AAK Annual Report 2018

119 Key audit matter How our audit addressed the Key audit matter Valuation of purchase contracts regarding raw materials and inventory on hand AAK has a purchase process implying that as soon as a sales contract has been signed, the equivalent currency and raw material price is hedged. The active risk management applied by AAK is described on page 34 and in Note 3 in the annual report. Entered purchase contracts (physical contracts and derivative instruments), including inventory on hand, are re- ported according to IFRS 9, which implies that all of these items are valued and reported at market value as at balance sheet date. The reporting of raw materials purchases is complex and fluctuations in raw materials prices can have a significant impact on the financial informa- tion, which is the reason an incorrect valuation of purchase contracts and inventories can have a direct impact on costs and results. A possible omission in reporting entered contracts or the risk that a fictive contract is reported, would imply an impact on reported costs and would limit AAK’s possibilities to achieve an appropriate risk management. In order to verify that raw material costs are complete, correctly reported and valued, and that they are comprised of existing purchase contracts, our audit has included, amongst other things: - a review and testing of AAK’s internal controls regarding the updating and registration of market prices, - data analyses, tests of detail through random sampling and other analytical procedures in order to en- sure the registration of signed contracts, received deliveries, inventory transactions, received invoices, payments and registered market prices. In order to ensure the completeness and correctness of the accounts regarding signed purchase con- tracts, we have, amongst other things: - obtained an understanding of, and tested, the controls referring to the identification of unallowed activities associated with the subscription and valuation of purchase contracts, - tested the confirmations received from counterparties regarding established purchase contracts. No deviations have been noted based on the audit activities described above. Other information than the annual accounts and consolidated accounts This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–38, 107–115 and 122–123. The Board of Directors and the Chief Executive Officer are responsible for this other information. Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information. In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the informa- tion otherwise appears to be materially misstated. If we, based on the work performed concerning this information, conclude that there is a material misstate- ment of this other information, we are required to report that fact. We have nothing to report in this regard.