Extent to which the audit was capable of detecting irregularities, including fraudIrregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
•Our understanding of the Syndicate and the industry in which it operates;
•Discussion with management and those charged with governance; and
•Obtaining an understanding of the Syndicate’s policies and procedures regarding compliance with laws and regulations;
we considered the significant laws and regulations to be the applicable accounting framework, the LR 2008, and the Lloyd’s Syndicate Accounts Instructions.
The Syndicate is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the requirements of the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”).
Our procedures in respect of the above included:
•Review of minutes of meetings of those charged with governance for any instances of non-compliance with laws and regulations;
•Review of correspondence with regulatory for any instances of non-compliance with laws and regulations;
•Review of financial statement disclosures and agreeing to supporting documentation; and
•Review of legal expenditure accounts to understand the nature of expenditure incurred.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
•Enquiry with management and those charged with governance regarding any known or suspected instances of fraud;
•Obtaining an understanding of the Syndicate’s policies and procedures relating to:
oDetecting and responding to the risks of fraud; and
oInternal controls established to mitigate risks related to fraud.
•Review of minutes of meetings of those charged with governance for any known or suspected instances of fraud;
•Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;
•Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and
•Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these.
Based on our risk assessment, we considered the areas most susceptible to fraud to be valuation of IBNR, Revenue recognition specifically the risk lies in the selection and application of earning patterns to gross premiums written and management override of controls.
Our procedures in respect of the above included:
•Involvement of forensic specialists in our fraud risk assessment; •Assessing significant estimates made by management for bias through review of the methods and assumptions applied by management in valuing IBNR, performing independent projections of IBNR, the reprojection is conducted on both an ultimate and earned basis,
