The Audit Plan – template user guide
Contents
1. Grant Thornton The Audit Plan for Torbay Council Year ended 31 March 2015 18 March 2015 Alex Walling Engagement Lead T 0117 305 7804 E alex j walling uk gt com Mark Bartlett Manager T 0117 305 7896 E mark bartlett uk gt com Lesley Whitworth Executive T 0117 305 7854 E lesley a whitworth uk gt com The contents of this report relate only to the matters which have come to our attention which we believe need to be reported to you as part of our audit process It is not a comprehensive record of all the relevant matters which may be subject to change and in particular we cannot be held responsible to you for reporting all of the risks which may affect the Council or any weaknesses in your internal controls This report has been prepared solely for your benefit and should not be quoted in whole or in part without our prior written consent We do not accept any responsibility for any loss occasioned to any third party acting or refraining from acting on the basis of the content of this report as this report was not prepared for nor intended for any other purpose Contents Section 1 Understanding your business 2 Developments relevant to your business and the audit Go Our audit approach 4 Significant risks identified a Other risks 6 Value for Money 7 Results of interim work 8 Key dates 9 Fees and independence 10 Communication of audit matters with those charged with governance2. Conclusion Overall we have concluded that the internal audit service continues to provide an independent and satisfactory service to the Council and that internal audit work contributes to an effective internal control environment at the Council Our review of internal audit work has not identified any weaknesses which impact on our audit approach Our work has not identified any weaknesses which impact on our audit approach Our work has identified no material weaknesses which are likely to adversely impact on the Council s financial statements Results of interim audit work cont d Work performed Conclusion Review of information technology Our information systems specialist will be performing a high level We have yet to conclude our review and will report the results controls review of the general IT control environment as part of the overall to management and summarise any issues for those charged review of the internal controls system We will also perform a follow with governance before the financial statements are approved up of the issues that were raised last year Journal entry controls We have reviewed the Council s journal entry policies and We will undertake further testing of journal entries as part of procedures as part of determining our journal entry testing strategy our final accounts audit fieldwork and have not identified any material weaknesses which are likely to i n adversely impact on the Council s cont
3. evidence Ensures compliance with International Standards on Auditing ISAs Devise audit strategy planned control reliance Extract your data v e Test controls e Substantive analytical review e Tests of detail General audit procedures Financial statements v e Test of detail Anal d e Substantive Report output nalyse data METETE using relevant F to teams review parameters Conclude and report Documents processes and controls Significant risks identified Significant risks often relate to significant non routine transactions and judgmental matters Non routine transactions are transactions that are unusual either due to size or nature and that therefore occur infrequently Judgmental matters may include the development of accounting estimates for which there is significant measurement uncertainty ISA 315 In this section we outline the significant risks of material misstatement which we have identified There are two presumed significant risks which are applicable to all audits under auditing standards International Standards on Auditing ISAs which are listed below Significant risk Description Substantive audit procedures The revenue cycle includes Under ISA 240 there is a presumed risk that revenue Having considered the risk factors set out in ISA240 and the nature of the revenue fraudulent transactions may be misstated due to the improper recognition of streams at Torbay Council we ha
4. Thornton UK LLP Torbay Council Audit Plan 2014 15 15 Action plan Priority High Significant effect on control system Medium Effect on control system Low Best practice Rec No Recommendation Priority 1 The Section 151 officer should not have Medium the ability to create journals on the ledger 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 Management response Agreed Implementation date amp responsibility 31 March 2015 Lorraine Woolcock System Manager GrantThornton 2015 Grant Thornton UK LLP All rights reserved Grant Thornton means Grant Thornton UK LLP a limited liability partnership Grant Thornton is a member firm of Grant Thornton International Ltd Grant Thornton International References to Grant Thornton are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms as the context requires Grant Thornton International and the member firms are not a worldwide partnership Services are delivered independently by member firms which are not responsible for the services or activities of one another Grant Thornton International does not provide services to clients grant thornton co uk
