Independent Auditors’ report to the members of
The Lindsell Train Investment Trust plc continued
How our audit addressed the key audit matter
We assessed the accounting policy for income recognition for compliance
with accounting standards and the AIC SORP and performed testing to
check that income had been accounted for in accordance with this stated
accounting policy. We found that the accounting policies implemented were
in accordance with accounting standards and the AIC SORP, and that income
has been accounted for in accordance with the stated accounting policy.
We understood and assessed the design and implementation of key
controls surrounding income recognition.
Capital gains/losses on investments
The gains/losses on investments held at fair value comprise realised and
unrealised gains/losses. To test the accuracy for unrealised gains and losses
calculated, we tested the valuation of the portfolio at the year-end
(see valuation and existence of listed investment key audit matters), together
with testing the reconciliation of opening and closing investments. For the
accuracy of realised gains/losses, we tested a sample of disposal proceeds by
agreeing the proceeds to bank statements and we re-performed the
calculation of a sample of realised gains/losses. In addition, we tested
dividend receipts by agreeing the dividend rates from investments to
independent third party sources. No significant exceptions were identified
by our testing which required reporting to those charged with governance.
Revenue (or dividend income)
To test for completeness, we tested that the appropriate dividends had been
received in the year by reference to independent data of dividends declared for
all listed investment holdings in the portfolio. Our testing did not identify any
unrecorded dividends.
We tested the occurrence assertion by testing that all dividends from listed
investments recorded in the year had been declared in the market by investment
holdings, and we traced a sample of dividends received to bank statements.
We tested the allocation and presentation of dividend income between the
revenue and capital return columns of the Income Statement in line with the
requirements set out in the AIC SORP. We did not find any special dividends that
were not treated in accordance with the AIC SORP.
No material differences were identified.
Key audit matter
Income from investments
Refer to the Report of the Audit
Committee, Note 1 Accounting policies
Note 2 Income and Note 10 Investments
held at fair value through profit or loss.
ISAs (UK) presume there is a risk of fraud
in income recognition. In this instance, we
consider that ‘income’ refers to all the
Company’s income streams, both revenue
and capital (including gains and losses on
investments). As the objective of the
Company is to ‘maximise long-term total
return ‘ we do not believe there is a
specific incentive to incorrectly classify
income. We have, however, considered,
where applicable, the judgement required
in classifying dividend income.
We focused on the valuation of
investments with respect to gains on
investments and the accuracy and
completeness of dividend income
recognition and its presentation in the
Income Statement as set out in the
requirements of The Association of
Investment Companies Statement of
Recommended Practice (the ‘AIC SORP’).
How we tailored the audit scope
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 structure of the Company, the accounting
processes and controls, and the industry in which it operates.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in
the Financial Statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our
audit and the nature, timing and extent of our audit procedures on the individual financial statement line
items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on
the Financial Statements as a whole.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Overall Company
materiality £2.2m (2021: £2.3m).
How we determined it 1% of Net Assets.
Rationale for benchmark
applied
We have applied this benchmark, a generally accepted auditing practise for
investment trust audits, in the absence of indicators that an alternative
benchmark would be appropriate and because we believe this provides an
appropriate and consistent year on year basis for our audit.