Governance Report Independent auditors’ report to the members 4 of S Capital plc continued Overview Audit scope We conducted an audit of the complete financial information of eight components (‘full scope’). Specific balances and financial statement line items were audited within additional components based on their size. Purchase price allocation and acquisition accounting and share-based payments were tested at the Group level. The components where we performed an audit of complete financial information, in addition to the audit of consolidation journals and specified procedures over other components accounted for 74% of Group revenue. Key Audit Matters • Purchase price allocation and acquisition accounting for significant acquisitions (Group). • Fraud in revenue recognition (Group). • Revenue and cost of sales recognition over time on Content contracts (Group). • Loan refinancing (Group). • Existence of bank and cash (Group). • Carrying value of Investments (Company). Materiality • Overall Group materiality: £6.8 million (2020: £3.4 million) based on approximately 1% of revenue. • Overall Company materiality: £9.0 million (2020: £7.0 million) based on approximately 1% of total assets. • Performance materiality: £5.1 million (2020: £2.6 million) (Group) and £6.8 million (2020: £5.3 million) (Company). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. The Group’s financial statements are a consolidation of 126 legal entities which are included in the Content, DDM or Technology Services segments, of which one entity is split into three reporting branches. We identified that each legal entity and the three reporting branches meet the criteria for a component, and based on this methodology, 28 components (16 Content, six DDM, one Technology Services and five Holding companies (including the debt holding company and the Parent Company) were identified as in scope. Two of these components were deemed financially significant as their revenue made up more than 10% of the Group revenue, and an audit of their complete financial information was performed by the component auditors. We instructed component teams to perform audits of the complete financial information of a further six entities (bringing the total to eight full scope entities) and 20 were identified as in scope due to having individually large or unusual balances. This includes the entity holding the majority of the Group’s external borrowings which was included in scope due to the individually large balance and its relevance to a significant risk. Our audit scope addressed 74% of Group revenue. Of the 28 components in scope, 18 trading components were audited by component auditors. The remaining five trading components and five Holding companies (including the debt holding company and the Parent Company) were audited by the Group audit team. Opinions were received from our PwC component teams as envisaged with the exception of four Content components, where modified opinions were received in respect of revenue and cost of sales on open contracts, representing approximately 5% of recognised Group revenue, as a result of significant control deficiencies in those components. Following on from the four modified opinions, the Group team performed additional work over revenue and cost of sales in order to reach a conclusion – see the Key Audit Matter in respect of ‘Revenue and cost of sales recognition over time on Content contracts (Group)’ below. Key Audit Matters Key Audit Matters are those matters that, in the auditors’ professional judgment, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, 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. This is not a complete list of all risks identified by our audit. 100 S4Capital Annual Report and Accounts 2021