The Audit Plan – template user guide
Contents
1. Grant Thornton The Audit Plan for Solihull Metropolitan Borough Council Year ended 31 March 2015 9 March 2015 Mark Stocks Director T 0121 232 5437 E mark c stocks uk gt com Neil Preece Audit Manager T 0121 232 5292 E neil a preece uk gt com Allison Thomas Executive T 0121 232 5278 E allison a thomas 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 4 2 Developments relevant to your business and the audit 5 3 Working with you 6 4 Our audit approach 7 5 Significant risks identified 8 6 Other risks 9 7 Group scope and risk assessment 10 8 Value for Money 11 9 Results of interim work 12 13 10 Key dates 14 11 Fees and2. Solihull MBC Audit Plan 2014 15 T 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 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 th
3. 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 17
4. areas through our regular meetings with senior management and those charged with governance providing a view where appropriate and assessing the Council s arrangements for challenging how it secures economy efficiency and effectiveness 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 Solihull MBC Audit Plan 2014 15 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 e Council staff have been invited to our technical update workshops covering key developments in the year We will engage with Officers as early as possible to highlight and resolve emerging issues e We will carry out our audit of the WGA in accordance with requirements 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 1 Financial reporting e Changes to the CIPFA Code of Practice e Changes to the
5. not identified any significant weaknesses weaknesses which impact on our audit approach impacting on our responsibilities Walkthrough testing We have completed walkthrough tests of controls operating in areas Our work has not identified any weaknesses which impact on where we consider that there is a risk of material misstatement to our audit approach 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 Entity level controls We have obtained an understanding of the overall control Our work has identified no material weaknesses which are environment relevant to the preparation of the financial statements likely to adversely impact on the Council s 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 UK LLP Solihull MBC Audit Plan 2014 15 12 Results of interim audit work cont d Review of information technology controls Journal entry controls Early substantive testing Value for money Work performed Our information systems specialist performed a detailed review of the IT contro
6. recognition of school land and buildings on local authority balance sheets e Adoption of new group accounting standards IFRS 10 11 and 12 We will check that e the Council complies with the requirements of the CIPFA Code of Practice through discussions with management and our substantive testing e schools are accounted for correctly and in line with the latest guidance e the group boundary is recognised in accordance with the Code and joint arrangements are accounted for correctly 2 Legislation e Local Government Finance settlement e We will discuss the impact of the legislative changes with the Council through our regular meetings with senior management and those charged with governance providing a view where appropriate 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 Developments and other requirements Corporate governance Annual Governance Statement AGS Explanatory foreword We will review the arrangements the Council has in place for the production of the AGS We will review the AGS and the explanatory foreword to consider whether they are consistent with our knowledge 4 Better Care Fund Better Care Fund BCF plans and the associated pooled budgets will be operational from 1 April 2015 5 Financial Pressures e Managing service provision with less resource e Progress against savings plans We will review the Council s performance agai
7. Cut off testing will be performed on pre and post year end transactions Substantive testing of year end balances and individual employee transactions made since the interim visit and our return at the final audit Substantive testing is performed via the HBCOUNT work which provides assurances over the balances in the financial statements Review of key reconciliations that are performed between the Revenue and Benefits systems and the ledger 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 components 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 required Component Significant under ISA 600 Risks identified Planned audit approach Solihull Community Yes Targeted Recorded transactions not valid e Substantive testing of Council transactions Housing e Review the Council s consolidation workings to ensure that they correctly derive from the component accounts Coventry amp Solihull Yes Targeted Investments carrying value e Review valuation of the Company obtained by the Waste Disposal Council Company e Review the Council s consolidation workings to ensure that they correctly derive from the component accounts Blythe Valley No Analytical Inve
8. ce 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 has proper arrangements for challenging how it secures economy efficiency and effectiveness The organisation is prioritising its resources within tighter budgets for example by achieving cost reductions and by improving efficiency and productivity 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 11 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 e Undertake a detailed risk assessment which will support our overall conclusion e Undertake a financial resilience review The results of our VfM audit work and the key messages arising will be reported in our Audit Findings report and in the Annual Audit Letter We will agree any additional reporting to the Council on a review by review basis 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 Work performed and findings Conclusion Internal audit We have reviewed internal audit s work on the Council s key financial Our review of internal audit work has not identified any systems to date We have
