The Audit Plan – template user guide
Contents
1. 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 Appendices 2014 Grant Thornton UK LLP Action plan Priority High Significant effect on control system Medium Effect on control system Low Best practice Rec Implementation date amp No Issue Recommendation Priority Management response responsibility 1 No user access review being conducted Management should implementa Low Agreed To be implemented by formal process to review user September 2014 access to the network ABS and Frontier applications on a regular basis to ensure access is John Robinson Information appropriate based on job Services Ser2. Grant Thornton The Audit Plan for Hertsmere Borough Council Year ended 31 March 2014 March 2014 Phil Westerman Engagement Lead T 020 7728 2548 E philip r westerman uk gt com Trevor Greenlee Manager T 01293 554071 E trevor greenlee 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 Significant risks identified 5 Other risks 6 Results of interim work 7 Value for Money 8 Logistics and our team 9 Fees and independence 10 Communication of audit matters with those charged with governance Appendices A Action plan 2014 Grant Thornton UK L
3. Service Fees None Nil 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 Full 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 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 be
4. e Review and testing of revenue recognition policies e Testing of material revenue streams Work completed to date e Testing of journal entries to 31 January 2014 Further work planned e Review of accounting estimates judgments and decisions made by management e Testing of journal entries for the remainder of the year 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 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 other risks of material misstatement which we have identified as a result of our planning Other reasonably possible risks Description Work completed to date Further work planned Operating Creditors understated or e Identification and walkthrough of system controls e Substantive testing of creditor balances EXPENSES not recorded in the correct e Cut off testing to ensure that transactions have been recorded period in the correct accounting period Employee Employee remuneration e Identification and walkthrough of system controls e Substantive testing of payroll expenses remuneration accrual understated Welfare Welfare benefit e
5. Identification and walkthrough of system controls e Substantive testing of a sample of benefit claims Expenditure expenditure improperly e Review reconciliation of benefit expenditure to the benefit computed subsidy claim e Complete benefit software diagnostic tool uprating checks and analytical review compared to prior year subsidy claim Property Revaluation measurement e Identification and walkthrough of system controls Pari NOLRON EOL e Evaluate the qualifications and work of the valuation expert Equipment e Substantively test revaluations to supporting documentation e Review supporting documentation to confirm overall carrying value per accounts does not differ materially from fair value 2014 Grant Thornton UK LLP 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 Review of information technology IT controls 2014 Grant Thornton UK LLP Work performed and findings We have reviewed internal audit s overall arrangements in accordance with auditing 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 perform walkthrough tests of con
6. Council has been required to put in place new arrangements locally to implement these changes We will e consider the new arrangements for council tax support and business rates and review how the impact of the reforms has been incorporated into the Council s medium term financial plans e consider accounting issues associated with the reforms and review the Council s treatment against the 2013 14 Accounting Code of Practice 4 Financial statements e The Department for Communities and Local Government DCLG is proposing to bring forward the timetable for closure of accounts by up to two months with any change potentially happening as early as 2015 16 Any significant acceleration of the timetable for accounts submission would require the Council to review its processes for accounts preparation Although not an issue for 2013 14 we will e work with the Council to help identify ways of streamlining the accounts preparation process if any acceleration of the accounts timetable is confirmed 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 e Changes to the CIPFA Code of Practice including clarification of Code requirements around PPE valua
7. LP 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 Reduction in funding and financial position Since the Chancellor s Autumn statement in 2010 central government funding to local authorities has been reducing year on year This financial environment continues to pose significant challenges for the Council We will e review the Council s approach to strategic financial planning financial governance and financial control as part of the work to support our value for money conclusion 2014 Grant Thornton UK LLP 2 Challenges opportunities Delivering efficient and effective services In recent years the Council s budget process has been supported by efficiency savings from change management and organisational review The Council s medium term financial strategy anticipates that further efficiency savings will be needed tin future years We will monitor developments through our review of Council papers and meetings with senior management Our value for money conclusion work will consider if the Council continues to have efficient and effective arrangements for the delivery of services 3 Local government finance reforms e The Local Government Finance Act 2012 introduced changes to the framework for council tax support and business rates with effect from 1 April 2013 The
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9. en 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 2014 Grant Thornton UK LLP 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
10. g efficiency and productivity 2014 Grant Thornton UK LLP We will undertake a risk assessment to identify areas of risk to our VfM conclusion 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 Key dates The audit cycle 2014 Grant Thornton UK LLP February 2014 Interim audit visit July 2014 September 2014 Final accounts Completion Visit reporting September 2014 Debrief Date January 2014 March 2014 1 April 2014 July August 2014 September 2014 By 30 September 2014 Key phases of our audit Activity Planning Interim audit visit Presentation of audit plan to Audit Committee Final accounts work Report audit findings to the Audit Committee Sign financial statements opinion Fees and independence Fees Council audit 64 921 Grant certification 13 900 Total fees excluding VAT 78 821 Our fee assumptions include Supporting schedules for all figures in the accounts are supplied by the agreed dates and in accordance with the agreed information request list The scope of the audit and the Council s activities has not changed significantly e The Council will make available management and accounting staff to help us locate information and to provide responses to audit queries 2014 Grant Thornton UK LLP Fees for other services
