The Audit Plan – template user guide
Contents
1. General audit procedures Financial statements Y e Test of detail Anal d e Substantive Report output nalyse data ETEME 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 7 Substantive audit procedures Further work planned e Review and testing of revenue recognition policies e Testing of material revenue streams Further work planned e R2. Grant Thornton The Audit Plan for Gloucestershire County Council Year ended 31 March 2014 12 March 2014 Liz Cave Engagement Lead T 0117 305 7885 E liz a cave uk gt com Peter Smith Audit Manager T 0117 305 7832 E peter w smith uk gt com Paul Benfield Executive T 0117 305 7894 E paul m benfield 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 i Oe a 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 Results of interim work Value for Money Logistics and our team Fees an
3. Sign financial statements opinion Fees and independence Fees Council audit 130 680 Grant certification 6 250 Total fees excluding VAT 136 930 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 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 2014 Grant Thornton UK LLP Fees for other services 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 There is one matter we wish to draw to your attention which does not impact on our independence as auditors The firm is the advisor to Urbaser Balfour Beatty who are the Council s contractor following financial close of the contract in February 2013 We have considered whether the issue is a threat to our independence and have concluded it is not 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 servi
4. that controls are operating as described e Document our understanding of the controls operating in the PPE system Further work planned e Test of a selection of key controls e Substantive testing of operating expenditure e Test of a selection of key controls which will reduce the amount of testing required at year end e Substantive testing of employee remuneration e Walkthrough of the valuation process e Review of the instructions to and report from the Council s valuers to confirm process is compliant with the code e Agreement of valuations to information provided by the valuers 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 opportunities effectively and to secure a stable financial position that enables it to continue to operate for the foreseeable financial resilience future The organisation has proper arrangements for challenging how The organisation is prioritising its resources within tighter budgets for it secures
5. atory foreword to e We will undertake a review of Audit Commission e schools are accounted for consider whether they are Financial Resilience as part of requirements correctly and in line with the consistent with our knowledge our VFM conclusion latest guidance 2014 Grant Thornton UK LLP 5 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 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 Stores audit evidence Ensures compliance with International Standards on Auditing ISAs Devise audit strategy planned control reliance Extract your data y e Test controls e Substantive analytical review e Tests of detail
6. ces 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 13 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 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
7. d independence Communication of audit matters with those charged with governance 2014 Grant Thornton UK LLP Understanding your business 1 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 Financial Position Understand the potential budget gap over the next 3 years 2015 16 2017 18 and process to mitigate it including increasing other sources of income to the council We will review the Council s performance against the 2013 14 budget including consideration of performance against the savings plan We will carry out a high level review of the Council s Medium Term Financial Plan as part of our work to support our VFM conclusion 2014 Grant Thornton UK LLP 2 Delivery of Better Care Fund e Progress the preparation for the Better Care Fund in 2015 16 e Review of the plan in place with other participating bodies understand the transfer of funding and the arrangements in place to ensure delivery of objectives Challenges opportunities 3 Delivery of Community services and Demand Management e Understanding and controlling the costs in respect of Adult Social care and Children s services in the short and long term e Developing further strategies to influence the demand for services e Ensuring contracted providers are delivering required level of service performance e We will undertak
8. e benchmarking of high cost areas of adult social care to gain an understanding of whether the council can reduce these costs e We will carry out a high level review of the Council s processes to challenge service delivery options outcomes and cost as part of our work to support our VFM conclusion 4 Organisation Culture and structure Becoming a more effective Commissioning organisation Understanding what are the most effective structures for working with stakeholders eg service delivery models with Gloucestershire Care Services and risk sharing with Gloucestershire CCG We will carry out a high level review of cost savings and consider whether these have had a negative impact on service delivery as part of our work to support our VFM conclusion 5 Waste Contract e The impact on the Council of the delay in the developer obtaining planning permission for the proposed new waste disposal facility e We will consider the Council s response to the delays in the waste development as part of our work to support our VFM conclusion e We will discuss with finance staff the disclosures required about liabilities in the financial statements 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 Develop
