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ANNUAL REPORT 2016 – BOSKALIS
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other EY network firms. We have used the work of other non-EY
firms when auditing a number of entities, especially in the Middle
East and France, which represented approximately 4% of the net
turnover. Also certain joint ventures were audited by non-EY firms.
The consolidation, financial statement disclosures and a number of
complex items such as impairments of goodwill and of property,
plant and equipment, pension accounting, and acquisitions and
divestments are audited at group level.
In total these procedures represent approximately 93% of net
turnover.
For the remaining components we performed, amongst others,
analytical procedures to corroborate our assessment that there
were no significant risks of material misstatements within those
components.
RISK
OUR AUDIT APPROACH
RECOGNITION OF CONTRACT REVENUE, MARGIN AND RELATED RECEIVABLES AND LIABILITIES (SEE NOTE 3.12, 6, 20, 26 AND 29)
The construction industry is characterised by contract risk with
significant judgments involved in the assessment of contract
financial performance. Revenue and margin are recognised
based on the stage of completion of individual contracts. The
status of contracts is updated on a regular basis. In doing so,
management is required to exercise significant judgment in their
assessment of the valuation of contract variations, claims and
liquidated damages (revenue items); the completeness and
accuracy of forecasts regarding costs to complete; and the
ability to deliver contracts within forecast timescales. The
potential final contract outcomes can cover a wide range.
Changes in these judgments, and the related estimates, as
contracts progress can result in material adjustments to revenue
and margin, which can be both positive and negative. We
therefore identified correct and complete recognition of contract
revenue, margin and related receivables and liabilities as
significant to our audit.
Our audit procedures on projects relating to contract revenue
included an assessment of the company’s project control,
substantive audit procedures and testing of management’s
positions against underlying documentation. We performed
substantive procedures relating to contractual terms and
conditions, including disputes, claims and variation orders, costs
incurred, including local representatives’ fees, and forecasted
cost to complete including progress measurement. We also
analysed differences with prior project estimates and assessed
consistency with the developments during the year. We verified
that claims and variation orders on projects meet the recognition
criteria and are valued accurately and complete. In connection
with the above, we discussed, also during site visits, a range
of financial and other risks, disputes and related estimation
uncertainties with management and project staff, assessing
whether these have been adequately addressed in the financial
statements. We challenged management’s assumptions at the
project and group management levels in order to evaluate the
reasonableness and consistency of the recognition of contract
revenue and related receivables and liabilities as well as
required disclosures.
By performing the procedures mentioned above at group entities,
together with additional procedures at group level, we have been
able to obtain sufficient and appropriate audit evidence about the
group’s financial information to provide an opinion about the
consolidated financial statements.
OUR KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements. We have communicated the key audit matters to the
Supervisory Board. The key audit matters are not a comprehensive
reflection of all matters discussed.
These matters were addressed in the context of our audit of the
financial statements as a whole and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.