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3. Our application of materiality and an overview of Normalised profit before tax Materiality 5. Fraud and breaches of laws and regulations – ability and other management (as required by auditing standards), Contents
the scope of our audit £20.0m (2020: £20.5m) £715k (2020: £800k) to detect and from inspection of the Company’s regulatory and legal
Materiality for the financial statements as a whole was correspondence and discussed with the directors and other
Contents
set at £715k (2020: £800k), determined with reference £715k Identifying and responding to risks of material management the policies and procedures regarding
to a benchmark of the Company’s profit before tax, Whole financial misstatement due to fraud compliance with laws and regulations.
statements materiality
normalised by averaging over the last four years due to (2020: £800k) Fraud risk assessment As the Company is regulated, our assessment of risks
the impact of Covid-19 on the financial performance in involved gaining an understanding of the control
the years ended 31 December 2020 and 31 December £460k To identify risks of material misstatement due to fraud environment including the entity’s procedures for
2021, of which it represents 3.58% (2020: 3.89% of Whole financial (“fraud risks”) we assessed events or conditions that could complying with regulatory requirements. Strategic Report
profit before tax, normalised by averaging over the last statements performance indicate an incentive or pressure to commit fraud or provide We communicated identified laws and regulations
three years). materiality (2020: £520k) an opportunity to commit fraud. Our risk assessment throughout our team and remained alert to any indications
In line with our audit methodology, our procedures on procedures included: of non-compliance throughout the audit.
individual account balances and disclosures were — Enquiring of directors and inspection of policy The potential effect of these laws and regulations on the
performed to a lower threshold, performance documentation as to the Company’s high-level policies financial statements varies considerably.
materiality, so as to reduce to an acceptable level the £35k and procedures to prevent and detect fraud, as well as
risk that individually immaterial misstatements in Misstatements reported to the whether they have knowledge of any actual, suspected Firstly, the Company is subject to laws and regulations that
individual account balances add up to a material amount Normalised profit before tax audit committee (2020: £40k) or alleged fraud; directly affect the financial statements including financial
across the financial statements as a whole. Materiality — Reading Board and various other committee minutes; reporting legislation (including related companies
Performance materiality was set at 65% (2020 : 65%) legislation), distributable profits legislation and taxation
of materiality for the financial statements as a whole, — Considering remuneration incentive schemes and legislation and we assessed the extent of compliance with
which equates to £460k (2020: £520k). We applied this performance targets for management and directors; these laws and regulations as part of our procedures on the
percentage in our determination of performance — Using analytical procedures to identify any unusual or related financial statement items. Corporate Governance Statement
materiality based on the level of identified unexpected relationships. Secondly, the company is subject to many other laws and
misstatements, control deficiencies and changes in the regulations where the consequences of non-compliance
control environment during the prior period. We communicated identified fraud risks throughout the could have a material effect on amounts or disclosures in
We agreed to report to the Audit Committee any audit team and remained alert to any indications of fraud the financial statements, for instance through the
corrected or uncorrected identified misstatements throughout the audit. imposition of fines or litigation or the loss of the Company’s
exceeding £35k (2020: £40k), in addition to other As required by auditing standards, we perform procedures license to operate. We identified the following areas as
identified misstatements that warranted reporting on to address the risk of management override of controls and those most likely to have such an effect: specific areas of
qualitative grounds. the risk of fraudulent revenue recognition under the regulatory capital and liquidity, conduct, money laundering,
Our audit of the Company was undertaken to the effective interest rate (‘EIR’) method, arising from the sanctions list and financial crime, and certain aspects of
materiality and performance materiality levels specified judgements in relation to customer paydown profiles. We company legislation recognising the financial and regulated
above and was performed by a single audit team. also identified a fraud risk related to estimation of nature of the Company’s activities. Auditing standards limit
We were able to rely upon the Company's internal impairment of loans and advances to customers specifically the required audit procedures to identify non-compliance
control over financial reporting in several areas of our relating to the economic scenarios and cashflow forecasts with these laws and regulations to enquiry of the directors
audit, where our controls testing supported this as these involve subjective judgements, in response to and other management and inspection of regulatory and
approach, which enabled us to reduce the scope of our possible pressures to meet performance targets. legal correspondence, if any. Therefore, if a breach of Independent Auditor’s Report
substantive audit work; in the other areas the scope of Further detail in respect of revenue recognition - EIR operational regulations is not disclosed to us or evident
the audit work performed was fully substantive. accounting and impairment of loans and advances to from relevant correspondence, an audit will not detect that
customers is set out in the key audit matter disclosures in breach.
4. Going concern section 2 of this report. Context of the ability of the audit to detect fraud or
The directors have prepared the financial statements on — we consider that the directors’ use of the going concern We also performed procedures including: breaches of law or regulation
the going concern basis as they do not intend to basis of accounting in the preparation of the financial Owing to the inherent limitations of an audit, there is an
liquidate the Company or to cease its operations, and as statements is appropriate; • Identifying journal entries to test based on risk criteria unavoidable risk that we may not have detected some
they have concluded that the Company’s financial — we have not identified, and concur with the directors’ and comparing the identified entries to supporting material misstatements in the financial statements, even
position means that this is realistic. They have also assessment that there is not, a material uncertainty documentation. These included journal entries with though we have properly planned and performed our audit
concluded that there are no material uncertainties that related to events or conditions that, individually or specific comments assessed as higher risk. in accordance with auditing standards. For example, the
could have cast significant doubt over its ability to collectively, may cast significant doubt on the • Assessing significant accounting estimates for bias. further removed non-compliance with laws and regulations
continue as a going concern for at least a year from the Company's ability to continue as a going concern for the is from the events and transactions reflected in the financial
date of approval of the financial statements (“the going going concern period; and We discussed with the Audit Committee matters related to statements, the less likely the inherently limited procedures Financial Statements
concern period”). — we have nothing material to add or draw attention to in actual or suspected fraud, for which disclosure is not required by auditing standards would identify it.
An explanation of how we evaluated management’s relation to the directors’ statement in note 4 to the necessary, and considered any implications for our audit. In addition, as with any audit, there remained a higher risk
assessment of going concern is set out in the related financial statements on the use of the going concern Identifying and responding to risks of material of non-detection of fraud, as these may involve collusion,
key audit matter in section 2 of this report. basis of accounting with no material uncertainties that misstatement due to non-compliance with laws and forgery, intentional omissions, misrepresentations, or the
Our conclusions based on this work: may cast significant doubt over the Company’s use of regulations override of internal controls. Our audit procedures are
— we consider that the directors’ use of the going that basis for the going concern period. We identified areas of laws and regulations that could designed to detect material misstatement. We are not
concern basis of accounting in the preparation of the However, as we cannot predict all future events or reasonably be expected to have a material effect on the responsible for preventing non-compliance or fraud and
financial statements is appropriate; conditions and as subsequent events may result in financial statements from our general commercial and cannot be expected to detect non-compliance with all laws
and regulations.
— we have not identified, and concur with the outcomes that are inconsistent with judgements that were sector experience, through discussion with the directors
directors’ assessment that there is not, a material reasonable at the time they were made, the above
uncertainty related to events or conditions that, conclusions are not a guarantee that the Company will
individually or collectively, may cast significant doubt continue in operation.
on the Company's ability to continue as a going Notes to the Financial Statements
concern for the going concern period; and

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