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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
Independent auditor’s
report to the
shareholders of Blue Label Telecoms Limited
continued
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance
whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They
are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall
Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements
as a whole.
Overall Group materiality
R49.6 million
How we determined it
5% of consolidated profit before tax adjusted for the significant gain
on the fair value assessment of the investment in OSI.
Rationale for the materiality benchmark
applied
We chose an adjusted consolidated profit before tax benchmark
because, in our view, it is an appropriate measure of underlying
performance and it is the benchmark against which the performance
of the Group is most commonly measured by users. We chose 5%
which is within the range of acceptable quantitative materiality
thresholds used for profit-oriented companies in this sector. Profit
before tax was adjusted downwards by excluding the gain on
associate measured at fair value as this is the first fair value
adjustment for this investment.
How we tailored our Group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and
the industry in which the Group operates.
The Group financial statements are a consolidation of 25 reporting components, comprising the Group’s operating businesses
and centralised functions. Of these reporting components, we selected 10 components for full scope audits due to their
financial significance.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed by us,
as the Group engagement team, the component auditors from other PwC network firms and the non-PwC firms operating
under our instruction. Where the work was performed by component auditors, we determined the level of involvement we
needed to have in the audit work at those components 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.
We had various interactions with our significant component teams in which we discussed and evaluated recent
developments, the scope of audits, audit risks, materiality and audit approaches.
We discussed the reports of the component teams, the findings of their procedures and other matters which could be of
relevance for the consolidated financial statements. In the current year the Group engagement leader visited the component
audit team responsible for the audit of Blue Label Mexico S.A. de C.V.
By performing the procedures above, combined with additional procedures at Group level, we have obtained sufficient and
appropriate audit evidence regarding the financial information of the Group as a whole to provide a basis for our opinion on
the consolidated financial statements.