Comptroller and Auditor General’s Certificate and Report on the Group Financial Statements

The Certificate and Report of the Comptroller and Auditor General to the Board of the British Broadcasting Corporation, acknowledging that Parliament also places reliance on the Group Accounts and Report

Opinion on financial statements

I certify that I have audited the financial statements of the British Broadcasting Corporation (BBC) Group for the year ended 31 March 2026 which comprise the BBC Group’s:

• Consolidated balance sheet as at 31 March 2026;
• Consolidated expenditure statement, Consolidated statement of comprehensive (expenditure)/income, Consolidated cashflow statement and Consolidated statement of changes in equity for the year then ended; and
• the related notes including the significant accounting policies.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted international accounting standards.

In my opinion, the financial statements:

• give a true and fair view of the state of the BBC Group’s affairs as at 31 March 2026 and of the deficit for the year then ended;
• have been properly prepared in accordance with UK adopted international accounting standards; and
• have been prepared in accordance with the Royal Charter for the continuance of the British Broadcasting Corporation and Secretary of State directions issued thereunder.

Opinion on regularity

In my opinion, in all material respects the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Basis for opinions

I conducted my audit in accordance with International Standards on Auditing (UK) (ISAs (UK), applicable law and Practice Note 10 Audit of Financial Statements and Regularity of Public Sector Bodies in the United Kingdom (2024). My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of my certificate.

Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical Standard 2024. I am independent of the BBC Group in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

The framework of authorities that has been considered in the context of my opinion on regularity is:

• the Royal Charter for the continuance of the British Broadcasting Corporation and the agreements issued thereunder on 7 November 2016, 26 May 2022 and 16 December 2025; and
• other agreements the BBC has entered into with Government Ministers.

Conclusions relating to going concern

In auditing the financial statements, I have concluded that the BBC Group’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

My evaluation of the BBC Board’s assessment of the BBC Group’s ability to continue to adopt the going concern basis of accounting included understanding and assessing risks to future revenue streams and the BBC Group’s ability to access borrowings and take other mitigating actions to manage cash-flows. I also considered my wider understanding of the environment in which the BBC Group operates which may have implications for the ability to adopt the going concern basis of accounting.

Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the BBC Group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the BBC Board’s reporting on how it has applied the UK Corporate Governance Code, I have nothing material to add or draw attention to in relation to the BBC Board’s statement in the financial statements about whether the Board considered it appropriate to adopt the going concern basis of accounting.

My responsibilities and the responsibilities of the BBC Board with respect to going concern are described in the relevant sections of this report.

Overview of my audit approach

Summary of my audit approach

Key Audit Matters

I identified the following as key audit matters for my audit of the BBC Group:

• Consolidation Processes and Scope
• Accounting for Daunus Limited
• Revenue recognition - Licence Fee and Commercial revenue
• Valuation of Defined Benefit Pension Scheme Assets and Liabilities
• Programme asset accounting
• Valuation of lease liabilities
• Valuation of derivatives

Materiality

I have applied materiality of £60 million for my audit of the BBC Group financial statements, approximately 1% of group revenue (2024/25: £50 million, 1% of group revenue).

Scope

I included in the scope of my audit various classes of transactions, account balances and disclosures arising from the Public Service Broadcaster and BBC Commercial Group components based on the risk of material misstatement to the BBC Group financial statements, given their size, estimation, and/ or complexity.

I also included in the scope of my audit the licence fee income that I audit as part of the Television Licence Fee Trust Statement audit and certain Defined Benefit Pension Scheme assets that are audited by the BBC Pension Scheme auditors.

My audit included coverage of 97.3% of BBC Group income and 81.9% of BBC Group total assets through the work performed directly as a group auditor and work performed by the component auditors.

Key audit matters

Key audit matters are those matters that, in my professional judgment, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditor, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of the audit of the financial statements as a whole, and in forming my opinion thereon. I do not provide a separate opinion on these matters.

This is not a complete list of all risks identified through the course of my audit but only those areas that had the greatest effect on my overall audit strategy, allocation of resources and direction of effort. I have not, for example, included information relating to the work I have performed around the presumed risk of fraud through management override of controls, where my work has not identified any matters to report.

The key audit matters were discussed with the Audit and Risk Committee; their report on matters that they considered to be significant to the financial statements is set out in the Audit and Risk Committee report.

I have made the following changes to the key audit matters and risks identified compared to my prior year audit and report:

• I previously considered the classification of Daunus Limited within the key audit matter ‘Consolidation Processes and Scope’. This year, I have recognised accounting for the Daunus arrangement as a standalone key audit matter, as there is significant complexity and judgement in determining whether the holding represents a joint venture or subsidiary controlled by the BBC and in valuing the balances associated with the arrangement;
• I have updated the key audit matter on ‘Commercial revenue’ to focus on the risk that revenue recognised around the year-end is recorded in the incorrect financial year;
• In prior years, I included in the key audit matter ‘Programme Assets’ the assets within both the Public Service Broadcaster and BBC Commercial Group. This year, I have reduced the scope to focus on accounting for the programme assets held by the Public Service Broadcaster due to the lower value of these assets held by BBC Comercial Group; and
• For 2024/25 I identified ‘Accounting for Corporate Transactions’ as a key audit matter due to retrospective adjustments made for the Britbox acquisition in 2023/24, and the acquisitions and disposals made by the BBC Commercial Group in 2024/25. There have been no significant acquisitions or disposals during 2025/26.

Consolidation processes and scope

Description of risk

The production of BBC Group financial statements requires multiple levels of consolidation of entities within the Group, identification of consolidation adjustments and elimination of intra-group transactions. The complexity of the group structure, the volume and value of required adjustments and the manual interventions in the consolidation processes increase the risk of material misstatement.

How the scope of my audit responded to the risk

I assessed the design and implementation of controls relevant to this key audit matter. I have reperformed the BBC Group and BBC Commercial consolidations to ensure they have been undertaken appropriately, including sub-consolidations in the commercial entities. I have also tested the accuracy and completeness of consolidation adjustments and intra-group eliminations.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Accounting for Daunus Limited

Investment in joint venture - £nil (2024/25: £nil), right of use asset £1,062 million (2024/25: £1,037 million), lease liability £922 million (2024/25: £918 million) – refer to note E and G4

Description of risk

The BBC holds shares in Daunus Limited, an entity that was set up as part of a sale and lease back arrangement to finance the refurbishment of London Broadcasting House in 2003. The BBC has assessed that Daunus Limited is a joint venture as it considers that the entity’s activities are not controlled by the BBC. This is a significant judgement under the relevant accounting standards. The BBC has accounted for the interest in joint venture as an equity investment as at 31 March 2026.

As part of the arrangement, the BBC holds a sub-lease to London Broadcasting house with Daunus Limited. In 2033, the BBC can exit the sub-lease arrangement or exercise one of two options to continue its use of London Broadcasting House. The BBC has assessed that the value of the lease liability and right of use asset should include the expected cost to exercise the option to re-purchase the headlease to the property. The BBC has valued the option that it holds to purchase the remaining shares in Daunus Limited in 2033 at nil. The accounting for the lease liability & right of use asset and associated lease options require significant judgement.

How the scope of my audit responded to the risk

I assessed the design and implementation of relevant controls.

I reviewed legal and contractual documentation detailing the BBC’s relationship with Daunus Limited to review and challenge the BBC’s judgement that the entity is subject to joint control and therefore accounted for as a joint venture. I reviewed BBC’s accounting for its investment in Daunus Limited against the relevant accounting standard and supporting financial information for the company. I assessed the data, assumptions, method and model used to account for the lease liability and right of use asset for London Broadcasting House. I reviewed the BBC’s assessment of its share call option and the valuation of this option.

I consulted with accounting experts to challenge the appropriateness of the assumptions and application of the relevant accounting standards, and to provide support in all of these areas

I have reviewed the disclosures to ensure compliance with the accounting standards.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Revenue recognition – Licence fee

Licence fee revenue – £3,879 million (2024/25: £3,843 million) – refer to note B2

Description of risk

The BBC’s primary source of revenue is derived from the Television Licence Fee (the licence fee). The licence fee is set by the Secretary of State for Culture, Media and Sport in accordance with the 2016 Royal Charter for the Continuance of the BBC; the current Charter ends on 31 December 2027.

I consider that there may be an incentive to manage and report licence fee revenue in ways that meet stakeholders’ expectations. This might involve the BBC or other parties involved in the licence fee revenue collection and reporting process. I consider that there is a heightened risk around year end revenue recognition being managed to achieve particular results and this has been a key focus of my testing in this area.

