The Edinburgh Investment Trust Plc Annual Financial Report 2022 - Flipbook - Page 54
52 / FINANCIAL REVIEW / THE EDINBURGH INVESTMENT TRUST PLC
Independent Auditor’s Report / continued
Auditors’ responsibilities for the audit of the financial statements
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, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Company and industry, we identified that the principal risks of non-compliance with laws and
regulations related to breaches of Chapter 4 of Part 24 of the Corporation Tax Act 2010, and we considered the extent to which noncompliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct
impact on the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks
were related to posting inappropriate journal entries to increase revenue (investment income and capital gains) or to increase net asset
value. Audit procedures performed by the engagement team included:
–enquiries with management, including consideration of known or suspected instances of non-compliance with laws and regulations
and fraud;
–understanding the controls implemented by Liontrust Fund Partners LLP (previously Majedie Asset Management Limited) (the
“Manager”) and The Bank of New York Mellon (International) Limited (the “Depository” and “Custodian”) designed to prevent and
detect irregularities;
–assessment of the Company’s compliance with the requirements of Chapter 4 of Part 24 of the Corporation Tax Act 2010, including
recalculation of numerical aspects of the eligibility conditions;
–identifying and testing journal entries, in particular year end journal entries posted by the Fund Accountant during the preparation of
the financial statements;
–reviewing relevant meeting minutes, including those of the Audit Committee; and
–designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of noncompliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also,
the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We
will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to
enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.