The Audit Plan – template user guide
Contents
1. Audit findings clearance meeting with Executive Director of Resources Report audit findings to those charged with governance Audit and Procurement Committee Sign financial statements opinion Fees and independence Fees Fees for other services Service Fees Council audit 231 280 Grant certification 20 930 Certification of teachers pension return for 2013 14 4 200 Total fees excluding VAT 252 210 Certification of teachers pension return for 2014 15 4 200 Tax advice on structuring for Coventry amp Solihull Waste Disposal Company 4 796 to 33 572 depending on scope of work performed Our fee assumptions include e Supporting schedules to all figures in the accounts are supplied by the agreed dates and in accordance with the agreed upon information request list 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 Fees for other services e The scope of the audit and the Council and its activities have not changed significantly independancecia sities The Council will make available management and accounting staff to help us locate information and to provide explanations 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 E2. Grant Thornton The Audit Plan for Coventry City Council Year ended 31 March 2015 23 March 2015 John Gregory Director T 0121 232 5333 E john gregory uk gt com Simon Turner Manager T 0121 232 5273 E simon a turner uk gt com Paul Harvey Assistant Manager T 0121 232 5328 E paul m harvey 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 Go vi 10 11 12 Understanding your business Developments relevant to your business and the audit Our audit approach An audit focused on risks Significant risks identified Other risks Group scope and risk assessment Value for Money Results of interim work Key dates Fees and independence Communication
3. How the Audit and Procurement Committee provide oversight of management s fraud risk assessment process 2015 Grant Thornton UK LLP Coventry City Council Current understanding based on planning and interim work to date There are no material instances of fraud that have been identified during the year Any significant suspected or alleged fraud are investigated by Internal Audit and reported to the Audit and Procurement Committee on a regular basis Although there is an on going risk of fraud being committed against the Council arrangements are in place to both prevent and detect fraud These include the regular review of arrangements and work carried out by Internal Audit as part of their annual plan The risk of material misstatement of the accounts due to undetected fraud is low and this is consistent with the risk management processes that are in place within the Council The Council has a Confidential Reporting whistleblowing Policy in place which outlines the responsibilities and channels for raising concerns and issues and also the approach to be taken There are no material instances of fraud that have been identified during the year arising from whistleblower tips or complaints The Annual Governance Statement and Head of Internal Audit Opinion are formally presented to the Audit and Procurement Committee on an annual basis The system of internal control is reviewed annually as part of the annual governance statement The wor
4. of audit matters with those charged with governance 2015 Grant Thornton UK LLP Coventry City Council 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 LG Finance Settlement The local government spending settlement facing a cash reduction in their spending power of 6 in 2015 16 Atthe same time local authorities are facing increasing demands for school places and adult social care services showed local authorities are 2 Major projects The Council is delivering a number of major projects designed to transform the Council and its relationships with those who use its services This includes the Kickstart project the Coventry Investment Fund and the School Expansion Programme 3 LG Reorganisation e Combined authorities 4 Alternative Delivery Models e Delivering services through local authority trading companies e Partnership working with other bodies and the voluntary sector 5 Collaborative working with the NHS Development of new working arrangements to deliver the Better Care Fund e NHS emergency care overload and the re emergence of bed blocking linked to adult social care capacity 6 Children s services e A 2014 Ofsted inspection judged children s services to be inadequate overa
5. aterial 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 other risks of material misstatement which we have identified as a result of our planning Other risks Description Audit Approach Operating expenses Creditors understated or not recorded in the correct period Operating expenses understated Employee remuneration Employee remuneration accruals understated e Remuneration expenses not correct e Welfare Expenditure Welfare benefit expenditure improperly computed 2015 Grant Thornton UK LLP Coventry City Council Walkthrough of the key controls for this system Performance of substantive testing on material expenditure streams and creditors Review of accounting estimates judgments and decisions made by management Walkthrough of the key controls for this system Performance of substantive testing on material expenditure streams Walkthrough of the key controls for this system Testing of the final Housing Benefit claim will be completed using the HB COUNT methodology with assurance for the financial statements taken from the testing of the initial sample of 20 cases per benefit category and other modules of the HB COUNT approach Group audit scope and risk assessment ISA 600 requires that as Group auditors we obtain sufficient appropriate audit evidence regarding the financial information of the co
6. e 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 these responsibilities 2015 Grant Thornton UKLLP Coventry City Council 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 qualita
7. he Council and that internal audit work contributes to an effective internal control environment at the Council Our review of internal audit work completed to date 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 not identified any material weaknesses which are likely to adversely impact on the Council s financial statements Results of interim audit work cont d Review of information technology controls Journal entry controls Early substantive testing Follow up of issues from 2013 14 audit Value for money 2015 Grant Thornton UK LLP Coventry City Council Work performed Our information systems specialist will be performing a high level review of the general IT control environment as part of the overall review of the internal controls system We will also perform a follow up of the issues that were raised last year We have reviewed the Council s journal entry policies and procedures as part of determining our journal entry testing strategy and have not identified any material weaknesses which are likely to adversely impact on the Council s control environment or financial statements We are currently undertaking a detailed programme of early substantive testing This covers the following areas e Operating expenses e Other revenues e Employee remuneration e Revenue grants e Property plant and eq
8. irements 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 Statement AGS plans and the associated with less resource submit a Whole of e Changes to the recognition of 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 Value for Money work 2014 15 budget including with requirements Code of Practice through regular meetings with senior production of the AGS and will carry out further work consideration of performance We will certify the housing discussion
9. k plan of Internal Audit includes reviewing the operation of internal controls and appropriate segregation of duties Internal Audit include fraud risk in their planning process 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