How the scope of my audit responded to the risk

In relation to the licence fee revenue recognised in the BBC Group’s consolidated financial statements, I have assessed the reasonableness of the licence fee revenue recognition policy. I have substantively tested the amounts and the timing of licence fee revenue paid to the BBC by the Secretary of State for Culture, Media and Sport as well as its associated disclosures. I assessed the design and implementation of controls relevant to this key audit matter.

The licence fee revenue and balances recorded in the Television Licence Fee Trust Statement (the Trust Statement) provide an expectation of the related licence fee revenue and balances recorded in the consolidated financial statements. I have carried out audit procedures on the BBC’s licence fee collection systems and processes and on related transactions and balances reported in the Trust Statement, which I also audit.

These included obtaining assurance on the accuracy, completeness and occurrence of licence fee revenue recorded in the Trust Statement by using IT audit procedures on reports generated from licence fee collection systems, testing controls and a sample of in-year transactions and year-end balances. I have also obtained assurance over the correct allocation of year end balances by examining evidence showing cash receipts and licences issued around the year end.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Revenue recognition – Commercial

Commercial revenue from contracts with customers – £2,145 million (2024/25: £2,155 million) – refer to note B1

Description of risk

I have assessed that there is a lower inherent risk in revenue contracts following the conclusion of two large contracts and an enhanced understanding of the judgements involved in commercial revenue contracts. In the current year, given the competitive trading environment, I have focussed on ensuring that judgements around when revenue is recognised in the financial statements are appropriate.

In forming my risk assessment, I have considered the incentives to manipulate revenue recognition and when there could be opportunity to do so. I concluded there is most opportunity to manipulate revenue recognition at the year end. Consequently, my significant risk was modified to focus on ensuring that the revenue recognised around the year-end is recorded in the correct financial year.

How the scope of my audit responded to the risk

I assessed the design and implementation of controls relevant to this key audit matter. I have reviewed the key accounting judgements and assumptions and considered theses against my knowledge of the business and the wider sector for the BBC’s commercial subsidiaries.

My testing included a sample test of revenue items recorded in the final period of the financial year to confirm that items were appropriately recognised by inspecting supporting contracts and other documentation. I performed analysis of revenue on a monthly and year on year basis, and tested items recognised around the year end to ensure that there is no evidence of revenue being inappropriately accelerated or deferred.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Valuation of defined benefit pension assets

Defined benefit pension scheme asset: £12,445 million (2024/25: £12,558 million) – refer to note D6

Description of risk

The valuation of the defined benefit pension scheme assets reported in the accounts is highly judgemental, and changes to market assumptions can result in material changes to the valuation. Pension assets include equities, bonds, repurchase agreements, property, alternative investments and other assets. There is also a longevity swap contract in place for this pension scheme which is held at fair value.

The valuations for some of these assets are inherently subjective and require a significant level of estimation in selecting appropriate valuation methodologies and assumptions. Given these factors, and the quantum of the assets, I have assessed the valuation of the pension scheme assets as a significant risk of material misstatement for my audit.

How the scope of my audit responded to the risk

I have obtained an understanding of the BBC’s pension scheme arrangements and assessed the processes and controls used by the BBC to value and account for pension scheme assets.

To audit the pension scheme assets, I have used the work of the BBC pension scheme auditors. The scheme auditors used their in-house valuations experts to consider whether the methodology and assumptions used in valuing these assets were reasonable. I reviewed the results of the procedures carried out by the scheme auditors to assess if they were sufficient for the purposes of my audit.

I also commissioned additional specified procedures from the pension scheme auditors to ensure that all assets material to the BBC Group have been audited, and that where assets are held in unquoted formats, appropriate benchmarks, control reports and fund manager statements have been reviewed to challenge or verify year end valuations. The totality of this work by the pension scheme auditors, with my team’s review of this work, provides assurance over the valuation of the Scheme assets.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Valuation of defined benefit pension scheme liabilities

Defined benefit pension scheme liability: £11,951 million (2024/25: £11,684 million) – refer to note D6

Description of risk

The valuation of the defined benefit pension scheme liabilities reported in the accounts is highly judgemental, and changes to actuarial assumptions, such as discount rate, inflation and mortality rates, can result in material changes to the valuation. The IAS 19 valuation of the pension scheme liability was carried out by external actuarial experts commissioned by the BBC. Given these factors, and the quantum of pension scheme liabilities, I have assessed the valuation of the pension scheme liabilities as a significant risk of material misstatement to my audit.