9. 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 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 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
10. cts 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 Ethical standards and International Standards on Auditing ISA 260 require us to give you full and fair disclosure of matters relating to our independence In this context we disclose the following to you e One of our audit team has a long standing friendship with an officer in your economic development team We will ensure that this auditor does not undertake any audit work involving economic development 15 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
11. e improper recognition of streams at Solihull MBC we have determined that the risk of material 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 there is regular financial monitoring and reporting e there are financial control systems in place including internal audit e the culture and ethical frameworks of local authorities including Solihull MBC mean that all forms of fraud are seen as unacceptable Management over ride of controls Under ISA 240 the presumption that the risk of Further work planned i e over ride of controls is present in all 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 Solihull MBC Audit Plan 2014 15 8 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 substa
12. independence 15 12 Communication of audit matters with those charged with governance 16 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 3 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 1 Alternative Delivery Models e Partnership working with other bodies and the voluntary sector 2 Procurement and Commissioning e Delivering efficiency savings through improved procurement e Moving from the provision to the commissioning of services Challenges opportunities 3 LG Finance Settlement e The local government spending settlement showed local authorities are facing a cash reduction in their spending power of 6 in 2015 16 e Atthe same time local authorities are facing increasing demands for school places and adult social care services 4 Collaborative working with the NHS e 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 5 Financial Reporting including Whole of Government Accounts e Changes to the CIPFA Code of Practice e Whole of Government Accounts WGA requirements still to be finalised for 2014 15 Our response e We will discuss your plans in these
13. l environment as part of the overall review of the internal controls system We have also performed 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 have undertaken substantive testing to confirm the Council s rights amp obligations to and the physical existence of all significant property plant amp equipment PPE on the opening position We have undertaken an initial risk assessment to identify areas of risk to our Value for Money conclusion 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 13 Conclusion We are awaiting the report from our IT specialists and will then consider any impact on the Council s financial statements The control environment for journal postings was found to be sufficiently sound to not adversely impact our planned approach or raise additional material risks for the financial statements We identified that not all journals are required to be reviewed and approved as only those journals over 0 250m are required to be approved by budget holders We have determined our journal testing approach and will undertake detailed testing on journal transactions for the year by extracting unusual entries for f
14. ng the local government pension scheme costs In addition e Officers attended a training event on the 2013 14 accounts in our Birmingham office Officers attended a legal risk seminar in our Birmingham office We provided training for Officers on our Housing Benefit claim certification work e We met with senior Officers to discuss opportunities around the treatment of VAT e We certified an European Regional Development Fund ERDF grant claim as additional work outside the Audit Commission regime and e We certified a Teachers Pension Claim as additional work outside the Audit Commission regime 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 6 In 2014 15 we are continuing to engage with officers at the earliest opportunity and have already discussed a number of issues e Accounting for the early payment of the pension fund deficit e Accounting for local authority schools e Provided an opinion on the proposed changes to the Minimum Revenue Provision and e De cluttering and further enhancing the annual accounts In addition e Officers have been invited to attend a training event on the 2014 15 accounts in our Birmingham office Officers attended a data analytics seminar in our Birmingham office We have subsequently discussed with officers how this area of our business could support the ongoing work you are doing on HS2 e We will again certify the ERDF and Teachers Pensions claims as addi
15. nst the 2014 15 budget including consideration of performance against the savings plan We will consider whether the BCF is a risk in the context of our VfM conclusion and will carry out further work if required e We will undertake a review of Financial Resilience as part of our VfM conclusion 6 Other requirements e The Council is required to submit a Whole of Government accounts pack on which we provide an audit opinion e The Council completes grant claims and returns on which audit certification is required e We will carry out work on the WGA pack in accordance with requirements e We will certify the housing benefit subsidy claim in accordance with the requirements specified by Public Sector Audit Appointments Ltd This company will take over the Audit Commission s responsibilities for housing benefit grant certification from 1 April 2015 Working with you 2013 14 was our second year as your external auditors We have previously reported positively on the outcome of our work During our audit we worked with officers in a number of areas to pre empt problems arising Property Plant amp Equipment valuations e Business rates appeals e Valuation of Coventry amp Solihull Waste Disposal Company e Valuation of Blythe Valley Innovation Centre e Changes to the Service Reporting Code of Practice for Local Authorities SeRCOP new Public Health line and e Accounting for and financi
