Independent auditor's report

To: the Annual General Meeting of Shareholders and the Supervisory Board of Koninklijke DSM N.V.

Our opinion

In our opinion:

• the accompanying consolidated financial statements give a true and fair view of the financial position of Koninklijke DSM N.V. (hereafter: ‘Royal DSM’, ‘DSM’ or the ‘Company’) as at 31 December 2022 and of its result and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code
• the accompanying parent company financial statements give a true and fair view of the financial position of Royal DSM as at 31 December 2022 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code

What we have audited

We have audited the financial statements 2022 of Royal DSM based in Heerlen. The financial statements include the consolidated financial statements and the parent company financial statements.

The consolidated financial statements comprise:

1. the consolidated balance sheet as at 31 December 2022;
2. the following consolidated statements for 2022: the income statement, the statements of comprehensive income, changes in equity and cash flows; and
3. the notes comprising a summary of the significant accounting policies and other explanatory information

The parent company financial statements comprise:

1. the parent company balance sheet as 31 December 2022;
2. the parent company income statement for 2022; and
3. the notes comprising a summary of the accounting policies and other explanatory information

Basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report.

We are independent of Royal DSM in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).

We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The information in respect of going concern, fraud and non-compliance with laws and regulations, climate and the key audit matters was addressed in this context, and we do not provide a separate opinion or conclusion on these matters.

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Information in support of our opinion

Summary

Materiality

Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR 32.5 million (2021: EUR 45 million)]. The materiality is determined with reference to profit before income tax expense, normalized for acquisition/divestment related expenses, resulting in a percentage of 5.4% (2021: 4.8%). We consider this normalized profit before income tax expense as the most appropriate benchmark following our analysis of the common information needs of users of the financial statements. The reduction in materiality is the result of the (announced) divestments of the Engineering Materials business and Protective Materials business. Although included in net profit for the year, the results of these businesses and related activities, including the book result from the disposal of the Protective Materials business in 2022, have been presented separate from continuing operations, and are no longer part of (normalized) profit before income tax expense. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the Supervisory Board that misstatements identified during our audit in excess of EUR 1.5 million would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Scope of the group audit

Royal DSM is at the head of a group of components. The financial information of this group is included in the financial statements of Royal DSM.

Because we are ultimately responsible for the auditor’s report, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for components reporting for group audit purposes. Decisive were the size and/or the risk profile of the components or operations. Based on our risk assessment, we selected 18 components (2021: 23 components) to perform audits for group reporting purposes on a complete set of reporting packages. In addition, we selected 17 components (2021: 13 components) to perform specified audit procedures for group reporting purposes on specific items of the reporting packages.

This resulted in a coverage of 75% (2021: 76%) of total net sales and 78% (2021: 79%) of total assets. The remaining 25% of total net sales (2021: 24%) and 22% of total assets (2021: 21%) is represented by a significant number of components (‘Remaining components’), none of which individually represent more than 1% of total net sales and 2% of total assets.

For these remaining components, we performed central procedures such as analytical procedures to validate our assessment that there are no risks of material misstatement within these components.

Our procedures as described above can be summarized as follows:

We have:

• performed audit procedures at group level in respect of areas such as the annual goodwill impairment tests, other asset impairment (trigger) assessments, income tax for the Dutch fiscal unities, acquisitions of subsidiaries, accounting for (announced) divestments, restructuring provisions, treasury and shared service centers; and
• used the work of local KPMG (‘component auditors’) when auditing reporting packages or performing specified audit procedures at component level

The group audit team has set materiality levels for the components, which ranged from EUR 5 million to EUR 12.5 million (2021: EUR 5 million to EUR 12.5 million), based on the mix of size and risk profile of the respective components.

The group audit team provided detailed instructions to all Business Group and component auditors part of the group audit, covering the significant audit areas, including the relevant risks of material misstatement, and the information required to be reported back to the group audit team.

The group audit team scheduled (virtual) site visit meetings with local component auditors and local component management in the United States of America, Switzerland, China, the Netherlands and the shared service center in India. For these components, as well as the components in Brazil and Mexico, the group audit team reviewed selected component auditor documentation.

Virtual meetings were held with all component auditors that participated in the group audit, to discuss the audit approach and the audit findings and observations reported to the group audit team.

By performing the procedures mentioned above at group components, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the financial statements.