How the scope of my audit responded to the risk

I have obtained an understanding of the BBC’s pension scheme arrangements and assessed the processes and controls used by the BBC to value and account for pension scheme liabilities.

Using actuarial experts, I have assessed the reasonableness of the method, model, data and key assumptions used by the BBC’s actuaries in determining the pension scheme liability, benchmarking them against other schemes; and I have assessed the nature and appropriateness of BBC context-specific assumptions and challenged these, where appropriate. I have assessed the expertise and independence of the BBC’s actuaries.

I have tested the accounting entries to the underlying work performed by the BBC’s actuaries and reviewed disclosures made to confirm these are in accordance with the accounting standards.

I have also commissioned experts to consider whether the assumptions and methodology used in valuing the assets were reasonable in relation to the longevity swap contract. I reviewed the results of their procedures and assessed the expertise and independence of the experts who prepared the valuation of the swap.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Programme asset accounting

Programme-related assets and other inventory: £1,368 million (2024/25: £1,207 million) – refer to note E1

Description of risk

The BBC Group recognises programme assets in respect of costs associated with making or acquiring a programme. These assets are then released to broadcast expenditure in the Consolidated Expenditure Statement as programmes are made available and consumed.

The valuation of programme assets held by the Public Sector Broadcaster is a highly material estimate in the accounts, and there is a significant amount of judgement over the release to broadcast expenditure and valuation of programme-related assets.

I have identified a risk that the approach to valuation (judgment over initial value and consumption of these assets) could result in material misstatement. As the accounting process is manual, there is also a risk of human error, which given the value of programme asset balances, could have a material impact on the financial statements.

How the scope of my audit responded to the risk

I assessed the design and implementation of controls relevant to this key audit matter. I have assessed the policy adopted by the BBC in respect of programme assets as a key accounting judgement, including an assessment against the relevant accounting standards and the wider practice within the media industry.

In particular, I reviewed the accounting estimate in respect of audience consumption of programmes. I considered independent audience data to challenge the BBC’s assessment of the differing consumption between programme categories, particularly considering the impact of trends in iPlayer viewing. I considered and challenged the continued appropriateness of recognising expenditure for the majority of programme categories when first made available and children’s categories of over a multi-year period.

I have reviewed the methodology and assumptions used in the BBC’s calculations and whether there is any indication of bias. I substantively tested a sample of programme assets and related expenditure to confirm that these had been accounted for in accordance with the policy adopted by the BBC. I have also challenged whether programmes have been reviewed for impairment.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Valuation of lease liabilities

Obligations under leases: £1,627 million (2024/25: £1,649 million) – refer to note F2

Description of risk

BBC has a significant number of leases that often require judgment around the method, model, data and assumptions used in calculating the value of the lease liabilities. These judgments include a consideration of repurchase options at the end of the lease term and the treatment of contingent rent arrangements. Therefore, I have identified a risk of material misstatement in respect of the valuation of lease liabilities.

How the scope of my audit responded to the risk

I have assessed the design and implementation of controls relevant to this key audit matter. For a sample of leases – I have recalculated the lease liabilities, confirming for those entered into in prior periods that the ongoing accounting treatment remains appropriate. I have assessed the reasonableness of inputs into lease calculations and key assumptions and judgements, by checking these for consistency and contradictory evidence through inspection of lease documentation.

I have assessed whether disclosures relating to the accounting policies adopted by the BBC in relation to leases are sufficient.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Valuation of derivatives

Cash flow swaps financial assets: £299 million (2024/25: £310 million) – refer to note G4

Cash flow swaps financial liabilities: £467 million (2024/25: £461 million) – refer to note G4 

Description of risk

The BBC entered into an agreement involving cash flow swaps as part of the 2016/17 refinancing of the London Broadcasting House sale and lease back arrangement (the Daunus arrangement above). The valuation of the cash flow swap assets and liabilities requires significant BBC judgement, and changes to assumptions can result in material changes to the valuation.