16. ntive 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 Operating Creditors understated or not recorded expenses in the correct period Operating expenses understated Employee Employee remuneration accruals understated Remuneration expenses not correct remuneration Welfare benefit expenditure improperly computed Welfare Expenditure 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 Work completed at interim We have updated our understanding and discussed the cycle with relevant personnel from the finance team and the Order Processing amp Payments team during the interim audit We performed walkthrough tests of the controls identified in the cycle We have updated our understanding and discussed the cycle with relevant personnel in Payroll during the interim audit We performed walkthrough tests of the controls identified in the cycle Substantive testing of balances and individual employee transactions up to the date of the interim audit We have updated our understanding and discussed the cycle with relevant personnel in the Income and Awards team during the interim audit We performed walkthrough tests of the controls identified in the cycle Further work planned at the final audit Substantive testing of balances will be performed on transactions to cover the year
17. 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 these responsibilities 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 16 Audit Audit Our communication plan plan findings Respective responsibilities of auditor and management those
18. stments carrying value e Review the Council s consolidation workings to ensure Innovation Centre that they correctly derive from the component accounts Targeted the group audit team identified one or more potential risks of material misstatement and has determined that audit procedures at the component level are needed to respond to the risk s The group audit team selects this approach whenever sufficient appropriate audit evidence for the audit of the group can be obtained by performing audit procedures that respond to the identified risk s Audit procedures being targeted by auditing either an account balance class of transactions or disclosures Analytical is applied to components that are not individually significant The group audit team selects this approach when the component is not significant and the risks can be addressed sufficiently by applying analytical procedures at the group level 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 10 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 Commission VfM criteria Focus of the criteria The organisation has propet arrangements in place for securing financial resilien
19. tional work outside the Audit Commission regime and We are discussing with officers holding a national seminar and developing a national report on what freedoms should be granted to authorities that become self financing While we recognise that Solihull MBC is a well run Council and we have reported very few issues in the last few years auditing standards require us to maintain professional scepticism The standards also require us to identify and highlight to you those areas where we believe there is the greatest scope for misstatement The next few slides address these requirements 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 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 prepared in all gt material respects Other with the CIPFA Code risks of Practice l 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
20. udit 178 050 Grant certification indicative fee 13 530 Total fees excluding VAT 191 580 A supplementary fee of 1 470 has been added to the 2014 15 main audit fee for audit work on business rates and thus the amount differs from that approved in our fee letter 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 e 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 e Our fees for grant certification cover only housing benefit subsidy certification which falls under the remit of Public Sector Audit Appointments Limited as the successor to the Audit Commission in this 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 Solihull MBC Audit Plan 2014 15 Fees for other services Service Fees ERDF Grant 3 000 Teachers Pensions 4 200 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 fa
21. urther review during our final audit We will revisit the early PPE rights amp obligations and existence testing at the final closing position to ensure that all significant PPE at the 31 March 2015 has been verified We will complete work to address the risks identified during our final audit and this will include the areas set out in our Value for Money section at page 11 above Key dates The audit cycle Date February 2015 February 2015 March 2015 July August 2015 August 2015 September 2015 September 2015 2015 Grant Thornton UK LLP Solihull MBC Audit Plan 2014 15 February 2015 July August 2015 September 2015 Final accounts Visit Interim audit Completion reporting visit Key phases of our audit Activity Planning Interim site visit Presentation of audit plan to Audit Committee Year end fieldwork Audit findings clearance meeting with Director of Resources Report audit findings to those charged with governance Audit Committee Governance Committee Sign financial statements opinion December 2015 Debrief Our Team Mark Stocks Engagement Lead T 0121 232 5437 E Mark C Stocks uk gt com Neil Preece Manager T 0121 232 5292 E Neil A Preece uk gt com Allison Thomas Executive T 0121 232 5278 E Allison A Thomas uk gt com lan Barber VFM Lead T 0121 232 5357 E ian m barber uk gt com Fees and independence Fees Council a
Download Pdf Manuals
Related Search