Capital Limited
Annual Report 2023
71
Strategic
Report
Corporate
Governance
Financial
Statements
Supplementary
Information
Sustainability
AUDIT AND RISK COMMITTEE (“ARC”) REPORT CONTINUED
Taxation:
The Group operates in multiple jurisdictions
with complex legal, tax and regulatory
requirements. In certain of these jurisdictions,
the Group has taken income tax positions
that management believes are supportable
and are intended to withstand challenge
by tax authorities. Some of these positions
are inherently uncertain and include
those relating to transfer pricing matters
and the interpretation of income tax laws.
Management periodically reassesses its tax
positions and presents these assessment
updates to the Committee for consideration
and approval. In particular, the Committee
assessed the positions concerning the claims
of the Ivory Coast and Mali tax authorities.
The Committee is satisfied with
management’s estimates and assumptions.
The Committee takes into account the views
and experience of the external advisors but
accepts that responsibility for such matters lies
with management and, ultimately, the Board.
Asset impairment and inventory valuation:
The Group reviews the carrying amounts of its
assets and inventory annually. Management
performed a detailed analysis in terms of IAS
36, Impairment of Assets and IAS 2, Inventories
to assess the carrying amounts of the Group’s
assets and inventories. The Committee
is satisfied with management’s estimates
and assumptions.
Recoverability of Trade Receivables:
The Group carried trade receivables of $49.6m
(2022: $41.5m) at year end, net of an expected
loss provision of $4.7m(2022: $3.0 m). The
provision for expected credit losses represents
management’s best estimate at the Balance
Sheet date. A number of judgements are
made in the calculation of the provision,
primarily the existence of any disputes, recent
historical payment patterns and the debtors’
financial position. Further details can be found
in Note 17 to the financial statements.
Recoverability of VAT receivables:
The Group holds $7.6 million (2022: $6.5 million)
of VAT receivables at year end that is owed by
fiscal authorities in a number of jurisdictions.
In assessing the recoverability of the VAT
receivables, the Group assessed the ECL on
the VAT amounts owed based on current
and historic correspondence with the relevant
fiscal authorities and consultations with local
tax experts.
External auditor independence:
The Company’s policy is to tender the
external audit every ten years. The last audit
tender was undertaken in 2019 when BDO
United Kingdom (BDO) were appointed as
auditors to the Group. The effectiveness of the
external audit process is largely dependent
on appropriate audit risk identification at the
commencement of the audit process. BDO
prepared a detailed audit plan, identifying
key risks which in 2023 included identifying
and assessing the risks of management
accounting of uncertain tax positions
revenue recognition, accounting of tax
positions, valuation of inventories, valuation
and existence of PPE, accounting for lease
liabilities, valuation of trade receivables,
recoverability of VAT receivables, going concern
and impact of climate change and related
disclosures. In forming its assessment of the
effectiveness of the overall audit process , the
Committee considered the FRC’s Audit Quality
Review report on BDO LLP, received formal
presentations regarding the proposed audit
strategy, met separately with the Audit Partner
without members of management present
and the Committee Chair met separately with
the Audit Partner to discuss the audit strategy
in detail, with the Committee Chair reporting
back to the Committee after doing so. These
forums enabled the Committee to assess
the extent to which the audit strategy was
considered to be appropriate for the Group’s
activities and addressed the risks the business
faces, including factors such as independence,
materiality, the auditors’ risk assessment versus
the Committee’s own risk assessment, the
extent of the Group auditors’ participation
in the subsidiary component audits and the
planned audit procedures to mitigate risks.
The Committee assesses the effectiveness of
the audit process in addressing these matters
semi-annually. In addition, the Committee
seeks feedback from management on the
effectiveness of the audit process. For the 2023
financial year, management was satisfied
that there had been appropriate focus and
challenge on the primary areas of audit risk
and assessed the quality of the audit process
to be good. The Committee concurred with
the view of management and did not consider
it necessary to request the auditors to look at
any specific areas. The external auditor and
Committee have the opportunity at the end
of a Committee meeting to speak privately
without management to ensure that no
restriction in scope has been placed on the
external auditor by management. Informal
meetings are also held from time to time
between the Chair of the Committee and the
external audit partner and did not consider it
necessary to request the auditors to look at any
specific areas.
Provision of non-audit services
The Committee requires that any non-audit
services to be performed by the external
auditors are formally approved in advance of
the service being undertaken. Audit-related
services do not require pre-approval and
encompass actions necessary to perform
an audit, including areas such as providing
comfort letters to management and/or
underwriters; and performing regulatory
audits. The provision of any non-audit services
requires pre-approval and is subject to
careful consideration, focused on the extent
to which provision of such non-audit service
may impact the independence or perceived
independence of the auditors. The auditors are
required to provide details of their assessment
of the independence considerations, as
well as measures available to guard against
independence threats and to safeguard the
audit independence.
Systems of risk management and
internal control
The Board has ultimate responsibility for the
Group’s systems of risk management and
internal control, including those established
to identify, manage and monitor risks
throughout 2023.
The system of internal controls is vital in
managing the risks that face the Group
and safeguarding shareholders’ interests.
The Group’s internal controls are designed
to manage rather than eliminate risk as an
element of risk is inherent in the activities
of a mining services company.