Audit response to the risk of fraud and non-compliance with laws and regulations

In the chapter “Corporate governance and risk management” of the Integrated Annual Report, the Managing Board describes its procedures in respect of the risks of fraud and non-compliance with laws and regulations. In the chapter “Supervisory Board Report”, the Supervisory Board reflects on this.

As part of our audit, we have gained insights into Royal DSM and its business environment, and evaluated the design and implementation of Royal DSM’s risk assessment in relation to fraud and non-compliance. Our procedures included, among other things, assessing Royal DSM’s code of business conduct, alert cases (whistleblowing procedures), compliance policies and its procedures to investigate indications of possible fraud and non-compliance. Furthermore, we performed relevant inquiries with the Managing Board, Supervisory Board and other relevant functions, such as the Corporate Operational Audit department, Legal Counsel and Fraud Committee. As part of our audit procedures, we:

• obtained an understanding of how the company uses information technology (IT) and the impact of IT on the financial statements, including the potential for cybersecurity incidents to have a material impact on the financial statements;
• assessed other positions held by Managing Board members and Executive Committee members and paid special attention to procedures and governance in view of possible conflicts of interest;
• evaluated indications of possible fraud and non-compliance;
• evaluated correspondence with relevant supervisory authorities and regulators as well as legal confirmation letters.

In addition, we performed procedures to obtain an understanding of the legal and regulatory frameworks that are applicable to Royal DSM and identified the following areas as those most likely to have a material effect on the financial statements:

• Health and safety regulation (reflecting the nature of Royal DSM’s production and distribution processes);
• Environmental regulation (reflecting the environmental clean-up responsibilities related to mainly Royal DSM’s former production and distribution processes);
• Competition legislation (reflecting Royal DSM’s operations across the world and potential investigations by national competition authorities);
• Employment legislation (reflecting Royal DSM’s significant and geographically diverse work force);
• Consumer product law relating to product safety (reflecting the nature of Royal DSM’s diverse product base)

We, together with our forensics specialists, evaluated the fraud and non-compliance risk factors to consider whether those factors indicate a risk of material misstatement in the financial statements.

Based on the above and the auditing standards, we identified the following fraud risks that are relevant to our audit, including the relevant presumed risks laid down in the auditing standards, and responded as follows:

Management override of controls (a presumed risk)

Risk:

• Fraud risk related to management override and alteration of (financial) results to meet external expectations, to maintain/increase current stock price and to meet bonus targets.

Responses:

• We evaluated the design and the implementation of internal controls that mitigate fraud risks such as controls related to journal entries
• We performed data analyses on high-risk journal entries and evaluated key estimates and judgements for bias by management, such as estimates relating to impairment testing of goodwill, development projects and acquisition-related intangibles, accounting for retirement and other post-employment benefits and accounting for acquisitions, including retrospective reviews of prior year's estimates. Furthermore, we evaluated bias in the adjustments made to arrive at the alternative performance measures used by management. Where we identified instances of unexpected journal entries or other risks through our data analytics, we performed additional audit procedures to address each identified risk. These procedures also included testing of transactions back to source information
• We incorporated elements of unpredictability in our audit, including changes in the scope of the group audit and increasing the scope of the data analytics procedures in the sales cycle

Revenue recognition (a presumed risk)

Risk:

• Fraudulent revenue recognition on sales cut-off before the end of the reporting period is an inherent risk within Royal DSM

Responses:

• In addition to the procedures related to management override mentioned above, we evaluated the design and the implementation of internal controls that mitigate fraud risks with respect to revenue recognition
• In their nine months’ 2022 trading update, DSM lowered the full year 2022 outlook. We assessed the effect thereof on our fraud risk assessment, and concluded to focus the fraud risk with respect to revenue recognition specifically to on sales cut-off before the end of the reporting period. This was also confirmed by the risk assessment of our component auditors based on an assessment of local facts and circumstances.
• To assess whether revenue was recognized in the appropriate period, for selected sales transactions recognized before year-end we inspected agreements with the customers and shipping documents
• Further, we inspected selected credit notes issued before year-end to assess whether revenue was recognized appropriately

Our procedures to address the identified risks of fraud did not result in a key audit matter.

We communicated our risk assessment, audit responses and results to the Managing Board and the Supervisory Board.

Our audit procedures did not reveal indications and/or reasonable suspicion of fraud and non-compliance that are considered material for our audit.

