Grupo Aval Acciones y Valores S A : Auditor’s Report Consolidated Financial Statements December 2023 (2024)

Key Audit Matter

How our audit approached this matter

As established in notes 4.1.5 and 11 to the

My audit procedures to assess the assignation of the

consolidated financial statements, provision

credit risk rating and the effect of the provision

for impairment of the Group's credit

includes, among others, the following:

portfolio amounted to $10.035.715 million

as of December 31, 2023.

- Evaluation of design and effectiveness of certain

The Group measures impairment of its

internal controls on the process established by the

Group to calculate impairment of the credit

credit portfolio for an amount equal to

portfolio, including, among others, controls on: (i)

Expected Credit Loses (ECL) for the life of

models and assumptions used, (ii) estimate of

each credit, except those that have not

macroeconomic variables, (iii) integrity and

experienced a significative increase of credit

accuracy of data, and (iv) the Group's monitoring on

risk since their initial recognition, for which

the general provision for impairment losses,

the Group calculates an ECL of twelve

including application of the judgement employed.

months. Provision for impairment of credit

lose reflects a probability-weighted result

- Involvement of credit risk professionals with specific

that considers multiple economic scenarios

abilities, knowledge, and industry experience, who

based on forecasts of future economic

assisted me in: (i) assessment of key models and

conditions and is determined in function of

supplies used to determined the Probability of

the Group's assessment on Probability of

Default (PD), Loss Given Default (LGD), and

Default (PD), Loss Given Default (LGD), and

Exposure Given Default (EGD) parameters, (ii)

Exposure Given Default (EGD) associated to

assessment of macroeconomic projections and

each loan. The Group, in accordance with

weighting of scenario probability, (iii) assessment of

requirements of IFRS 9 and following market

qualitative adjustments applied to models, (iv)

practices, uses complex models that

recalculation for a sample of credits evaluated

incorporate data and assumptions that

collectively and a sample of significant credits

require significant judgement to estimate

evaluated individually, of impairment and analysis

the loss for impairment of the credit

of guarantee values, and (v) verification for a

portfolio.

sample of individually-significant credits of the

I identified the assessment of impairment of

credit risk rating assigned by the Group.

the credit portfolio as a key audit matter

since there is a high degree of estimation

inherent to the determination of the

expected loss from impairment of the credit

portfolio, as a result of the judgement

required for prospective assumptions and

models involved.

The assessment of the impairment of the

credit portfolio required significant attention

from the auditor, involvement of judgement,

and participation of credit risk professionals,

Key Audit Matter

How our audit approached this matter

As stated in notes 2.20, 5 and 16 to the

My audit procedures to assess 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 related financial assets

with the State for the construction and subsequent

included, among others:

maintenance of infrastructure for a determined

period. In exchange, the Groups and its

- Assessment of design, implementation, and

Subsidiaries have the right to received direct

effectiveness of certain internal controls

payments from Government and/or tariffs charged

established by the Group and its Subsidiaries to

to the final users of the infrastructure.

determine the fair value of financial assets

arising from concession contracts and to

During the construction phase, the Group and its

establish income to be recognized from

Subsidiaries recognize income and a financial asset

contracts in construction phase. These controls

for payments that are unconditionally guaranteed

include those related to: (i) review of supplies

for the state and/or an intangible asset for

and assumptions used, (ii) review of completion

payments in connection with the use of the

cost estimates, and (iii) review and approval of

infrastructure.

fair value of assets and amount of income to be

recognized.

Performance obligations related to construction

services are complied with time and the amount of

- Involvement of professionals in valuation with

income recognized depends on the termination

specific abilities and industry knowledge, who

stage of the construction services and the fair

assisted me in: (i) assessment of whether the

value of the asset recognized. The Group and its

models developed internally are consistent with

Subsidiaries have designated some of the financial

valuation practices generally used for this

assets related to concession contracts to be

purpose and IFRS, (ii) comparison of WACC

measured at fair value with changes in income

discount rates with a determined rank using

subsequent to initial recognition. As of December

macroeconomic assumptions verified by the

31, 2023, the Group and its subsidiaries have

market, (iii) assessment of future inflation rates

financial assets from concession contracts for

comparing them to available market data, (iv)

$3.830.916 million, measured at fair value and

assessment of costs estimated until completion,

classified on level 3 of the fair value hierarchy and

including assumptions used, (v) assessment of

assets for concession contracts in construction

income projected for the use of infrastructure,

phase for $7.964.822 million.

comparing it with internal and external data,

when available, and (vi) evaluation of the

I identified the evaluation of income recognized for

accuracy of forecasts on inflation and

concession contracts in construction phase and fair

construction costs, by comparing them with a

value of related financial assets as a key audit