9. economy efficiency and effectiveness example by achieving cost reductions and by improving efficiency and productivity 2014 Grant Thornton UK LLP Having already successfully delivered 114m of savings in the past 3 years the Council now faces the challenge of identifying a further 75m of savings to reduce the identified budget gap over the next 3 years At the same time the Council is working with other organisations partners and stakeholders to improve setvice delivery outcomes with less resources We have undertaken an initial risk assessment to identify areas of risk to our VfM conclusion We will undertake work in the following areas to address the risks identified Health and Social Care Integration Transformation Fund Better Care Fund BCF Where we will review the plan in place with other participating bodies and the arrangements in place to ensure the delivery of desired outcomes Waste disposal project Where we will consider the Council s response to the tisks associated with the project delay Adult Social Care costs Where we will examine the level of costs incurred by benchmarking areas of high cost with other similar Councils In addition we will follow up progress on any issues discussed with the Council following last years VFM work 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 Results of interim audit
10. eview of accounting estimates judgments and decisions made by management e Testing of journal entries 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 Operating expenses Employee remuneration Property Plant amp Equipment Description Creditors understated or not recorded in the correct period relating to both I amp E and Balance sheet assertions Employee remuneration accrual understated relating to I amp E assertions Revaluation measurement not correct relating to Balance sheet assertions 2014 Grant Thornton UK LLP Work completed to date e Document our understanding of the controls operating in the operating expenses system Performed walkthrough to confirm that controls are operating as described e Document our understanding of the controls operating in the Employee Remuneration system e Performed walkthrough to confirm
11. 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 14 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 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
12. 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 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 co uk 15
13. ments and other requirements 1 Financial reporting 3 Corporate governance 4 Pensions 5 Financial Pressures 6 Other requirements e Changes to the CIPFA Code of e Annual Governance Statement e The impact of 2013 14 changes e Managing service provision e The Council is required to Practice AGS to the Local Government with less resource submit a Whole of Government e Clarification of Code e Explanatory foreword pension Scheme LGPS e Progress against savings plans accounts pack on which we requirements around PPE provide an audit opinion valuations e The Council completes grant e Changes to NDR regulations claims and returns on which audit certification is required e Transfer of assets to Academies Our response We will ensure that e We will review the e We will review how the Council e We will review the Council s e We will carry out work on the e the Council complies with the arrangements the Council has dealt with the impact of the performance against the WGA pack in accordance with requirements of the CIPFA in place for the production of 2013 14 changes through our 2013 14 budget including requirements Code of Practice through the AGS meetings with senior consideration of performance e We will certify grant claims and discussions with management e We will review the AGS and management against the savings plan fet rmeinraccordahce With and our substantive testing the explan
14. o an effective internal control environment at the Council 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 Work on the PPE system will be undertaken after the 31st March 2014 when the revaluation of PPE has been completed IT information technology controls work is expected to be undertaken in March 2014 on agreement with officers Journal entry controls Early substantive testing Value for money 2014 Grant Thornton UK LLP Work performed 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 To date we have started 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 No early substantive testing has yet to be undertaken It has been agreed with officers that operating expenditure testing will be undertaken in late March and then Employee Remuneration testing will be undertaken in early June An initial assessment based on prior year findings review of current available information and ou
15. r own knowledge to inform whether we undertake work on specific areas di Conclusion Further testing will be undertaken in late March as part of out early substantive testing visit We will undertake testing on the remaining 3 months of the year and post year end as part of our final accounts visit A strategy to undertake early testing has been agreed with officers to be undertaken before the final audit visit in July We have completed our initial risk assessment and identified 3 areas of risk which we will focus on in our detailed work These are The robustness of the process in respect of the Better Care Fund Plan The delay in the waste project Areas of high cost in Adult Social Care We will continue to update our risk assessment between April to September to identify whether there are any developments which could effect our conclusion Key dates The audit cycle 2014 Grant Thornton UK LLP Feb 2014 Interim audit visit July 2014 Aug 2014 Final accounts Visit Completion reporting Sep 2014 Debrief Date Jan 2014 Feb 2104 11t Apr 2014 Jul Aug 2014 Sep 2014 TBC with the DoF 26th Sep 2014 26th Sep 2014 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 Finance Report audit findings to those charged with governance
16. 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 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 have completed walkthrough tests of controls operating in Operating Expenditure and Employee Remuneration 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 Our information systems specialist perform a high level review of the general IT control environment as part of the overall review of the internal controls system They also performed a follow up of the issues that were raised last year 10 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 t
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