Audit response to going concern

The Managing Board has performed its going concern assessment and has not identified any significant going concern risks. To assess management’s assessment, we have performed, among other things, the following procedures:

• we considered whether the Managing Board’s assessment of the going concern risks includes all relevant information of which we are aware as a result of our audit;
• we inspected the financing agreements for terms or conditions that could lead to significant going concern risks;
• we analyzed the operating results forecast and the related cash flows compared to the actual results of 2022, developments in the business sector, macro-economic developments impacting amongst others energy and raw material prices and any information of which we are aware as a result of our audit;
• we analyzed the company’s financial position as at year-end and compared it to the previous financial year in terms of indicators that could identify significant going concern risks

The outcome of our risk assessment procedures did not give reason to perform additional audit procedures on management’s going concern assessment.

Audit response to climate-related risks

Royal DSM has set out its commitments and ambitions relating to climate change in the ‘Climate mitigation’ chapter included in the ‘Planet’ section of the Integrated Annual Report. Royal DSM has set targets on Greenhouse Gas (GHG) Emissions Scope 1 and 2 (absolute reduction of 59% by 2030) and Scope 3 emissions (intensity reduction of 28% by 2030) compared to a baseline in 2016. The targets were set based on the goals in the Paris Agreement. In addition, Royal DSM commits to 100% renewable electricity from purchased sources by 2030 and to reaching net-zero emissions across its own operations and its value chain by 2050. In addition, Royal DSM has set sub-targets in relation to energy, water and waste.

Against the background of Royal DSM’s business and operations, management has appropriately assessed how climate-related risks and opportunities and Royal DSM’s own commitments and ambitions could have a significant impact on its business or could impose the need to adapt its strategy and operations. As described in the ‘Climate-related risks’ chapter, included in the ‘Corporate Governance and risk management’ section of the Integrated Annual Report, Management has considered the impact of physical- and transition risks on the financial statements, more specifically relating to policy, legal and market effects, such as impact of carbon pricing schemes on operating costs, emission regulations limiting emissions-intensive manufacturing activities, lowering demand due to emission regulations or demand shifting to products with lower carbon footprint or dietary changes and negative impact on availability and price levels of raw materials.

Management prepared the financial statements, including considering whether the implications from material climate-related risks and commitments have been appropriately accounted for and disclosed, in accordance with the applicable financial reporting framework. The material climate-related risks are managed by Royal DSM as part of its regular risk management process and as such are taken into account in the preparation of the financial statements.

As part of our audit we performed a risk assessment of the impact of climate-related risk and the commitments and ambitions made by Royal DSM in respect of climate change on the financial statements and our audit approach. In doing this we performed the following:

• To understand management’s assessment and processes, against the background of Royal DSM’s business and operations, of the potential impact of climate-related risks and opportunities on Royal DSM’s financial statements, we:
  • held inquiries with relevant functions at Royal DSM including the Managing Board and the Sustainability Committee;
  • inspected documents such as internal climate-related risk assessments (both on physical and transition risks);
  • read minutes of meetings (including those of Audit- and Sustainability Committee) and draft disclosures in the Integrated Annual Report;
  • performed an analysis of the external environment and obtained an understanding of relevant sustainability themes and issues, and the characteristics of Royal DSM.
• We have evaluated climate-related fraud risk factors, including sustainability goals, such as climate related KPIs Energy Efficiency Improvement and GHG Emissions, being linked to board remuneration.
• We have made use of KPMG climate risk subject matter experts to:
  • Support in obtaining an understanding of management’s assessment processes, participate in inquiry sessions and inspect the aforementioned documentation;
  • Assess Royal DSM’s climate-related risk assessment, both on physical and transition risks, climate-related disclosures and reporting in line with TCFD recommendations in the Integrated Annual Report;
  • Obtain insights into potential business implications of the climate-related risks and opportunities identified impacting Royal DSM. These insights provided us with a better understanding of how climate-related risks and opportunities may affect Royal DSM and its accounting in the 2022 year’s financial statements.

Based on the procedures performed above we considered whether there is a risk of material misstatement specific to climate relative to the going concern assumption and valuation of long lived assets. Considering the risk assessment work performed, we did not identify a risk of material misstatement specific to climate and thus no further audit response was considered necessary.

Furthermore, we have read the other information with respect to climate-related risks as included in the Integrated Annual Report and considered whether such information contains material inconsistencies compared to the financial statements or our knowledge obtained through the audit.

Our key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed.

Compared to last year the key audit matter with respect to the accounting for acquisitions is not included, as there were no significant acquisitions in 2022. Furthermore, compared to last year the key audit matter with respect to the transformation of the DSM businesses was included because the transformation was effective as of 1 January 2022.

