Audit Report / Information • Feb 28, 2019
Audit Report / Information
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tel.: +48 22 543 16 00 fax: +48 22 543 16 01 e-mail: [email protected] www.bdo.pl
BDO spółka z ograniczoną odpowiedzialnością sp.k. ul. Postępu 12 02-676 Warszawa Polska
Opinion
We have audited the annual consolidated financial statements of the group whose parent entity is Giełda Papierów Wartościowych w Warszawie S.A. ("the Parent Entity") ("the Group") containing a consolidated statement of financial position as at 31 December 2018 and a consolidated statement of comprehensive income, a consolidated statement of changes in equity, a consolidated statement of cash flows for the year ended 31 December 2018 and notes containing a description of the adopted accounting policies and other information ("the consolidated financial statements").
In our opinion, the attached consolidated financial statements:
Our opinion is consistent with the additional report to the Audit Committee issued on 25 February 2019.
We have conducted our audit in accordance with the National Standards of Auditing in the wording of the International Standards on Auditing approved by the National Council of Auditors and in accordance with the Act of 11 May 2017 on Auditors, Audit Firms and Public Supervision ("the Auditor Act", Journal of Laws of 2017, item 1089, as amended) and Regulation (EU) No 537/2014 of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities ("the EU Regulation", EU Legal Journal L 158). Our responsibility under those standards is described below in the section Responsibility of the auditor for the audit of the consolidated financial statements.
We are independent of the Group companies in accordance with the Code of Ethics for Professional Accountants issued by the International Federation of Accountants ("the IFAC Code") adopted by resolutions of the National Council of Auditors, as well as other ethical standards applicable to financial audits in Poland. We have met our ethical obligations under those standards and the IFAC Code. The key auditor and the audit firm were independent of the Parent Entity during the audit in accordance with the independence criteria defined in the Auditor Act and the EU Regulation.
BDO spółka z ograniczoną odpowiedzialnością sp.k., Sąd Rejonowy dla m. st. Warszawy, XIII Wydział Gospodarczy, KRS: 0000729684, REGON: 141222257, NIP: 108-000-42-12. Biura BDO w Polsce: Katowice 40-007, ul. Uniwersytecka 13, tel.: +48 32 661 06 00, [email protected]; Kraków 31-548, al. Pokoju 1, tel.: +48 12 378 69 00, [email protected]; Poznań 60-650, ul. Piątkowska 165, tel.: +48 61 622 57 00, [email protected]; Wrocław 53-332, ul. Powstańców Śląskich 7a, tel.: +48 71 734 28 00, [email protected]
BDO spółka z ograniczoną odpowiedzialnością sp.k. jest członkiem BDO International Limited, brytyjskiej spółki i częścią międzynarodowej sieci BDO, złożonej z niezależnych spółek członkowskich
In our opinion, our audit evidence has provided a sufficient and adequate basis to express our opinion.
The Company's consolidated financial statements for the year ended 31 December 2017 had been audited by an auditor acting on behalf of another audit firm, who issued an unqualified opinion on the financial statements on 27 February 2018.
Key audit matters are matters which in our professional opinion are critical to the audit of the consolidated financial statements for the current reporting period. They include the most material identified risks of material misstatement, including identified risks of misstatement due to fraud. We have addressed such matters in the context of our audit of the consolidated financial statements as a whole and in drafting our opinion, and we have summarised our reaction to such risks and, where necessary, presented the key observations on such risks. We have not issued a separate opinion on key audit matters.
Key audit matter
The revenue of Group companies is determined in large part through automated processes in the transactional and billing systems. The systems process large amounts of data of transactions made on the markets operated by the Group and enable the determination of due revenue.
Controls in the IT environment, which cover change management, access control and division of competences, are material to the correct determination and recognition of sales revenue in the consolidated financial statements.
As the revenue level is a key measure of the Group's effectiveness, it is subject to an increased risk of intentional misstatement.
Sales revenue presented in the consolidated financial statements for the audited period was PLN 346,781 thousand.
Disclosures in the financial statements
The disclosures are presented in Note 2.20 Revenue and Note 22 Sales revenue.
