The Edinburgh Investment Trust Plc Annual Financial Report 2022 - Flipbook - Page 35
THE EDINBURGH INVESTMENT TRUST PLC / GOVERNANCE / 33
ACCOUNTING MATTERS AND SIGNIFICANT AREAS
For the year end, the following accounting matters were identified for specific consideration by the Committee:
Significant area
How addressed
Accuracy of the portfolio valuation, with emphasis on any
investments held at Directors’ valuation.
Actively traded listed investments are valued using stock exchange
prices provided by third party pricing vendors. Investments that
are unlisted or not actively traded are valued using a variety of
techniques to determine their fair value. This is set out in accounting
policies note 1C(v). Any such valuations are carefully considered by
the Manager’s pricing committee and the Committee.
Proof of existence of portfolio holdings.
The Manager and the depositary confirmed that the holdings
shown in the accounting records agreed with the custodian
records.
Recognition of investment income, with emphasis on special
dividend income.
Investment income is recognised in accordance with accounting
policies note 1F. The Manager provides detailed revenue
estimates for the Board’s review, and income is assessed to
ensure it is complete and accounted for correctly. Careful
consideration is given to special dividends. These are allocated to
revenue or capital according to the nature of the payment by the
underlying company and the allocation is also reviewed by the
auditor.
The allocation of management fees and finance costs between
revenue and capital.
The allocation is reviewed by the Committee annually taking into
account the long-term split of returns from the portfolio, both
historic and projected; yield; the objective of the Company; and
the latest market practice of peers. The committee last reviewed
the allocation at its meeting in May 2022.
These matters were discussed with the Manager and the auditor
in pre year end audit planning and were satisfactorily addressed
through consideration of reports provided by, and discussed
with, the Manager and the auditor at the conclusion of the audit
process.
Consequently, and following a thorough review process of the
2022 annual financial report, the Audit Committee advised the
Board that the report taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy.
REVIEW OF THE EXTERNAL AUDITOR, INCLUDING NONAUDIT SERVICES
The Committee evaluated the performance and effectiveness
of the external auditor and their audit process. This included a
review of the audit planning, execution and reporting and the
quality of the audit work, results and audit team. This review
sought the view of the Manager in their dealings with the
auditor. The Committee also considered the independence of
PricewaterhouseCoopers LLP (PwC) and the objectivity of the
audit process. No significant modifications were required to the
external audit approach. Combining the output of all the above,
and the Audit Committee Chairman’s and the Committee’s direct
interaction with PwC, the Committee concluded that it continued
to be satisfied with the performance of PwC and that the auditor
continued to display the necessary attributes of objectivity and
independence.
Prior to any engagement for non-audit services, the Audit
Committee considers whether the skills and experience of the
auditor make them a suitable supplier of such services and
ensures there is no threat to objectivity and independence in the
conduct of the audit as a result. Excluding VAT and any expenses,
the annual audit fee was £41,000 (2021: £33,000). and the
non- audit fee was £nil (2021: £3,000), see note 4 on page 62. The
Committee does not believe that this has impaired the auditor’s
independence and objectivity. Non-audit services up to £5,000 do
not require approval in advance of the Audit Committee; amounts
in excess of this require the approval of the Audit Committee.