152 ITV plc Annual Report and Accounts 2023 ITV plc Annual Report and Accounts 2023 153 F I INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ITV PLC NAN CONTINUED C I AL Where the work was performed by component audit teams, we determined the level of involvement we needed to have in the audit work at Conclusions relating to going concern S T those components to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Our evaluation of the Directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of A T Group financial statements as a whole. Our oversight procedures included the issuance of formal, written instructions to component auditors E accounting included: M setting out the work to be performed and regular communication throughout the audit cycle including regular component calls and a site visit • A critical assessment of management’s base case and downside scenarios, challenging and obtaining corroborating evidence for the E N to the component team in the Netherlands, review of component auditor work papers and participation in audit clearance meetings. key assumptions, and verifying that the forecasts have been subject to board review and approval T • Examining the Group’s available financing, including related covenants, and maturity profile to assess liquidity through the assessment S Taken together, the components where we performed our audit work accounted for 79% of the Group’s external revenue, and 78% of the period Group’s absolute profit before tax and operating exceptional items. This was before considering the contribution to our audit evidence from • Reviewing the key inputs into the model management used to develop their scenarios to ensure that these were consistent with our performing audit work at the Group level, including disaggregated analytical review procedures, which covers a significant portion of the understanding and the inputs used in other key accounting judgements in the financial statements such as impairment Group’s smaller and lower risk components that were not directly included in our Group audit scope. • Assessing the historical reliability of management forecasting by comparing budgeted results to actual performance Our audit of the Company financial statements included substantive procedures over all material balances and transactions. • Performing our own independent sensitivity analysis to assess appropriate downside scenarios The impact of climate risk on our audit Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually As part of our audit, we made enquiries of management to understand the process to assess the extent of the potential impact of climate or collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least change risks on the Group and its financial statements. The Group explains the impact of climate change on its business within the ‘Climate twelve months from when the financial statements are authorised for issue. Related Financial Disclosures’ section of the Strategic Report. Management’s assessment considered the climate-related risks disclosed in In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation the Annual Report including the impact of changes in the advertising sector, increased costs in the transition to a low carbon world and the of the financial statements is appropriate. resilience of productions to extreme weather events. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the As disclosed within the basis of preparation section of the financial statements, management considered that the impact of climate change Company’s ability to continue as a going concern. does not give rise to a material financial statement impact. In relation to the Directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw In response, we used our understanding of the Group to evaluate management’s assessment; in particular, we considered how climate attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to change risks, both physical and transitional, would impact the assumptions made in the forecasts prepared by management used in the adopt the going concern basis of accounting. impairment analysis and in the going concern and viability assessments. We did not identify any matters as part of this work which were inconsistent with the disclosures in the Annual Report or led to any material adjustments to the accounts. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. We also read the disclosures made in relation to climate change in the other information within the Annual Report, and considered their consistency with the financial statements and our knowledge from our audit. Our responsibility over other information is further described Reporting on other information in the ‘Reporting on other information’ section of our report. The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report Materiality thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other materiality. These, information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit of assurance thereon. procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether and in aggregate on the financial statements as a whole. the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. Financial statements – Group Financial statements – Company If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to Overall materiality £23.5 million (2022: £28.2 million) £71.0 million (2022: £ 64.9 million) report that fact. We have nothing to report based on these responsibilities. How we determined it 5% of the three-year average Group profit 1% of the Company’s total assets With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies before tax adjusted to exclude operating Act 2006 have been included. exceptional items Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters Rationale for benchmark applied We consider the most appropriate benchmark Balances and transactions that eliminate as described below. on which to calculate materiality is the Group’s upon consolidation were audited to a higher adjusted profit before tax adjusted to exclude materiality. We considered a total asset Strategic Report and Directors’ Report operating exceptional items as it is one of the measure to reflect the nature of the In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report key indicators of financial performance of the Company, which primarily acts as a holding for the year ended 31 December 2023 is consistent with the financial statements and has been prepared in accordance with applicable legal Group. We use a three year average due to the Company for the Group’s investments. requirements. volatility of earnings. In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of identify any material misstatements in the Strategic Report and Directors’ Report. materiality allocated across components was between £4.3 million and £20.0 million. Directors’ Remuneration We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected In our opinion, the part of the Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the Corporate Governance Statement nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £17.5 million (2022: £ 21.1 million) for the Group The Listing Rules require us to review the Directors’ statements in relation to going concern, longer-term viability and that part of the financial statements and £53.3 million (2022: £48.6 million) for the Company financial statements. Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to the Corporate Governance Statement as other information are In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and described in the Reporting on other information section of this report. aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £1.1 million (Group and Company audit) (2022: £1.4 million) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.