The auditor's procedures addressing identified risks
Our audit procedures included without limitation:
assessment of compliance of the accounting policy of the Group companies with the applicable financial reporting standards;
internal control tests covering the verification of data sourced from the billing system;
IT environment control tests performed with the participation of an IT specialist covering change management, access to IT systems, information security and change management, for the key IT systems used by the Group companies, including the transactional and billing systems;
analytical procedures based on expectations used to test that the amount of revenue from selected services is reasonable, performed using transaction volume data and knowledge of applicable prices;
reconciliation of a selected sample of sales revenue with the source documentation;
analysis of correction invoices for sales revenue issued after the end of the financial year in conjunction with an assessment of the correct determination of revenue in the audited period;
independent confirmation of balances for a sample of trade receivables at 31 December 2018;
assessment of the correctness and completeness of disclosures in the financial statements.
Goodwill at PLN 170,870 thousand as at 31 December 2018 generated when taking control of subsidiaries is an important part of the Group's assets.
The Parent Entity tested impairment of key cash generating units linked to goodwill in the consolidated financial statements corresponding to subsidiaries under IAS 36 based on usable value. Realisable value is estimated based on a number of critical judgments, including the weighted average cost of capital, cash flows in the time horizon of the forecast and growth rate after the time horizon of the forecast. The Group's tests identified no impairment of investments in subsidiaries.
We consider this to be a key audit matter in view of its material carrying amount and dependence on subjective judgments and assumptions.
Disclosures in the financial statements
The disclosures are presented in Note 2.6.1 Goodwill and Note 5 Intangible assets.
The auditor's procedures addressing identified risks
The audit documented our understanding of the impairment test and analysed the test. Our procedures included an assessment of the model and assumptions. In particular, we carried out the following audit procedures:
we compared the test forecasts with the business plans approved by the management of the subsidiaries;
we assessed the mathematical correctness and the adequacy of parameters and the probability of assumptions used in the financial forecasts;
we assessed the validity of the forecasts by analysing historical performance of the subsidiaries and earlier forecasts;
we evaluated the correctness and completeness of disclosures in the consolidated financial statements.
The Management Board of the Parent Entity is responsible for the preparation of the consolidated financial statements which present truly and fairly the Group's financial position and assets and financial results in accordance with the International Financial Reporting Standards adopted by the European Union and the adopted accounting principles (policies) and in accordance with the legal regulations applicable to the Group and the Articles of Association, and for internal controls which the Management Board of the Parent Entity considers necessary to enable the preparation of consolidated financial statements free of material misstatements due to fraud or error.
In the preparation of the financial statements, the Management Board of the Parent Entity is responsible for assessing the Group's ability to continue as a going concern, for disclosing, where applicable, any matters relating to continuation as a going concern, and for the application of the going concern as a basis of the accounting policy, other than where the Management Board is planning to liquidate the Group or discontinue its activity or has no realistic alternative to liquidation or discontinuation.
The Management Board of the Parent Entity and the members of the Supervisory Board of the Parent Entity are responsible for ensuring that the consolidated financial statements meet the requirements of the Accounting Act of 29 September 1994 ("the Accounting Act", Journal of Laws of 2018, item 395, as amended). The members of the Supervisory Board of the Parent Entity are responsible for supervising the financial reporting process.
It is objective to get reasonable assurance that the consolidated financial statements as a whole are free of material misstatements due to fraud or error, and to issue a report from the audit containing our opinion. Reasonable assurance is a high degree of assurance but it is no guarantee that the audit carried out according to the National Standards of Auditing will always detect existing material misstatements. Misstatements may result from fraud or error; they are considered material if they can
be reasonably expected to affect, individually or jointly, business decisions of users taken on the basis of the consolidated financial statements.
The concept of materiality is applied by the auditor both in planning and conducting the audit and in assessing the impact of misstatements and unadjusted misstatements identified in the audit, if any, on the financial statements, and in drafting the auditor's opinion. Consequently, all opinions and statements contained in the auditor's report are expressed taking into account the qualitative and quantitative materiality determined according to the audit standards and the auditor's professional judgment.
The scope of the audit does not include any assurance as to future profitability of the Group or the effectiveness and efficiency of the management of the Group by the Management Board of the Parent Entity either at this present time or in the future.
