Financial statements Independent auditors’ report to the members of Dunelm Group plc How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Parent Company, the accounting processes and controls, and the industry in which they operate. The Group is structured with one segment. The Group financial statements are a consolidation of eight legal entities within this segment, comprising the Group’s operating business and centralised functions. In establishing the overall approach to the Group audit, we identified one legal entity: Dunelm (Soft Furnishings) Limited, which, as the sole trading legal entity in the Group, required an audit of its complete financial information due to its financial significance to the Group. Further specific audit procedures over central functions including the Group consolidation, share based payments, equity and taxes were performed. All audit procedures were performed by the Group Engagement Team. The scoping above gave us the evidence we needed for our opinion on the Group financial statements as a whole. The Parent Company is comprised of one legal entity which was subject to a full scope audit for the purposes of the Parent Company financial statements. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Financial statements - Group Financial statements - Parent Company Overall materiality £7,800,000 (2020: £5,500,000). £5,400,000(00: 5,000,000). How we 5% of profit before tax 1% of total assets determined it Rationale for We have applied this benchmark, a generally We have applied this benchmark, a generally benchmark accepted auditing benchmark, as we believe this accepted auditing benchmark, as we believe this applied is the key measure used by the shareholders in is the key measure used by the shareholders in evaluating the performance of the Group. evaluating the performance of the Parent Company. For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to £5,850,000 for the Group financial statements and £4,050,000 for the Parent Company financial statements. In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and agggationre risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £390,000 (Group audit) (2020: £250,000) and £270,000 (Parent Company audit) (2020: £250,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. 182 DUNELM GROUP PLC ANNUAL REPORT & ACCOUNTS 2021