5. and those charged with governance providing a view where appropriate e We will review the progress you have made in delivering your efficiency savings in this area as part of our work on your arrangements for financial resilience 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 We will discuss your plans in these areas through our regular meetings with senior management and those charged with governance providing a view where appropriate e We will review your Medium Term Financial Plan and financial strategy as part of our work on your arrangements for financial resilience e We will discuss your plans in these areas through our regular meetings with senior management and those charged with governance providing a view where appropriate Developments relevant to your business and the audit In planning our audit we also consider the impact of key developments in the sector and take account of national audit requirements as set out in the Code of Audit Practice the code and associated guidance Developments and other requirements 1 Financial reporting 2 Legislation 3 Corporate governance 4 Better Care Fund 5 Financial Pressures 6 Other requirements e Changes to the CIPFA Code e Local Government Finance e Annual Governance e Better Care Fund BCF e Managing service provision e The Council is required to of Practice settlement Sta
6. for money Value for money The Code requires us to issue a conclusion on whether the Council has put in place proper arrangements for securing economy efficiency and effectiveness in its use of resources This is known as the Value for Money V M conclusion Our VfM conclusion is based on the following criteria specified by the Audit Commission VfM criteria Focus of the criteria The organisation has proper The organisation has robust systems and arrangements in place for securing processes to manage financial risks and financial resilience opportunities effectively and to secure a stable financial position that enables it to continue to operate for the foreseeable future The organisation has proper arrangements for challenging how The organisation is prioritising its resources within tighter budgets for example by achieving cost reductions and by improving efficiency and productivity it secures economy efficiency and effectiveness 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 As in 2013 14 the financial resilience of the Council will form the focus of our work We will look at the key indicators of the Council s financial performance and update our reviews of strategic financial planning financial governance and financial control using our 2013 14 assessment as the baseline The results of our VfM audit work and the key messages arising will be reported in our Audit Findings report and in the
7. other risks of material misstatement which we have identified as a result of our planning Other risks Description Creditors understated or not recorded in the correct period Operating expenses understated Operating expenses Employee remuneration Employee remuneration benefit obligations and expenses understated Remuneration expenses not correct 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 Audit Approach Work completed to date e Review of system documentation and walkthrough of transaction e Substantively tested a sample of operating expenses Further work planned e Substantively test a sample of expense transactions in month 12 and year end adjustments reconciliations e Testing for unrecorded liabilities by review of post year end payments and review of goods received not invoiced notes at year end Review of estimates judgements and decisions made by management for unusual and large accruals Work completed to date e Review of system documentation and walkthrough of transaction e Substantively tested a sample of remuneration transactions Further work planned e Substantively test a sample of remuneration transactions in months 11 and 12 to underlying evidence e Analytical procedures over the payroll figures throughout the year to ensure that they are reasonable and complete e Review the year end reconciliation of the payroll system to the HMRC return and the ledger Value
8. these responsibilities 2015 Grant Thornton UKLLP Torbay Council Audit Plan 2014 15 Audit Audit Our communication plan plan findings Respective responsibilities of auditor and management those charged v with governance Overview of the planned scope and timing of the audit Form timing v and expected general content of communications Views about the qualitative aspects of the entity s accounting and v financial reporting practices significant matters and issue arising during the audit and written representations that have been sought Confirmation of independence and objectivity A statement that we have complied with relevant ethical requirements regarding independence relationships and other matters which might be thought to bear on independence Details of non audit work performed by Grant Thornton UK LLP and network firms together with fees charged Details of safeguards applied to threats to independence Material weaknesses in internal control identified during the audit RS Identification or suspicion of fraud involving management and or others which results in material misstatement of the financial statements Non compliance with laws and regulations Expected modifications to the auditor s report or emphasis of matter Uncorrected misstatements Significant matters arising in connection with related parties SI el el Significant matters in relation to going concern 14 Appendices 2015 Grant
9. Annual Audit Letter Results of interim audit work The findings of our interim audit work and the impact of our findings on the accounts audit approach are summarised in the table below Internal audit Walkthrough testing Entity level controls Work performed and findings We have completed a high level review of internal audit s overall arrangements Our work has not identified any issues which we wish to bring to your attention We also reviewed internal audit s work on the Council s key financial systems to date We have not identified any significant weaknesses impacting on our responsibilities We have completed walkthrough tests of controls operating in areas where we consider that there is a risk of material misstatement to the financial statements Our work has not identified any issues which we wish to bring to your attention Internal controls have been implemented in accordance with our documented understanding We have obtained an understanding of the overall control environment relevant to the preparation of the financial statements including e Communication and enforcement of integrity and ethical values e Commitment to competence e Participation by those charged with governance e Management s philosophy and operating style e Organisational structure e Assignment of authority and responsibility e Human resource policies and practices 2015 Grant Thornton UKLLP Torbay Council Audit Plan 2014 15
