Strategic report Governance Financial statements Other information INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HARGREAVES LANSDOWN PLC CONTINUED This is not a complete list of all risks identified by our audit. The key audit matters below are consistent with last year. Key audit matter: Revenue recognition (group) Revenue is material to the group and is an important determinant of the group’s results. Revenue may be misstated due to errors in system calculations and/or manual processes, for example, arising from incorrect securities’ prices or levels of assets held used in such calculations and/or processes. Further, there are incentive schemes in place for Directors and staff which are in part based on the group’s revenue performance. Where there are incentives based on financial performance, there is an inherent risk of fraud in revenue recognition in order to misstate revenue. This may arise through unauthorised changes to key data inputs or system calculations used in the revenue recording processes and/or posting journal entries to manipulate revenue. Our assessment in this regard in respect of each of the group’s revenue streams concluded that relevant areas of risk related to the three areas described below. In order to address these areas of heightened risk, we evaluated the design and implementation of key controls as well as performing the following procedures: Area of focus How our audit addressed the key audit matter The potential manipulation of key data inputs used in the automated calculation of We tested relevant IT controls over the administration system, as well as the systems which capture and transmit platform fees (e.g. number of units held) or stockbroking commission (e.g. fee rates) customer transactions to the administration system. in the administration system. We identified and tested relevant IT dependencies (e.g. the interface between the front end systems and the administration system) used in the revenue reporting process. In addition to this we tested management’s controls over the accuracy of relevant data in the administration system (for example over the recording of customer holdings, and matching of transactions to third party records). We identified a number of exceptions from our testing of controls and therefore performed additional work to address these including consideration of mitigating controls, with no further issues arising. We tested samples of key data inputs held and used in the administration system to supporting documentation, with no exceptions being noted from this testing. The potential manipulation of the calculation logic within the administration system We used our data analytics software to reperform the platform fees and stockbroking commission calculations, using to increase reported revenue from platform fees and stockbroking commission, source data extracted from the administration system. We independently performed the calculation of interest on or the potential manipulation of manual spreadsheet calculations of interest on client money using source data extracted from records held by the group. We then compared our independent client money. recalculations to the amounts reported. With respect to the recalculations, we noted differences which in quantitative terms were trivial. We investigated these differences and did not consider them to require further testing. Posting journals to manipulate reported revenue amounts. We tested a risk-based sample of revenue related journals as part of our overall response to the risk of management override of controls. No exceptions were noted from this testing. 137 Hargreaves Lansdown Report and Financial Statements 2021