The Audit Plan – template user guide - Committees
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1. 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan Under ISA 240 there is a presumed risk that revenue may be misstated due to the improper recognition of Substantive audit procedures Having considered the risk factors set out in ISA240 and the nature of the revenue streams at Kent County Council we have determined that the risk of fraud arising from revenue recognition can be rebutted because e there is little incentive to manipulate revenue recognition as the Council is predicting a year end surplus opportunities to manipulate revenue recognition are very limited due to the nature of majority of income being from central government grants e the culture and ethical frameworks of local authorities including Kent County Council mean that all forms of fraud are seen as unacceptable Work completed to date e Discussions about the proposed accounting estimates judgments and decisions to be made by management e Testing of journal entries up to month 9 of the 2014 15 financial year Further work planned e Review of accounting estimates judgments and decisions made by management e Testing of journal entries for months 10 12 and closedown period e Review of unusual significant transactions 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 judgment2. Grant Thornton The Audit Plan for Kent County Council Year ended 31 March 2015 29 April 2015 Paul Hughes Engagement Lead T 0207 728 2256 E paul hughes uk gt com Elizabeth Olive Engagement Manager until July 2015 T 07880 456191 E elizabeth olive uk gt com Nicholas White Engagement Manager from August 2015 T 0207 383 5100 E _ nicholas j white uk gt com Stephen J Richards In charge auditor T 0207 728 3340 E stephen j richards 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 3 Our audit approach 4 An audit focused on risks 5 Significant risks identified
3. 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 these responsibilities 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan Audit Audit Our commu
4. 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 other risks of material misstatement which we have identified as a result of our planning Other risks Description Creditors related to core activities understated or not recorded in the correct period Completeness Operating expenses Employee remuneration and benefit obligations and expenses understated Completeness Employee remuneration 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan Audit Approach Work completed to date e Identification and walkthrough of controls e Testing of payments made during months 1 to 9 of the financial year Further work planned Testing of payments made during months 10 to 12 of the financial year e Testing of year end creditors e Testing for unrecorded liabilities Work completed to date e Identification and walkthrough of controls e Testing of payroll records for months 1 to 9 of the financial year Further work planned e Testing of payroll records for months 10 to 12 of the financial year e Reconciling the total pay per the payroll system to the general ledger e Perform a trend analysis of the payroll expenditure in the 2014 15 accounts Other risks identified cont d Other risks Description Property Plant and PPE acti
5. 6 Other risks 7 Value for Money 8 Results of interim work 9 Key dates 10 Fees and independence 11 Communication of audit matters with those charged with governance 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan 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 Council transformation The Council s Facing the Challenge programme is transforming the way the Council delivers it services whilst continuing to cut its budget Development of local authority trading companies to deliver services differently Partnership working with other bodies and the voluntary sector 2 Procurement and Commissioning Delivering efficiency savings through improved procurement Moving from the provision to the commissioning of services 3 LG Finance Settlement You have a good track record of meeting your financial targets and of implementing efficiency savings The local government spending settlement showed local authorities are facing a cash reduction in their spending power of 6 in 2015 16 At the same time local authorities are facing increasing demands for school places and adult social care services 4 Collaborative working with the NHS Development of new working arrangements to deliver the Bet
6. an Fees for other services Service Fees Audit of Initial teacher training claim 3 500 Compliance review of TIGER funding scheme in Dec 2014 12 000 Audit of Expansion East Kent RGF claim 3 250 Audit of Infrastructure RGF claim 950 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 in the table opposite This document The Audit Plan outlines our audit strategy and plan to deliver the audit while The
7. ctice Statement AGS e Changes to the recognition of school land and buildings on local authority balance sheets 2 Corporate governance e Explanatory foreword e Adoption of new group accounting standards IFRS 10 11 and 12 3 Better Care Fund e Better Care Fund BCF plans and the associated pooled budgets will be operational from 1 April 2015 Developments and other requirements 4 Financial Pressures e Managing service provision with less resource e Progress against savings plans 5 Other requirements e The Council is required to submit a Whole of Government accounts pack on which we provide an audit opinion Our response We will ensure that e We will review the arrangements the Council has in place for the production of the AGS and compare to good practice identified in our annual LG governance review e We will review the AGS and the explanatory foreword to consider whether they are consistent with our knowledge 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 e We will consider whether the BCF is a risk in the context of our V
8. eria 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 The organisation is prioritising its arrangements for challenging how resources within tighter budgets for it secures economy efficiency and example by achieving cost reductions and effectiveness by improving efficiency and productivity 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan 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 review and update our risk assessment agreed during our 2013 14 financial resilience review to reflect the up to date position on arrangements relating to key indicators of financial performance financial governance strategic financial planning and financial control e review the budget setting process for 2015 16 and the achievement of savings in 2014 15 including the savings from adults and children s transformation projects e review the governance arrangements put in place to successfully deliver the Facing the Challenge transformation plans e review the progress made against any recommendations made as a result of the 2013 14 financial