In our audit carried out according to the National Standards of Auditing, we apply professional judgment and professional scepticism and:
We notify the Supervisory Board of the Parent Entity among others of the planned scope and timing of the audit and material audit findings, including any material weaknesses of internal controls identified in the audit.
We represent to the Supervisory Board of the Parent Entity that we comply with all applicable ethical standards of independence and that we will notify them of any relations and other matters which could be rationally considered a threat to our independence and, where applicable, of security measures used.
We have identified those matters communicated to the Supervisory Board of the Parent Entity which were most material in the audit of the consolidated financial statements for the current reporting period and thus considered by us to be key audit matters. We describe such matters in our auditor's report unless their public disclosure is not permitted by law or regulations or where we determine in special circumstances that a matter should not be presented in our report because adverse consequences are reasonably expected to outweigh the benefits of such information for public interest.
Other information includes the report on the activity of the parent entity and the group for the financial year ended 31 December 2018 ("the Activity Report") together with a statement of compliance with corporate governance rules, which is a separate part of the Report, and the Annual Report for the financial year ended 31 December 2018 ("the Annual Report") (jointly "Other Information").
The Management Board of the Parent Entity is responsible for the preparation of Other Information according to the law.
The Management Board of the Parent Entity and the members of the Supervisory Board of the Parent Entity are responsible for ensuring that the Activity Report and its separate part meet the requirements of the Accounting Act.
Our opinion from the audit of the consolidated financial statements does not cover Other Information. In connection with the audit of the consolidated financial statements, it is our responsibility to read Other Information and, in doing so, to consider whether Other Information is not materially inconsistent with the consolidated financial statements or our knowledge gained during the audit, or otherwise seem materially misstated. If we identify material misstatement of Other Information on the basis of our work, we are required to report it in our auditor's report. It is our responsibility to issue an opinion, in accordance with the requirements of the Auditor Act, whether the Activity Report has been prepared according to the regulations and whether it is consistent with the information contained in the consolidated financial statements. Furthermore, it is our responsibility to issue an opinion whether the Group's statement of compliance with corporate governance rules contains the required information.
We received the Activity Report of the parent entity and the group before the date of this auditor's report; the Annual Report will be available after that date. If we identify any material misstatement in the Annual Report, we are required to report it to the Supervisory Board of the Parent Entity.
On the basis of our audit work, in our opinion, the Activity Report of the parent entity and the group:
has been prepared in accordance with Article 49 of the Accounting Act and § 71 of the Regulation of the Minister of Finance of 29 March 2018 on current and periodical information provided by issuers of securities and on conditions under which information required by legal regulations of a third country may be recognised as equivalent ("the Current Information Regulation", Journal of Laws of 2018, item 757);
is consistent with the information contained in the consolidated financial statements.
Furthermore, in the light of knowledge of the Group and its environment gained during our audit, we represent that we have identified no material misstatement in the Activity Report of the parent entity and the group.
In our opinion, the Group's statement of compliance with corporate governance rules contains the information required in § 70 subparagraph 6 point 5 of the Current Report Regulation. Furthermore, in our opinion, the information required in § 70 subparagraph 6 point 5 (c)-(f), (h) and (i) of the Regulation contained in the statement of compliance with corporate governance rules is consistent with the applicable regulations and with information contained in the consolidated financial statements.
We have conducted no assurance work concerning the statement of non-financial information and we have issued no assurance on the statement of non-financial information.
According to our best knowledge and belief, we represent that the non-audit services that we have provided to the Group are in accordance with the law and regulations applicable in Poland and that we have proceeded no audit services prohibited under Article 5(1) of the EU Regulation and Article 136 of the Auditor Act.
We were selected to audit the Group's consolidated financial statements by the resolution of the Supervisory Board of the Parent Entity of 16 July 2018. We have audited the Company's financial statements for the first time.
The key auditor responsible for the audit resulting in this auditor's report is Artur Staniszewski.
BDO spółka z ograniczoną odpowiedzialnością sp.k. with its registered office in Warsaw
entered in the register of audit firms, entry no. 3355
acting through the key auditor
Artur Staniszewski Chartered Auditor entry no. 9841
dr André Helin President of the Management Board Chartered Auditor entry no. 90004
Warsaw, 26 February 2019
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