AAK Annual Report 2018

118 Key audit matters Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consol- idated accounts as a whole, but we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the Key audit matter Revenue recognition – accounting of entered sales contracts The accounting of revenues comprises a significant risk based on their importance in the financial information and the complexi- ty in the valuation of entered sales contracts. As seen on page 34 and Note 3 of the annual report, AAK applies active risk management. The value of the sales contracts entered, are reported in accordance with IFRS 9 which implies that all of these are valued and reported at market value as at balance sheet date. The market value is determined, as appropriate, on the basis of liquid market prices in an open market and on stock exchange prices. Any possible error in the applied market price has a direct impact on the reported revenues and results. Any possible omis- sion in the reporting of entered contracts, or the risk of fictitious agreements being reported, would imply an impact on reported revenues and would limit AAK’s possibility to achieve appropriate risk management measures. In order to verify that revenues are complete, correctly reported and valued, and that they comprise of existing sales contracts, our audit has included, amongst other things, a combination of: - a review and testing of AAK’s internal controls - tests of detail through, amongst other measures, random sampling - analytical procedures, amongst other things, with the help of data analyses The audit activities described above refer to the sales process in its entirety (registration of sales contracts, delivery to the customer, inventory transactions, invoicing, receipt of payments and valuation). In order to ensure the completeness and correctness of the reporting regarding signed contracts, we have, amongst other things: - created an understanding for, and tested, the controls intended to identify unallowed activities linked to the signing and valuation of sales contracts, - tested confirmations from counterparties regarding established sales contracts. No deviations have been noted in the reporting of established sales contracts based on the executed audit, as described above.