10. Appendices A Action plan 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 So COC N A a A 10 12 13 14 Understanding your business In planning our audit we need to understand the challenges and opportunities the Council is facing We set out a summary of our understanding below Challenges opportunities 1 Alternative Delivery Models 2 Procurement and 3 LG Reorganisation 4 LG Finance Settlement 5 Collaborative working with Development of local authority trading companies Partnership working with other bodies and the voluntary sector NT Commissioning Delivering efficiency savings through improved procurement Moving from the provision to the commissioning of services Regional devolution plans Combined authorities Confederations The local government spending settlement showed local authorities are facing a cash reduction in their spending power in 2015 16 At the same time local authorities are facing increasing demands for school places and adult amp children social care services the NHS Development of new working arrangements to deliver the Better Care Fund NHS emergency care overload and the re emergence of bed blocking linked to adult social care capacity NY NT Our response We will discuss your plans and developments in these areas through our regular meetings with senior management
11. al Resilience as requirements specified by a Schodls are accounted ter appropriate consistent with our part of our VfM conclusion the Audit Commission correctly and in line with the knowledge Public Sector Audit latest guidance Appointments Ltd will take over the Audit Commission s responsibilities for housing benefit grant certification from 1 April 2015 e the group boundary is recognised in accordance with the Code and joint arrangements are accounted for correctly 2015 Grant Thornton UKLLP Torbay Council Audit Plan 2014 15 Our audit approach a Understanding and the entity Understanding gt the business Understanding _ management s focus gt Evaluating the gt year s results Voyager the environment Creates and tailors audit programs Global audit technology Inherent Develop audit plan to risks obtain reasonable assurance that the Financial Statements ak as a whole are free Significant from material risks misstatement and gt prepared in all material respects Other with the CIPFA Code risks of Practice framework using our global methodology and audit software Material balances Note a An item would be considered material to the financial statements if through its omission or non disclosure the financial statements would no longer show a true and fair view 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 Stores audit
12. in the table opposite This document The Audit Plan outlines our audit strategy and plan to deliver the audit while The Audit Findings will be issued prior to approval of the financial statements and will present key issues and other matters arising from the audit together with an explanation as to how these have been resolved We will communicate any adverse or unexpected findings affecting the audit on a timely basis either informally or via a report to the Council Respective responsibilities This plan has been prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission www audit commission gov uk We have been appointed as the Council s independent external auditors by the Audit Commission the body responsible for appointing external auditors to local public bodies in England As external auditors we have a broad remit covering finance and governance matters Our annual work programme is set in accordance with the Code of Audit Practice the Code issued by the Audit Commission and includes nationally prescribed and locally determined work Our work considers the Council s key risks when reaching our conclusions under the Code It is the responsibility of the Council to ensure that proper arrangements are in place for the conduct of its business and that public money is safeguarded and properly accounted for We have considered how the Council is fulfilling
13. rol environment or financial We will report to management any issues we find during he statements course of our audit and summarise them in our report to those charged with governance before the financial statements are To date we have undertaken detailed testing on journal transactions approved recorded for the first eleven months of the financial year by extracting unusual entries for further review We have made a recommendation that the Section 151 officer should not have the ability to create journals We identified that the Section 151 officer has the ability to create but not approve journals on the ledger There have not been any journals created by the Section 151 officer in the first eleven months of the year Early substantive testing We have tested a sample of employees to confirm they have valid This work will be concluded during the final accounts audit appointment documentation and are being paid at the appropriate F scale We have no issues to bring to your attention from the testing carried out to date We have tested a sample of operating expenses to confirm that they are supported by appropriate documentation 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 11 Key dates The audit cycle January March 2015 Interim audit visit June July 2015 July 2015 September 2015 Final accounts Completion Visit reporting pebret Key phases of our audit Date Jan