I have identified risks around the method, model, data and assumptions used in estimating the fair value of the derivative assets and liabilities related to the cash flow swaps, as well as the sufficiency and accuracy of the related disclosures.

How the scope of my audit responded to the risk

I assessed the design and implementation of controls relevant to this key audit matter. Using experts, I have assessed the reasonableness of the method, model, data and key assumptions used in determining the cash flow swap assets and liabilities. I have reviewed the relevant disclosures to confirm these are in accordance with the accounting standards and that the values disclosed are in line with the output from the model used to value these assets and liabilities.

Key observations

The outcomes of the procedures I performed in response to this risk were satisfactory. I noted no material issues arising from my work.

Materiality

I applied the concept of materiality in both planning and performing my audit, and in evaluating the effect of misstatements on my audit and on the financial statements. This approach recognises that financial statements are rarely absolutely correct, and that an audit is designed to provide reasonable, rather than absolute, assurance that the financial statements are free from material misstatement or irregularity. A matter is material if its omission or misstatement would, in the judgement of the auditor, reasonably influence the decisions of users of the financial statements.

Based on my professional judgement, I determined overall materiality for the BBC group’s financial statements as a whole as follows:

• Materiality: £60 million (2024/25: £50 million)
• Basis for determining materiality: Approximately 1% of revenue (2024/25: approximately 1% of revenue)
• Rationale for the benchmark applied: I chose Group revenue as the materiality benchmark because, in my professional judgement, revenue is the key driver of the BBC Group’s business; in particular licence fee revenue and commercial revenue generated by the BBC Group are key drivers of stakeholder interest. Parliament and the public have an interest in the way in which the BBC Group is funded and how it spends its funds. The level of licence fee revenue and commercial revenue determines the resources available to the BBC Group and drives strategic decisions around spending and investment.

Performance Materiality

I set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 70% of Group materiality for the 2025/26 audit (2024/25: 75%). In determining performance materiality, I have also considered the uncorrected misstatements identified in the previous period.

Other Materiality Considerations

Apart from matters that are material by value (quantitative materiality), there are certain matters that are material by their very nature and would influence the decisions of users if not corrected. Such an example is any errors reported in the Related Parties note in the financial statements. Assessment of such matters needs to have regard to the nature of the misstatement and the applicable legal and reporting framework, as well as the size of the misstatement.

I applied the same concept of materiality to my audit of regularity. In planning and performing my audit work to support my opinion on regularity and in evaluating the impact of any irregular transactions, I considered both quantitative and qualitative aspects that would reasonably influence the decisions of users of the financial statements.

Error Reporting Threshold

I agreed with the Audit and Risk Committee that I would report to it all uncorrected misstatements identified through my audit in excess of £300,000, as well as differences below this threshold that in my view warranted reporting on qualitative grounds. I also report to the Audit and Risk Committee on disclosure matters that I identified when assessing the overall presentation of the financial statements.

Total unadjusted audit differences reported to the Audit and Risk Committee would have increased the net deficit by £3.5 million.

Audit scope

The scope of my Group audit was determined by obtaining an understanding of the BBC Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level.

In line with the revisions to ISA (UK) 600 Audits of Group Financial Statements (Including the Work of Component Auditors) I assessed my approach to the audit of the BBC Group considering the risks of material misstatement given the size, estimation, and/or complexity of various classes of transactions, account balances and disclosures within the BBC Group financial statements. I used this risk assessment to determine the audit procedures I require to be performed under my direction, supervision and review, whether those classes of transactions, account balances and disclosures arise within the BBC Group itself or in its components.

Based on my risk assessment, I included in the scope of my audit various classes of transactions, account balances and disclosures arising from the BBC Public Service Broadcaster and BBC Commercial Group components. I also included in the scope of my audit the licence fee income that I audit as part of the Television Licence Fee Trust Statement audit and certain pension scheme assets that are audited by the BBC Pension Scheme auditors as I identified risks of material misstatements in these balances and disclosures.

My audit included coverage of 97.3% of BBC Group income and 89.1% of BBC Group gross assets through the work performed directly as a group auditor and work performed by the component auditors.

I audited the BBC Public Service Broadcaster component as part of my audit of the BBC Group.