11. gy planned control reliance Extract your data y e Test controls e Substantive analytical review e Tests of detail General audit procedures Financial statements Y e Test of detail Anal d e Substantive Report output nalyse data BETETE using relevant i 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 Under ISA 240 there is a presumed risk that revenue fraudulent transactions may be misstated due to the improper recognition of revenue Management over ride of controls Under ISA 240 there is a presumed risk that the risk of management over ride of controls is present in all entities 2014 Grant Thornton UK LLP Substantive audit procedures Work planned
12. he changes to the LGPS from 1 April 2014 2014 Grant Thornton UK LLP We will e review the Council s performance against the 2013 14 budget including delivery against savings plans e undertake a wider review of financial resilience issues to support our VFM conclusion We will e carry out work on the WGA pack in accordance with requirements e certify grant claims and returns in accordance with Audit Commission 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 2014 Grant Thornton UK LLP 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 Stores audit evidence Ensures compliance with International Standards on Auditing ISAs Devise audit strate
13. ner in the absence of such a control Given the criticality of the data in these systems it is advisable that there are processes to identify any unauthorised access thereby reducing the risk of fraud manipulation or error 2014 Grant Thornton UK LLP Recommendation Priority A policy and procedure associated to Low unauthorised login attempts to the network and systems should be created This policy should consider a review of unauthorised login attempts as well as set out follow up actions to be adopted in case a security risk is identified Management response Agreed Implementation date amp responsibility To be implemented by June 2014 John Robinson Information Services Service and Systems Manager GrantThornton 2014 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
14. ntry testing strategy We have undertaken testing of journal transactions for the first ten months of the financial year Conclusion We have not identified any material weaknesses which are likely to adversely impact on the Council s control environment or financial statements Our work to date has not identified any issues which we wish to bring to your attention We will perform testing of journal entries for the remainder of the financial year as part of our yearend work on the Council s financial statements 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 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 improvin
15. tions and changes to accounting for business rates 2 Legislation e Local Government Finance settlement e Welfare reform Act 2012 3 Corporate governance e Annual Governance Statement AGS e Explanatory foreword 4 Pensions e The impact of changes to the Local Government pension Scheme LGPS 5 Financial Pressures e Managing service provision with less resource e Progress against savings plans 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 Our response We will e liaise with the Council s finance team on relevant issues prior to the accounts being prepared e ensure that the Council complies with the requirements of the CIPFA Code of Practice through our work to review the 2013 14 financial statements We will e discuss the impact of legislative changes with the Council through our regular meetings with senior management and those charged with governance providing a view where appropriate We will e review the arrangements the Council has in place for the production of the AGS e review the AGS and the explanatory foreword to consider whether they are consistent with our knowledge We will e discuss with management the Council s preparations for t
16. trols operating in areas where we consider that there is a risk of material misstatement to the financial statements Our walkthrough testing is substantially complete 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 Our information systems specialist has performed a high level review of the general IT control environment as part of our overall review of the Council s organisation level controls 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 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 We have concluded that there are no material weaknesses which are likely to adversely impact on the Council s financial statements We have made two minor recommendations to improve controls Details of these recommendations and the management response are included on the Action Plan at Appendix A Journal entry controls 2014 Grant Thornton UK LLP Work performed We have reviewed the Council s journal entry policies and procedures as part of determining our journal e
17. vice and If user access is not reviewed by functions Systems Manager management on a regular basis there is a risk that access granted to users may become disproportionate to the user s responsibilities and this may not be identified in a timely manner Furthermore there is an increased risk that segregation dead gt of duties may be circumvented resulting roles and responsibilities with from individuals changing roles without their due consideration being given to access rights being reviewed and amended adequate segregation of duties accordingly There is no process in place to review user access rights and confirm that access privileges within the IT network ABS and Frontier applications is appropriate The review should address both the existence of users with access rights as well as the appropriateness of these access rights in relation to the users job 2014 Grant Thornton UK LLP Action plan Priority High Significant effect on control system Medium Effect on control system Low Best practice Rec No Issue 2 Unauthorised access attempts are not being logged investigated and follow up actions documented There is no documented process to review unauthorised entry attempts to the IT network ABS and Frontier applications on a periodic basis There is a risk that unusual activity or security events taking place within Hertsmere BC s network and systems might not be detected in a timely man
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