure over the estimated impact of
IFRS 9 in accordance with IAS 8
Materiality
The scope of our audit is influenced by the application of
materiality which is further explained in the section 'Our
responsibilities for the audit of the financial statements'.
Based on our professional judgement, we determined certain
quantitative thresholds for materiality, including the overall
materiality for the financial statements as a whole as set out in
the table below.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, both individually and in aggregate, on the
financial statements as a whole and on our opinion.
Overall group
materiality
Basis for
determining
materiality
Rationale for
benchmark
applied
Component
materiality
€181 million (2016:€135 million)
We used our professional judgement to determine overall
materiality. As a basis for our judgement we used 5% of profit
before tax
This benchmark is a generally accepted auditing practice,
based on our analysis of the common information needs of
users of the financial statements. On this basis we believe
that profit before tax is an important metric for the financial
performance of the company and is widely used within the
industry.
To each component in our audit scope, we allocate, based
on our judgement, materiality that is less than our overall
group materiality. The range of materiality allocated across
components was between €23 million and €63.5 million.
Next to the quantitative considerations as outlined above, we
have also focused in our audit on the accuracy and
completeness of the fair value disclosure, the legal, regulatory
and client care disclosure and the IAS 8 disclosure with the
estimated impact of IFRS 9 which are examples of taking into
account misstatements and/or possible misstatements, that in
our judgement, are material for qualitative reasons. We agreed
Rabobank Annual Report 2017 - Company financial statements
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