10. ll Our 2013 14 VfM conclusion was qualified as a result e Since then you have increased funding for children s services and taken a wide range of actions in response to the inspection Our response 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 consider the impact of these major projects on the Council s finances as part of our Value for Money work 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 e We will carry out our audit of your local authority trading companies in June and July during our audit of your group financial statements 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 e We will discuss with you your response to the inspection and the impact on your 2014 15 VfM conclusion 2015 Grant Thornton UK LLP Coventry City Council 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 requ
11. mponents and the consolidation process to express an opinion on whether the group financial statements are prepared in all material respects in accordance with the applicable financial reporting framework Level of response Component Significant required under ISA 600 Coventry and Solihull Waste Disposal Yes Targeted Company Limited Arena Coventry Yes Targeted Limited Coventry North No Analytical Regeneration Limited North Coventry No Analytical Holdings Limited Risks identified Investments carrying value Investments carrying value None None Planned audit approach Review and testing of arrangements in place to produce group accounts Review and testing of arrangements in place to produce group accounts Analytical procedures at the Group level Analytical procedures at the Group level During 2014 15 the Council sold its shares in Arena Coventry Limited held by the Council via North Coventry Holdings Limited We will review the accounting treatment of this transaction as part of the audit 2015 Grant Thornton UK LLP Coventry City Council Value 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 Commissi
12. on VfM criteria The organisation has propet arrangements in place for securing financial resilience The organisation has proper arrangements for challenging how it secures economy efficiency and effectiveness 2015 Grant Thornton UK LLP Coventry City Council Focus of the criteria The organisation has robust systems and processes to manage financial risks and opportunities effectively and to secure a stable financial position that enables it to continue to operate for the foreseeable future The organisation is prioritising its resources within tighter budgets for example by achieving cost reductions and by improving efficiency and productivity We have undertaken a risk assessment to identify areas of risk to our VfM conclusion We will undertake work in the following areas to address the risks identified lt assessment of the adequacy of the Council s reserves at 31 March 2015 review of the adequacy of the Council s savings plans in the medium term review of the adequacy of the Council s plans to change how it delivers services over the medium and longer term review of the adequacy of medium term financial plan in respect of how it addresses on going cuts to revenue funding consider your continuing actions in response to the inspection of children s services and the impact on your VfM conclusion for 2014 15 The results of our VfM audit work and the key messages arising will be reported in our Audi
13. ork 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 Stores audit 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 Substan
14. s with management and those e We will review the AGS and if 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 Financial Resilience as requirements specified by a achodleaie accounted ter appropriate consistent with our part of our Value for Money Public Sector Audit correctly and in line with the knowledge work Appointments Ltd This latest guidance company will take over the Audit Commission s e the group boundary is responsibilities for housing recognised in accordance benefit grant certification with the Code and joint from 1 April 2015 arrangements are accounted for correctly 2015 Grant Thornton UKLLP Coventry City Council Our audit approach 1 a Understanding and the entity Understanding gt the business Understanding _ management s focus gt Evaluating the gt year s results Voyager 2015 Grant Thornton UK LLP Coventry City Council the environment Creates and tailors audit programs Global audit technology Inherent Develop audit plan to risks obtain reasonable assurance that the Financial Statements a as a whole are free Significant from material risks misstatement and 3 gt prepared in all material respects Other with the CIPFA Code risks of Practice framew
15. t Findings report and in the 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 2015 Grant Thornton UKLLP Coventry City Council Work performed and findings We have reviewed internal audit s overall arrangements in accordance with auditing standards We continue to review internal audit s work on the Council s key financial systems 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 Conclusion Overall we have concluded that the internal audit service continues to provide an independent and satisfactory service to t
16. thical Standards and therefore we confirm that we are independent and are able to express an objective opinion on the ee ae financial statements Grant certification Full details of all fees charged for audit and non audit services will be included in our Audit Findings report at the e Our fees for grant certification cover only housing f conclusion of the audit benefit subsidy certification which falls under the remit of Public Sector Audit Appointments Limited We confirm that we have implemented policies and procedures to meet the requirement of the Auditing Practices as the successor to the Audit Commission in this Board s Ethical Standards area e Fees in respect of other grant work such as reasonable assurance reports are shown under Fees for other services 2015 Grant Thornton UK LLP Coventry City Council 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 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 advers
17. tive 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 ka 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 SISI SIS Significant matters in relation to going concern Communication of audit matters with those charged with governance cont In addition to the areas covered on the previous page we ate required to consider the following in our discussions with those charged with governance the Audit and Procurement Committee Area of consideration Awareness of fraud or suspected fraud Views about the risks of fraud Awareness of whistleblower tips or complaints
18. tive 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 Coventry City Council we have 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 Coventry City 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 planned management over ride of controls is present in all antites 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 Coventry City Council 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 m
19. uipment Our Audit Findings report for 2013 14 raised a number of issues which officers agreed to consider further prior to the preparation of the 2014 15 financial statements The most significant of these issues was in respect of accounting for PFI contracts This work is currently underway and we are having regular discussions with officers about it We have performed our initial risk assessment and are currently performing the work detailed on page 10 of this plan Conclusion We will report the results of this work in our Audit Findings report We will undertake detailed testing on journal transactions as part of our final accounts visit in June and July 2015 Our testing is currently underway but we have not identified any errors or issues to date which would result in a material misstatement of the Council s financial statements We will report the results of this work in our Audit Findings report We will report the results of this work in our Audit Findings report Key dates The audit cycle February March Interim audit June July August September October Final accounts Completion Debrief Visit reporting Key phases of our audit Date February 2015 March 2015 March 2015 June July 2015 TBC TBC TBC 2015 Grant Thornton UK LLP Coventry City Council Activity Planning Interim site visit Presentation of audit plan to Audit and Procurement Committee Year end fieldwork
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