Boskalis_Annual_Report_2016

ANNUAL REPORT 2016 – BOSKALIS 133

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.

OUR AUDIT APPROACH 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.

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

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.