Transformation of the DSM businesses

As disclosed in Note 4 and 8 to the financial statements, the new Health, Nutrition & Bioscience (HNB) structure, including the creation of the three new Business Groups (Animal Nutrition & Health, Health, Nutrition & Care and Food & Beverage), became effective as of 1 January 2022.

DSM assessed and concluded that as a result of above developments the identified three new Business Groups represent the reportable operating segments, and also form the basis for goodwill impairment testing as they represent the relevant (groups of) cash generating units (‘CGUs’).

Upon a change in the reporting structure in a way that changes the composition of one or more cash-generating units to which goodwill has been allocated, a reallocation of goodwill is required. As a consequence, as of 1 January 2022 the goodwill was reallocated to the three new Business Groups, based on a relative value approach.

Subsequently, management allocated the assets, liabilities and results to the respective CGUs for the purpose of goodwill impairment testing.

As disclosed in Note 4 of the financial statements, in line with IFRS 8, DSM restated the sales information for 2021 based on the 2022 reportable segment structure. DSM did not restate the other previously reported comparative segment information in reference to the guidance included in IFRS 8.29-30.

This event is significant to our audit because the aforementioned effects are complex, the accounting is non-routine and the allocations involve a certain level of management judgment.

Our response

We evaluated management’s assessment of the reportable operating segments and relevant (groups of) CGUs. Furthermore, we assessed management’s reallocation of goodwill to these CGUs, including the approach applied.

In relation to the allocation of assets, liabilities and results to the respective CGUs for the purposes of goodwill impairment testing, we inspected and evaluated the underlying calculations to support the allocations made. Further we performed sensitivity analyses to evaluate the impact of changes in allocations on the overall outcome.

Finally, we assessed the adequacy of the disclosures (Note 4 and 8) to the financial statements.

Our observation 

We consider that the outcome of management’s assessments of the reportable operating segments and relevant (groups of) CGUs is appropriate and adequately disclosed in respectively Note 4 and 8 to the financial statements.

Announced divestment of Engineering Materials business

As disclosed in Note 3 to the financial statements, on 31 May 2022, DSM announced their agreement to sell the Engineering Materials business to Advent International and LANXESS, subject to certain conditions and approvals. Management concluded that the Engineering Materials business classifies as held for sale and should be presented as discontinued operations (for the full Materials cluster together with the Protective Materials business).

This event is significant to our audit because the assessment of the classification as asset held for sale and discontinued operations is complex, the transaction and its accounting is non-routine and involves a certain level of management judgement. These include, amongst others, determining the date of classification of the Engineering Materials business as held for sale and the presentation of its results separately as discontinued operations (together with the Protective Materials business as elaborated on in the next key audit matter). This further involves determining whether charges from other DSM group companies to the Engineering Materials business should be presented as part of continuing or discontinued operations. Furthermore, upon classification of the Engineering Materials business as discontinued operation, management had to measure this business at the lower of the carrying amount and its fair value less cost to sell.

We inspected the contractual agreements and other relevant documents underlying the announced divestment in order to understand key terms and conditions and to assess the accounting impact. Our audit procedures included, among others, an assessment of the appropriateness of the classification of the Engineering Materials business as held for sale and the presentation of its results as discontinued operations.

This included evaluating management’s judgements over the identification of the disposal group, assessing the date as of which the Engineering Materials business is classified as held for sale, assessing the measurement of the Engineering Materials business at the lower of the carrying amount and fair value less cost of disposal, and testing the presentation of the Engineering Materials business in the financial statements (together with the Protective Materials business). Our evaluation of the recognition and presentation of the results of the Engineering Materials business as discontinued operations in the financial statements included an assessment of management’s assumptions in allocating charges from other group companies to the Engineering Materials business.

Finally, we assessed the adequacy of both the presentation as assets held for sale and discontinued operations and the disclosure (Note 3) of the announced divestment in the financial statements.

Our observation

We consider that the measurement of the Engineering Materials business, as well as the presentation of its assets and liabilities as held for sale and its results as those from discontinued operations (together with the Protective Materials business), is adequately reflected and disclosed in Note 3 to the financial statements.

Divestment of Protective Materials business

As disclosed in Note 3 to the financial statements, on 1 September 2022, Royal DSM completed the sale of its Protective Materials business to Avient Corporation for a consideration of EUR 1.4 billion. The net book result on the transaction amounts to EUR 1.0 billion.

The divestment is significant to our audit due to the non-routine nature of the transaction, amounts involved and its impact on the financial statements.