I have had direct involvement in the audit strategy for all other scoped in components. I issued Group audit instructions which enabled me to direct the component auditors to carry out the procedures required for my audit opinion on the BBC Group’s consolidated financial statements.

I am the appointed auditor for all but one of the components. For the BBC Pension Scheme Assets component, I have used the work of the appointed auditors and commissioned additional procedures to gain assurance over these asset balances.

Audit procedures in accordance with local adaptations of International Standards on Auditing have been conducted for classes of transactions, account balances and disclosures included in the scope of my audit and I have satisfied myself that sufficient work has been undertaken to provide the necessary assurances for my audit opinion on the BBC Group’s consolidated financial statements.

*Pension assets (£12,445 million) and liabilities (£11,951 million) are presented in the accounts on a net basis (£494 million) but are audited separately. We included gross pension assets in total assets when calculating group coverage.

Other information

The other information comprises the information included in the Annual Report, but does not include the financial statements and my auditor’s certificate and report thereon. The Accounting Officer is responsible for the other information.

My opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in my certificate, I do not express any form of assurance conclusion thereon.

My responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit or otherwise appears to be materially misstated.

If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact.

Opinion on other matters prescribed by the terms of my engagement

In addition to my audit of the BBC Group’s consolidated financial statements, the Board has engaged me to audit the information in the Remuneration report that is described as having been audited, which the Board has decided to prepare as if the BBC were required to comply with the requirements of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) made under the Companies Act 2006, where relevant.

In my opinion, the parts of the Remuneration report which I have been engaged to audit have been properly prepared in accordance with Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 where relevant, as if those requirements were to apply to the BBC Group.

In my opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic and Governance Reports for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the Strategic and Governance Reports have been prepared in accordance with applicable legal requirements.

Matters on which I report by exception

In the light of the knowledge and understanding of the BBC Group and its environment obtained in the course of the audit, I have not identified material misstatements in the Strategic Report or the Governance Report.

• I have nothing to report in respect of the following matters which I report to you if, in my opinion:
• adequate accounting records have not been kept by the BBC Group or returns adequate for my audit have not been received from branches not visited by my staff; or
• I have not received all of the information and explanations I require for my audit; or
• the financial statements and the parts of the remuneration report subject to audit are not in agreement with the accounting records and returns; or
• certain disclosures of remuneration specified by Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 have not been made; or
• a corporate compliance statement has not been prepared.

Corporate compliance statement

The terms of my engagement require me to review the BBC Board’s statement in relation to going concern, longer-term viability and that part of the Corporate Compliance Statement relating to the BBC Group’s compliance with the provisions of the UK Corporate Governance Code specified for my review.

Based on the work undertaken as part of my audit, I have concluded that each of the following elements of the Corporate Compliance Statement is materially consistent with the financial statements or my knowledge obtained during the audit:

• The BBC Board’s statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out in Note A.
• The BBC Board’s explanation as to its assessment of the entity’s prospects, the period this assessment covers and why they feel this period is appropriate set out in the Viability statement;
• The BBC Board’s statement whether the financial statements are fair, balanced and understandable set out in Statement of Board responsibilities;
• The BBC Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out in Our principal risks;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out in Our principal risks; and
• The section describing the work of the Audit and Risk Committee set out in Audit and Risk Committee report.

Responsibilities of the BBC Board for the financial statements

As explained more fully in the Statement of the Board Responsibilities in respect of the Annual Report and Accounts, the BBC Board is responsible for:

• maintaining proper accounting records;
• providing me with access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;
• providing me with additional information and explanations needed for my audit;
• providing me with unrestricted access to persons within the BBC Group from whom I determine it necessary to obtain audit evidence.
• ensuring such internal controls are in place as deemed necessary to enable the preparation of financial statements to be free from material misstatement, whether due to fraud or error;
• preparing Group financial statements which give a true and fair view and are in accordance with HM Treasury directions issued under the Government Resources and Accounts Act 2000;
• preparing the Annual Report, which includes the Remuneration report, in accordance with the Royal Charter for the continuance of the British Broadcasting Corporation and Secretary of State directions issued thereunder; and
• assessing the BBC Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the BBC Board either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

My responsibility is to audit, certify and report on the financial statements in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)).

