Annual Report 2017

Rothschild & Co | Annual Report 2017

177

1. Overview

4. Financial statements

Management report

2. Business review

Statutory auditors’ report on the consolidated financial

statements for the nine-month period ended 31 December 2017

This is a translation into English of the statutory auditors’ report on the consolidated financial statements of the Company issued in French and it is

provided solely for the convenience of English speaking users.

This statutory auditors’ report includes information required by European regulation and French law, such as information about the appointment of the

statutory auditors or verification of the management report and other documents provided to shareholders.

This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

Dear Shareholders,

Opinion

In compliance with the engagement entrusted to us by your General

Meeting, we have audited the accompanying consolidated financial

statements of Rothschild & Co for the nine-month period ended

31 December 2017.

In our opinion, the consolidated financial statements give a true and

fair view of the assets and liabilities and of the financial position of the

Group as at 31 December 2017 and of the results of its operations for the

nine-month period then ended in accordance with International Financial

Reporting Standards as adopted by the European Union.

The audit opinion expressed above is consistent with our report to the

Audit Committee.

Basis for Opinion

Audit framework

We conducted our audit in accordance with professional standards applicable

in France. We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the

Statutory Auditors’ Responsibilities for the Audit of the Consolidated

Financial Statements section of our report.

Independence

We conducted our audit engagement in compliance with independence

rules applicable to us, for the period from 1 April 2017 to the date of our

report and specifically we did not provide any prohibited non-audit services

referred to in Article 5(1) of Regulation (EU) No 537/2014 or in the French

Code of ethics (code de déontologie) for statutory auditors.

Justification of Assessments –

Key Audit Matters

In accordance with the requirements of Articles L. 823-9 and R. 823-7

of the French Commercial Code (code de commerce) relating to the

justification of our assessments, we inform you of the key audit matters

relating to risks of material misstatement that, in our professional

judgement, were of most significance in our audit of the consolidated

financial statements of the current period, as well as how we addressed

those risks.

These matters were addressed in the context of our audit of the

consolidated financial statements as a whole, and in forming our opinion

thereon, and we do not provide a separate opinion on specific items of the

consolidated financial statements.

1 Valuation of financial instruments carried

at fair values

Key audit matter

As at 31 December 2017, the Group holds for trading purposes financial

instruments categorised as Level 2 and Level 3 according to the IFRS fair

value hierarchy. These financial instruments are presented at fair value on

the asset side of the balance sheet for €566 million, representing 5% of

total assets.

The fair value of these financial assets, whose market prices are not

available or the valuation parameters are not observable, is determined

using valuation techniques or complex internal and external valuation

models and requires exercise of judgement.

We considered that the valuation of Level 2 and 3 financial instruments

recognised at fair value was a key audit matter for the consolidated financial

statements due to the exercise of the judgement that it requires and its

sensitivity to the assumptions made.

Information on the valuation of financial instruments is presented in

note IV.E, note V.1 and note V.3 of the consolidated financial statements

on pages 140 to 145 and page 147.

Our response

Our procedures consisted of:

• understanding of the internal control and governance put in place by

Management to identify and value the financial assets in level 2 and 3

of the fair value hierarchy;

• assessing the soundness of the methodology applied and the relevance

of the parameters and assumptions used by the Group to determine the

fair values of these financial assets;

• testing the valuations used by the Group for these level 2 and 3 financial

assets.

We have ensured that the information presented in the financial statements

is appropriate.