Our response

We inspected the contractual agreements and other relevant documents underlying the divestment in order to understand key terms and conditions and to assess the accounting impact. We verified that the deconsolidation of the Protective Materials business has been recorded at the date of disposal. As part of our audit procedures we assessed the book result by vouching the sales price to the contractual agreement, the cash receipts to bank statements, the net asset values that have been de-consolidated to underlying accounting records and allocated transaction costs to underlying supporting documentation such as invoices and contractual agreements.

Finally, we assessed the adequacy of the presentation as discontinued operations and the disclosure (Note 3) of the divestment in the financial statements.

Our observation

We consider that the net book result, as well as the presentation of the results as those from discontinued operations, are adequately reflected and disclosed in Note 3 to the financial statements.

Report on the other information included in the annual report

In addition to the financial statements and our auditor’s report thereon, the Integrated Annual Report contains other information.

Based on the following procedures performed, we conclude that the other information:

• is consistent with the financial statements and does not contain material misstatements; and
• contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the report by the Managing Board and other information

We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less than the scope of those performed in our audit of the financial statements.

The Managing Board is responsible for the preparation of the other information, including the information as required by Part 9 of Book 2 of the Dutch Civil Code.

Report on other legal and regulatory requirements and ESEF

Engagement

We were engaged by the Annual General Meeting of Shareholders as auditor of Royal DSM on 7 May 2014, as of the audit for the year 2015 and have operated as statutory auditor ever since that financial year.

No prohibited non-audit services

We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audits of public-interest entities.

European Single Electronic Format (ESEF)

Royal DSM has prepared its Integrated Annual Report in ESEF. The requirements for this are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF).

In our opinion the Integrated Annual Report prepared in XHTML format, including the (partly) marked-up consolidated financial statements as included in the reporting package by Royal DSM, complies in all material respects with the RTS on ESEF.

The Managing Board is responsible for preparing the Integrated Annual Report including the financial statements in accordance with the RTS on ESEF, whereby the Managing Board combines the various components into one single reporting package.

Our responsibility is to obtain reasonable assurance for our opinion whether the Integrated Annual Report in this reporting package complies with the RTS on ESEF. We performed our examination in accordance with Dutch law, including Dutch Standard 3950N ’Assurance-opdrachten inzake het voldoen aan de criteria voor het opstellen van een digitaal verantwoordingsdocument’ (assurance engagements relating to compliance with criteria for digital reporting). Our examination included among others:

• Obtaining an understanding of Royal DSM’s financial reporting process, including the preparation of the reporting package;
• Identifying and assessing the risks that the Integrated Annual Report does not comply in all material respects with the RTS on ESEF and designing and performing further assurance procedures responsive to those risks to provide a basis for our opinion, including:
• Obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance document and the XBRL extension taxonomy files have been prepared in accordance with the technical specifications as included in the RTS on ESEF;
• Examining the information related to the consolidated financial statements in the reporting package to determine whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF

Description of responsibilities regarding the financial statements

Responsibilities of the Managing Board and the Supervisory Board for the financial statements

The Managing Board is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Managing Board is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. In that respect the Managing Board, under supervision of the Supervisory Board, is responsible for the prevention and detection of fraud and non-compliance with laws and regulations, including determining measures to resolve the consequences of it and to prevent recurrence.

As part of the preparation of the financial statements, the Managing Board is responsible for assessing Royal DSM’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Managing Board should prepare the financial statements using the going concern basis of accounting unless the Managing Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Managing Board should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing Royal DSM’s financial reporting process.

Our responsibilities for the audit of the financial statements

Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.

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. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

A further description of our responsibilities for the audit of the financial statements is included in the appendix of this auditor’s report. This description forms part of our auditor’s report.

Amstelveen, 1 March 2023

KPMG Accountants N.V.
P.J. Groenland – van der Linden RA

Appendix:
Description of our responsibilities for the audit of the financial statements

Appendix

Description of our responsibilities for the audit of the financial statements

We have exercised professional judgement and have maintained professional scepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others:

• identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than the risk resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Royal DSM’s internal control;
• evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Managing Board;
• concluding on the appropriateness of the Managing Board’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Royal DSM’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern;
• evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and
• evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation

We are solely responsible for the opinion and therefore responsible to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the financial statements. In this respect we are also responsible for directing, supervising and performing the group audit.

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an additional report to the Supervisory Board in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audits of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.

We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.