Agenda item

Agenda item

AUDIT STRATEGY MEMORANDUM - YEAR ENDING 31 MARCH 2021

A report of the External Auditors.

Minutes:

A report of the External Auditors was submitted setting out the Audit Strategy Memorandum for the financial year ending 31st March 2021 (item 6 on the agenda filed with these minutes).

 

Mark Surridge, representing the External Auditors, attended the meeting to assist the Committee with the consideration of this item.

 

It was noted that:

 

·         It was the responsibility of the External Auditor to issue an opinion on financial statements.

·         External Auditors had a duty to provide Value for Money (VfM) commentary.

·         Electors had rights to ask questions of the Auditors.

·         It was the responsibility of the Auditors to design procedures for fraud rather than to detect it.

·         There were 4 main areas of significant risk:

o   Management override of controls – This was not necessarily a heightened risk.

o   Net defined benefit liability valuation – This related largely to the pension scheme and involved very large numbers based on judgements and estimates.  As such, extra time was spent on estimates.

o   Valuation of land & buildings, council dwellings, investment properties (where material) and assets held for sale (where material) – This was supported by a professional valuer.

o   Covid-19 grant recognition – This considered which grants would end up in financial statements and looking at accounting arrangements.  The eligibility of business rate payers for grands was not tested.  This was considered to be a significant risk as it was a new risk and involved large amounts of money.  The Committee were advised not to take false assurance from this work.

·         The VfM element had a new code of Audit Practice creating a new approach on the way the auditors worked.  In previous years there had been a conclusion whereas this year there was a detailed commentary on the arrangements that the Council had in place. The VfM Commentary Report would be in the public domain, showing the processes on financial sustainability, governance and costs and performance.  Each aspect should be in place in any public sector organisation.

·         The committee were assured that the external auditors were fair, balanced, independent and objective.

·         A webinar was being run by Mazars that would cover the basics of an Audit Committee.

 

The Committee were advised in response to questions that:

 

·         The reason that Management Override Controls had more of an impact than the pension fund was because there had been an increase in the level of the reporting of fraud and as such the auditors were professionally sceptical of arrangements in place and as such it was appropriate that due diligence was taken.

·         With regard to Covid-19 grant recognition, finance teams judgement was driven by accounting standards using ‘principle’, which referred to  specific issues such as revenue support grants, and ‘agent’, which referred to issues such as business rates whereby the authority was passing funds through on behalf of another body.

·         The competence of the VfM conclusion was decided through concerns raised at Audit Committee meetings and was seen as a collective responsibility.  This issue would be covered in their webinar.

·         VfM Measurements had been made this financial year as there had been a number of criticisms whereby organisations had not acted on auditor advice and has led to high-profile failings.  The new code gave auditors more power to enact on organisations that were not performing.  The external auditors had a shared responsibility with the Audit Committee and it was officers’ responsibility to act on advice.

 

 

RESOLVED that the report be noted.

 

Reason

 

To acknowledge the Committee’s consideration of the matter.

Supporting documents: