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(FREE TRANSLATION OF THE REPORT ISSUED IN SPANISH)
STATUTORY AUDITOR'S REPORT
To the Shareholders
Grupo Aval Acciones y Valores S.A.:
Opinion
I have audited the consolidated financial statements of Grupo Aval Acciones y Valores S.A. and subsidiaries (the Group), which comprise the consolidated statement of financial position at December 31, 2022 and the consolidated statements of income and other comprehensive income, changes in equity, and cash flows for the year then ended, and their respective notes that include the summary of significant accounting policies and other explanatory notes.
In my opinion, the above mentioned consolidated financial statements, attached to this report, present fairly, in all material aspects, the consolidated financial position of the Group at December 31, 2022, the consolidated results of its operations, and its consolidated cash flows for the year then ended, in conformity with Accounting and Financial Reporting Standards accepted in Colombia, applied on a consistent basis with previous year.
Basis for opinion
I conducted my audit in accordance with International Standards on Auditing (ISAs) accepted in Colombia. My responsibilities under those standards are further described in the "Statutory Auditor' Responsibilities for the Audit of the Consolidated Financial Statements" section of my report. I am independent of the Group in accordance with the Accountant's Professional Code of Ethics issued by the International Ethics Standards Board for Accountants (IESBA Code), included in the Information Assurance Standards accepted in Colombia together with the ethical requirements established in Colombia that are relevant to my audit of the consolidated financial statements, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code mentioned. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Key audit matters
Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the consolidated financial statements of the current period. These matters were addressed in the context of my audit of the consolidated financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters.
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Assessment of the Credit Portfolio Impairment under International Financial Reporting Standard
(IFRS) 9 (see notes 4.1.5 and 11 to the consolidated financial statements)
Key audit matter | How our audit approached this matter | |
As described in Notes 4.1.5 and 11 to the | My audit procedures to assess the assignment of a | |
consolidated financial statements, the | credit risk qualification and the effect on the provision | |
Group's provision for credit portfolio | included, among others, the following: | |
impairment amounted to 9.197.514 million | • | Evaluation of the design and implementation of |
Colombian pesos as of December 31, 2022. | ||
certain internal controls on the process | ||
The Group measures credit portfolio | established by the Group to calculate credit | |
impairment by an amount equal to the | portfolio impairment, including, among others, | |
Expected Credit Losses (ECL) for each | controls on: (i) the models and assumptions | |
credit's lifetime, except those credits that | used, (ii) the estimation of the economic | |
have not had a significative increase in credit | variables, (iii) the integrity and accuracy of the | |
risk since their initial recognition, for which | data, and (iv) the Group's monitoring on the | |
the Group calculates a 12-month ECL. The | general provision for impairment losses, | |
provision for credit portfolio impairment | including the application of the judgment used, | |
reflects a result weighted by probability that | and operative efficiency tests on selective | |
considers multiple economic scenarios | samples. | |
based on forecasts of future economic | • | Involvement of credit risk professionals with |
conditions and is determined as a function | ||
specific abilities, knowledge, and industry | ||
of the Group's assessment of the Probability | ||
experience, who assisted me with: (i) the | ||
of Default (PD), Loss Given Default (LGD), | ||
evaluation of the models and key inputs used to | ||
and Exposure Given Default (EGD) | ||
determine the parameters of Probability of | ||
associated with each loan. The Group, in | ||
Default (PD), Loss Given Default (LGD), and | ||
accordance with the requirements of IFRS 9 | ||
Exposure Given Default (EGD); (ii) the assessment | ||
and following market practices, uses | ||
of the macroeconomic projections and the | ||
complex models that incorporate data and | ||
weighting of the scenarios' probability, (iii) the | ||
assumptions that require significative | ||
assessment of the qualitative adjustments | ||
judgment to estimate the credit portfolio | ||
applied to the models, (iv) recalculation for a | ||
impairment loss. | ||
sample of collectively-evaluated credits and a | ||
I identified the assessment of credit | sample of significative individually-evaluated | |
portfolio impairment as a key audit matter | credits, of impairment and analysis of guarantee | |
since there is a high degree of estimation | values; and (v) verification, for a sample of | |
inherent to the determination of the | individually significative credits, of the credit risk | |
expected loss by the credit portfolio | qualification assigned by the Group. | |
impairment as a result of the judgment | ||
required for prospective assumptions and | ||
involved models. | ||
The assessment of credit portfolio | ||
impairment required significant attention | ||
from the auditor, the involvement of a |
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judgment and the participation of risk credit professionals, as well as knowledge and industry experience.
