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KUWAIT ENERGY PLC
INDEPENDENT AUDITOR’S REPORT
7
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both
in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group materiality
US$6.3 million (2016: US$6.8 million)
Basis for determining
materiality
2.4% of net assets prior to the impairment of PP&E assets.
Rationale
for
the
benchmark applied
We have determined materiality based on the net asset position of the Group, reflecting
the long-term value of the Group in its portfolio of development assets, particularly those
in Iraq which have not yet reached commercial production, and their associated reserves
and resources. We have determined that using a balance sheet metric, rather than a
profit-based metric, will provide a more stable base for materiality, whilst also reflecting
the value of the Group.
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess
of US$ 0.315 million (2016: US$ 0.342 million), as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit and Risk Committee on disclosure matters that we
identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
The Group comprises three operational reporting units, Egypt, Iraq and Yemen, alongside the corporate head office
and the Oman JV. All of the components were included in our assessment of the risks of material misstatement. Full
scope audits were performed on those operations and business units audited by the Group team and by the
component teams in Egypt and Yemen. Specified audit procedures were performed on the Oman JV. The
materialities applied to components ranged from US$3.1 million to US$4.4 million.
The Group team directly performed the audit work on certain locations including Iraq, Kuwait and the consolidation
process. The Group team planned and oversaw the work performed by component auditors; this included the audit
partner and audit director visiting Egypt to direct and review the audit work performed there.
Net assets US$186.9
million
Group materiality
US$6.3 million
Component materiality
range US$3.1 million to
US$4.4 million
Audit and Risk
Committee reporting
threshold US$0.315…
Net assets
Group materiality