Other information Annua l Report 2014 154
Ahold at a glance I Business review I Governance I Financials
Materiality
The scope of our audit is influenced by the application of materiality. Our audit opinion aims to provide reasonable assurance as to whether the financial statements are free from material misstatement. Misstatements may arise
due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified
misstatements on our opinion.
Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:
Overall group materiality €45 million (2013: €46 million).
How we determined it 4.5% of profit before tax.
Rationale for benchmark applied We have applied this benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of users of the financial statements.
On this basis we believe that profit before tax is an important metric for the financial performance of the company.
We also take misstatements and/or possible misstatements into account that, in our judgment, are material for qualitative reasons.
We agreed with the Supervisory Board that we would report to them misstatements identified during our audit above €2.3 million (2013: €2.3 million) as well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
The scope of our group audit
Koninklijke Ahold N.V. is the parent of a group of entities. The financial information of this group is included in the consolidated financial statements of Koninklijke Ahold N.V.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account: the geographic and management structure of the
group; the accounting processes and controls; and the markets in which the group operates through its retail channels. The group's financial statements are a consolidation of its world-wide reporting units, comprising its retail
operations and centralised functions.
In establishing the overall group audit strategy and plan, we determined the type of work that needed to be performed at the reporting units by the group engagement team and by component auditors from other PwC
network firms. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those reporting units so as to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. For each reporting unit we determined whether we required an audit of their complete financial
information or whether higher level procedures would be sufficient. Those where a complete audit was required included the three largest reporting units (the United States, the Netherlands and Czech Republic). We included
one reporting unit to have audit coverage on the group's investments in joint ventures with unrelated parties (Portugal), and performed specified procedures on two other reporting units (in the United States and Curasao) in order
to obtain sufficient coverage of specific financial statement line items in the consolidated financial statements. In addition, we performed higher level procedures with respect to the remaining reporting units.
The group consolidation, financial statement disclosures and a number of complex items were audited by the group engagement team at the company's head office. These include derivative financial instruments, goodwill
impairment testing, share based payments, the purchase price allocation of the SPAR acquisition in the Czech Republic and judgemental accounting positions. The group engagement team also visited the businesses in the
United States, the Netherlands and the Czech Republic to direct the planning, review the work undertaken and assess the findings. Taken together, and excluding our higher level procedures, our audit work performed at
individual component locations and at the head office addressed 100% of group net sales.
By performing the procedures above at components, combined with additional procedures at group level, we have obtained sufficient and appropriate audit evidence regarding the financial information of the group to
provide a basis for our opinion on the consolidated financial statements.