14. tement AGS plans and the associated with less resource submit a Whole of e Changes to the recognition of e Care Act e Explanatory foreword pooled budgets will be e Progress against savings Government accounts pack school land and buildings on operational from 1 April 2015 plans on which we provide an audit local authority balance opinion sheets e The Council completes grant e Adoption of new group claims and returns on which accounting standards IFRS audit certification is required 10 11 and 12 We will ensure that e We will discuss the impact of e We will review the e We will consider whether the e We will review the Council s e We will carry out work on the e the Council complies with the the legislative changes with arrangements the Council BCF is a risk in the context of performance against the WGA pack in accordance requirements of the CIPFA the Council through our has in place for the our VfM conclusion and will 2014 15 budget including with requirements Code of Practice through regular meetings with senior production of the AGS carry out further work if consideration of performance We will certify the housing discussions with management and those e We will review the AGS and required against the savings plan benefit subsidy claim in management and our charged with governance the explanatory foreword to e We will undertake a review accordance with the substantive testing providing a view where consider whether they are of Financi
15. uary 2015 12 January amp 23 February 2015 18 March 2015 15 June 2015 July 2015 29 July 2015 August 2015 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 Activity Planning Interim site visit Presentation of audit plan to Audit Committee Year end fieldwork Audit findings clearance meeting with Section 151 officer Report audit findings to those charged with governance Audit Committee Sign financial statements opinion Fees and independence Fees Council audit 136 070 Grant certification 12 840 Total fees excluding VAT 148 910 In 2013 14 the Audit Commission increased the audit fee for all unitary councils by 1 070 to reflect the additional work required on material business rates balances as auditors were no longer required to carry out work to certify the NNDR3 returns The Audit Commission has included this additional amount in all audit fees for 2014 15 Our fee assumptions include Supporting schedules to all figures in the accounts are supplied by the agreed dates and in accordance with the agreed upon information request list The scope of the audit and the Council and its activities have not changed significantly The Council will make available management and accounting staff to help us locate information and to provide explanations Grant certification Our fees for grant certification cover only housing benefit subsidy certification which falls
16. under the remit of Public Sector Audit Appointments Limited as the successor to the Audit Commission in this area Fees in respect of other grant work such as reasonable assurance reports are shown under Fees for other services 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 Fees for other services Service Fees None Nil Fees for other services Fees for other services reflect those agreed at the time of issuing our Audit Plan Any changes will be reported in our Audit Findings Report and Annual Audit Letter Independence and ethics We confirm that there are no significant facts or matters that impact on our independence as auditors that we are required or wish to draw to your attention We have complied with the Auditing Practices Board s Ethical Standards and therefore we confirm that we are independent and are able to express an objective opinion on the financial statements Pull details of all fees charged for audit and non audit services will be included in our Audit Findings report at the conclusion of the audit We confirm that we have implemented policies and procedures to meet the requirement of the Auditing Practices Board s Ethical Standards Communication of audit matters with those charged with governance International Standards on Auditing ISA 260 as well as other ISAs prescribe matters which we are required to communicate with those charged with governance and which we set out
17. ve determined that the risk of fraud arising from revenue revenue recognition can be rebutted because This presumption can be rebutted if the auditor e there is little incentive to manipulate revenue recognition concludes that there is no risk of material misstatement opportunities to manipulate revenue recognition are very limited due to fraud relating to revenue recognition e the culture and ethical frameworks of local authorities including Torbay Council mean that all forms of fraud are seen as unacceptable Management over ride of controls Under ISA 240 the presumption that the risk of Work completed to date management over ride of controls is present in all a e Testing of journal entries entities e Review of unusual significant transactions Further work planned e Review of accounting estimates judgments and decisions made by management e Testing of journal entries e Review of unusual significant transactions 2015 Grant Thornton UK LLP Torbay Council Audit Plan 2014 15 Other risks identified The auditor should evaluate the design and determine the implementation of the entity s controls including relevant control activities over those risks for which in the auditor s judgment it is not possible or practicable to reduce the risks of material misstatement at the assertion level to an acceptably low level with audit evidence obtained only from substantive procedures ISA 315 In this section we outline the
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