9. fM conclusion and will carry out further work if required e We will review the Council s performance against the 2014 15 budget including consideration of performance against the savings plan e We will undertake a review of Financial Resilience as part of our VfM conclusion 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan e We will carry out work on the WGA pack in accordance with 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 3 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 Kent County Council 2014 15 Audit Plan Stores audit evidence Ensures compliance with International Standards on Auditi
10. ip 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
11. ng 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 The revenue cycle includes fraudulent transactions revenue This presumption can be rebutted if the auditor concludes that there is no risk of material misstatement due to fraud relating to revenue recognition Management over ride of controls Under ISA 240 the presumption that the risk of management over ride of controls is present in all entities
12. nication 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 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 partnersh
13. 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 issue a separate report in respect of VfM 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 reviewed internal audit s overall arrangements against the Public Sector Internal Audit Standards 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 Managemen
14. rnal 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 To date we have undertaken detailed testing on journal transactions recorded for the first nine months of the financial year by extracting unusual entries for further review No issues have been identified that we wish to highlight for your attention Early substantive testing We have undertaken early substantive testing in the following areas e sample testing of payments for months 1 to 9 e sample testing of payroll records for months 1 to 9 e sample testing of income for months 1 to 9 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan Conclusion Our work is in progress and we will report any significant issues arising in the Audit Findings Report Our work has identified no material weaknesses which are likely to adversely impact on the Council s financial statements We will complete journals testing for months 10 to12 and closedown journals at the accounts audit visit Our work to date has not identified any significant issues which we wish to bring to your attention We will complete the remaining testing at the accounts audit visit Key dates The audit cycle January and April 2015 Interim audit June July 2015 July 2015 September 2015 Final accounts Completion Debrief Visit reporting Key phase
15. s of our audit Date January 2015 April 2015 29 April 2015 w c 15 June to 6 July 2015 w c 10 July 2015 23 July 2015 23 July 2015 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan Activity Planning Interim site visit Presentation of audit plan to Audit Committee Year end fieldwork Audit findings clearance meeting with Corporate Director of Finance and Procurement Report audit findings to those charged with governance Sign financial statements opinion Fees and independence Fees Fees Council audit 207 900 Total fees excluding VAT 207 900 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 e 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 Kent County Council 2014 15 Audit Pl
16. t 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 Kent County Council 2014 15 Audit Plan 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 The Institute of Internal Audit has undertaken a compliance review against the PSIAS s during March 2015 The draft report has been received and confirmed that the Council is compliant with the requirements 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 Review of information technology Our information systems specialist will be performing a high level controls 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 Journal entry controls We have reviewed the Council s journal entry policies and procedures as part of determining our jou
17. ter Care Fund NHS emergency care overload and the re emergence of bed blocking linked to adult social care capacity Our response We will carry out a review of the accounting entries in your financial statements of your Local Authority Trading Companies LATCs We will review progress in delivering the Facing the Challenge transformation programme as part our financial resilience work We will review the progress you have made in delivering your efficiency savings in the adults and children s transformation projects as part of our work on your arrangements for financial resilience 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan We will review the Council s financial planning monitoring and governance arrangements focusing on the robustness of assumptions in the medium term resources strategy as part of our financial resilience work 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 1 Financial reporting e Changes to the CIPFA Code e Annual Governance of Pra
18. vity not valid valuation Equipment PPE Property Plant and Revaluation measurements not correct Equipment PPE valuation 2015 Grant Thornton UK LLP Kent County Council 2014 15 Audit Plan Audit Approach Work completed to date e Identification and walkthrough of controls e Discussion with officers about the accounting changes for schools in 2014 15 Further work planned e Substantive testing of entries in the PPE notes e Verify the capital programme to the additions recorded in the asset register in the financial year Work completed to date e Identification and walkthrough of controls e Discussion with officers about the valuation approach in 2014 15 Further work planned e Review the reconciliation of the valuation report to the asset register and accounts e Perform assurance procedures over the work of the external valuer as an expert e Consider any changes in the valuation of property plant and equipment and investment properties and ensure these changes are appropriate and correctly accounted for in the disclosure notes 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 crit
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