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a certificate that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was considered capable of detecting non-compliance with laws and regulations including fraud

I design procedures in line with my responsibilities, outlined above, to detect material misstatements in respect of non-compliance with laws and regulations, including fraud. The extent to which my procedures are capable of detecting non-compliance with laws and regulations, including fraud is detailed below.

Identifying and assessing potential risks related to non-compliance with laws and regulations, including fraud

In identifying and assessing risks of material misstatement in respect of non-compliance with laws and regulations, including fraud, I:

• considered the nature of the sector, control environment and operational performance including the design of the BBC Group’s accounting policies, key performance indicators and performance incentives;
• inquired of management, the BBC’s Director for Quality, Risk and Assurance and those charged with governance, including obtaining and reviewing supporting documentation relating to the BBC Group’s policies and procedures on:
• identifying, evaluating and complying with laws and regulations;
• detecting and responding to the risks of fraud; and
• the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations including the BBC Group’s controls relating to the BBC Group’s compliance with the Royal Charter for the continuance of the British Broadcasting Corporation, the Communications Act 2003, the Companies Act 2006 in so far as it is applicable to the BBC Group, regulations established by the Office of Communications, the Competition and Markets Authority and regulations relating to money laundering and sanctions.
• inquired of management, the BBC’s Director for Quality, Risk and Assurance and those charged with governance whether:
• they were aware of any instances of non-compliance with laws and regulations;
• they had knowledge of any actual, suspected, or alleged fraud; and
• discussed with the engagement team, including significant component audit teams, and the relevant internal and external specialists, including information technology, corporate finance, actuarial and tax specialists, regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, I considered the opportunities and incentives that may exist within the BBC Group for fraud and identified the greatest potential for fraud in the following areas: judgements relating to revenue recognition and profit recognition; posting of unusual journals; complex transactions; and management override of controls, including bias in management’s estimation. In common with all audits under ISAs (UK), I am required to perform specific procedures to respond to the risk of management override.

I obtained an understanding of the BBC Group’s framework of authority and other legal and regulatory frameworks in which the BBC Group operates. I focused on those laws and regulations that had a direct effect on material amounts and disclosures in the financial statements or that had a fundamental effect on the operations of the BBC Group. The key laws and regulations I considered in this context included the Royal Charter for the continuance of the British Broadcasting Corporation, the Communications Act 2003, the Companies Act 2006 in so far as it is applicable to the BBC Group, regulations established by the Office of Communications, regulations relating to money laundering and sanctions and applicable taxation and employment legislation.

In addition, I considered the following matters:

• the risk of fraud in revenue recognition with respect to both licence fee and commercial revenue as well as the judgement involved in impairing their associated receivables;
• the significant judgement applied in the valuation of programme assets and potential for management bias in determining the pattern of consumption that underpins when programmes are released to cost of transmission;
• the high degree of judgement applied in valuing the defined benefit pension scheme assets and liabilities, which exposes the valuation to a risk of management manipulation or bias; and
• the complex nature of the BBC’s property portfolio and related financing arrangements including accounting for property under IFRS 16, including the Daunus arrangement, which gives rise to significant judgements that may be subject to management bias.

Audit response to identified risk

To respond to the identified risks resulting from the above procedures:

• I reviewed the financial statement disclosures and tested them to supporting documentation to assess compliance with provisions of relevant laws and regulations described above as having direct effect on the financial statements;
• I enquired of management, the Audit and Risk Committee and in-house legal counsel concerning actual and potential litigation and claims;
• I reviewed minutes of meetings of those charged with governance and the Board and internal audit reports;
• in addressing the risk of fraud through management override of controls, I tested the appropriateness of journal entries and other adjustments; assessed whether the judgements on estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business;
• in assessing the reasonableness of the accounting treatment applied, as well as considerations of key inputs, model calculations and other methods of estimation, judgements and assumptions, relating to key estimates, I considered whether these indicated any potential bias or manipulation; and
• performed a sample of intra-group transactions to confirm these were made in accordance with regulations established by the Office of Communications.

I communicated relevant identified laws and regulations and potential risks of fraud to all engagement team members, including internal and external specialists and significant component audit teams and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

A further description of my responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website. This description forms part of my certificate.

Other auditor’s responsibilities

I am required to obtain sufficient appropriate audit evidence to give reasonable assurance that the expenditure and income recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control I identify during my audit.

Report

I have no observations to make on these financial statements.