Assessment of income recognized from concession contracts in construction phase, and fair value of the financial assets related to those concession contracts (see noted 2.20, 5, and 16 to the consolidated financial statements)
Key audit matter | How our audit approached this matter | |
As detailed in notes 2.20, 5, and 16 to the | My audit procedures to evaluate the recognition of | |
consolidated financial statements, the Group and | income from concession contracts in construction | |
its subsidiaries have concession contracts signed | phase and fair value of the related financial assets, | |
with the government for the construction and | include, among others: | |
subsequent maintenance of infrastructure for a | • | |
given period. In exchange, the Group and its | Evaluation of the design and implementation | |
subsidiaries have a right to receive direct payments | of certain internal controls on the process | |
from the government and/or fees charges to the | established by the Group and its subsidiaries | |
final users of the infrastructure. | to determine the fair value of its financial | |
During the construction phase, the Group and its | assets from concession contracts and establish | |
the income to be recognized from the | ||
subsidiaries recognize income and a financial asset | ||
contracts in construction phase. These | ||
for the payments unconditionally guaranteed by | ||
controls include those related to: (i) the review | ||
the government and/or an intangible asset for the | ||
of the inputs and assumptions used; (ii) the | ||
payments related to the use of the infrastructure. | ||
review of the termination costs estimation; | ||
The performance obligations related to the | and (iii) the review and approval of the assets' | |
construction services are satisfied with time and | fair value and the income amount to be | |
the amount of recognized income depends on the | recognized, and operative efficiency tests on | |
termination stage of the construction services and | selective samples. | |
the fair value of the recognized asset. The Group | • | Involvement of valuation professionals with |
and its subsidiaries have assigned some of the | specific abilities and industry knowledge, who | |
financial assets related with concession contracts | ||
assisted me with: (i) the assessment of | ||
to be measured at fair value with changes in | ||
whether the models internally developed are | ||
income after the initial recognition. As of | ||
consistent with the valuation practices | ||
December 31, 2022, the Group and its subsidiaries | ||
generally used for this purpose and the IFRS; | ||
have financial assets from concession contracts for | ||
(ii) the comparison of the WACC discount rate | ||
3.507.231 million Colombian pesos that are | ||
with a determined range using market-verified | ||
measured at fair value and classified on level 3 of | ||
macroeconomic assumptions; (iii) the | ||
fair value hierarchy and intangible assets from | ||
assessment of future inflation rates estimated | ||
concession contracts in construction phase for | ||
by the Group, comparing them with available | ||
7.329.700 million Colombian pesos. | ||
market data; (iv) the assessment of estimated | ||
I identified the assessment of income recognized | costs until finalization, including assumptions | |
for construction contracts in construction phase | used; (v) the assessment of projected income | |
from use of infrastructure comparing them |
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Assessment of income recognized from concession contracts in construction phase, and fair value of the financial assets related to those concession contracts (see noted 2.20, 5, and 16 to the consolidated financial statements)
and fair value of related financial assets as a key audit matter because it implies an effort and significative audit judgement, including the participation of valuation professional with specific abilities and industry knowledge.
For contracts in construction phase, auditor's judgement was required to assess the estimated costs until the termination of the construction contracts in construction phase and evaluated the models developed by the Group and its subsidiaries to estimate the fair value of the financial and intangible assets, as well as the significative inputs and unobservable assumptions for these models.
For financial assets related to concession contracts subsequently measured at fair value with change in income, auditor's judgement was required to evaluate the models developed by the Group and its subsidiaries to estimate its fair value, as well as the data and important unobservable assumptions of these models. The inputs and important unobservable assumptions of the models include the Weighted Average Capital Cost (WACC), future inflation rates, and projected income for use of infrastructure.
with internal and external data, when available; and (vi) the evaluation of the accuracy of the forecasts made on inflation and constructions costs, by comparing a sample of previously estimated values with the real values obtained.
Other matters
The consolidated financial statements at and for the year ending December 31, 2021 are submitted only for comparison purposes, were audited by another public accountant, member of KPMG S.A.S., who, in their report dated March 4, 2022, expressed an unqualified opinion thereon.
Responsibilities of Management and those in charge with the Company's corporate governance for the consolidated financial statements
Management is responsible for the fair preparation and presentation of these consolidated financial statements in accordance with Accounting and Financial Reporting Standards accepted in Colombia. This responsibility includes: designing, implementing and maintaining the internal control relevant that management considers necessary for the preparation of consolidated financial statements that are free
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from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern accounting basis unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Statutory Auditor's responsibilities for the audit of the consolidated financial statements
My objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an audit report 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 will always detect a material misstatement, when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the users' economic decisions taken on the basis of these consolidated financial statements.
As part of an audit conducted in accordance with ISAs, I exercise professional judgment and maintain professional skepticism throughout the audit. I also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant for the audit in order to design audit procedures that are appropriate in the circumstances.
- Evaluate the appropriate accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern hypothesis and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If I would conclude that a material uncertainty exists, I am required to draw attention in my statutory auditor's report to the related disclosure in the consolidated financial statements or, if such disclosure is inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my report. However, future events or conditions may cause the Group ceases to continue as a going concern.
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Grupo Aval Acciones y Valores SA published this content on 18 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 April 2023 14:37:05 UTC.