The Audit Plan – template user guide
Contents
1. 1 a Understanding and the entity Understanding gt the business Understanding _ management s focus gt Evaluating the gt year s results Voyager 2015 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 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 4 Significant risks identified Significant risks often relate to significant non routine transactions and judgmental matters2. Grant Thornton The Audit Plan for Thanet District Council Year ended 31 March 2015 March 2015 Darren Wells Engagement Lead T 01293 554 120 E darren j wells uk gt com Terry Blackman Engagement Manager T 020 7728 3194 E _ terry blackman uk gt com Matt Dean Assistant Manager T 020 7728 3181 E matthew dean 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 Key dates 9 Fees and independence 10 Communication of audit matters with those charged with gov
3. 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 the improper recognition of streams at Thanet District Council we have determined that the risk of 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 the culture and ethical frameworks of local authorities including Thanet District Council mean that all forms of fraud are seen as unacceptable Management over ride of controls Under ISA 240 the presumption
4. need for the Council to clarify its strategy through fewer corporate priorities e We will review your Medium Term e We will review the progress the Council has made in e We will keep up to date with the Council s e We will consider the impact of these Financial Plan and financial response to the findings of the Peer Review as part of the plans to recruit permanent senior officers areas as part of our assessment of strategy as part of our work on work on our Value for Money conclusion e We will monitor developments in the the Council s arrangements for your arrangements for financial e We will review progress in establishing a more focused Council s discussions with the former Chief securing economy efficiency and resilience group of corporate priorities Executive regarding compensation effectiveness 2015 Grant Thornton UK LLP 2 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 2 Corporate governance 3 Financial Pressures 4 Other requirements e Changes to the CIPFA Code of Practice e Annual Governance Statement e Managing service provision with e The Council is required to submit a e Adoption of new group accounting AGS less resource Whole of Gov
5. as part of our work on your arrangements for financial resilience We will consider the impact of alternative delivery models part of our assessment of the Councils arrangements for securing economy efficiency and effectiveness We will review progress in plans to recruit permanent senior officers over the coming months We will monitor developments in the Council s discussions with the former Chief Executive regarding compensation 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 8 Key dates The audit cycle February 2015 Interim audit August Sept 2015 Sept 2015 October 2015 Final accounts Completion Debrief Visit reporting Key phases of our audit Date January 2015 February 2015 17 March 2015 August to September 2015 Mid September 2015 Late September 2015 By 30th Sept 2015 2015 Grant Thornton UK LLP Activity Planning Interim site visit Presentation of audit plan to Audit Committee Year end fieldwork Audit findings clearance meeting with Director of Corporate Resources Report audit findings to those charged with governance Governance and Audit Committee Sign financial statements opinion 9 Fees and independence Fees Council audit 88 395 Grant certification 35 280 Total fees excluding VAT 123 675 Our fee assumptions include
6. ded 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 10 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 in accordance with
7. 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 Fees for other services Service Fees None Nil 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 inclu
8. ed on the Council s monthly expenditure totals to ensure all applicable amounts have been recorded within the Accounts We will test a sample of expenditure incurred by the Council during the year and agree this back to supporting documents Testing will also be performed on payments made post period end to identify any items which have been potentially omitted from the Accounts We will also ensure that amounts remaining outstanding at year end have been correctly recorded as Creditors within the Accounts We will undertake a walkthrough of the Council s processes and controls over this area to gain an understanding of these A high level trend analysis will be performed on the monthly employee remuneration totals to provide assurance over the completeness of the figures included within the Accounts at year end Testing on a sample basis of the employee remuneration expenditure incurred during the year including agreement back to source documents Work will also be performed on the Council s Pension Costs including a review of the report received from the Scheme Actuary Barnett Waddingham We have undertaken a walkthrough of the Council s processes and controls over this area to gain an understanding of these An analytical review will be performed on the figures included within the draft Housing Benefit Subsidy Claim to identify any significant variances requiring explanation Detailed testing will be performed on the expenditure inc
9. ernance 2015 Grant Thornton UK LLP 1 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 LG Finance Settlement 2 Response to Corporate Peer Review 3 Staffing Issues 4 Alternative Delivery Models The local government spending During 2013 14 the Council received the results of a e The Council has seen considerable changes e Development of local authority settlement showed local peer review exercise undertaken by the Local in its key senior members of staff during the trading companies authorities are facing a cash Government Association LGA year including the resignation of the Chief e Partnership working with other Ela in their spending power e The findings regarding inappropriate Member behaviour Executive bodies and the voluntary sector of 6 in SDa P resulted in the Council s Value for Money conclusion e Key statutory roles are currently held on an e Exploration of more joint working Atthe same time local authorities being qualified and led to a number of measures by the acting or interim basis as a result and there with neighbouring councils are facing increasing demand for Council in response including the establishment of an remains a need to ensure these posts are services Improvement Board filled more permanently going forward The review also identified a
10. ernment accounts pack standards IFRS 10 11 and 12 e Explanatory foreword e Progress against savings plans e The Council completes grant claims and returns on which audit certification is required Our response We will ensure that e We will review the arrangements the e We will review the Council s e We will carry out work on the WGA e the Council complies with the requirements Council has in place for the reporting and performance against pack in accordance with requirements of the CIPFA Code of Practice through production of the AGS the 2014 15 budget including e We will certify the housing benefit discussions with management and our e We will review the AGS and the consideration of performance subsidy claim in accordance with the substantive testing explanatory foreword to consider against the savings plan requirements specified by Public Sector e the group boundary is recognised in whether they are consistent with our e We will undertake a review of the Audit Appointments Ltd This company accordance with the Code and joint knowledge Council s financial resilience as will take over the Audit Commission s arrangements are accounted for correctly part of our VfM conclusion responsibilities for housing benefit grant in particular for the interest in East Kent certification from 1 April 2015 Housing 2015 Grant Thornton UK LLP 3 Our audit approach
11. luded within the draft HB Subsidy Claim in line with the HBCOUNT methodology provided by the Audit Commission We will also select a sample of Local Council Tax Support cases to ensure expenditure on these cases has been correctly calculated for inclusion within the Accounts 6 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 2015 Grant Thornton UK LLP Work performed and findings We have completed a high level review of internal audit s overall arrangements 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
12. nd 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 Significant matters in relation to going concern Audit Audit plan findings v v v v v v v v v 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 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
13. ouncil 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 improving efficiency and productivity 2015 Grant Thornton UK LLP We have undertaken a risk assessment to identify areas of risk to our Vf M conclusion We will undertake work in the following areas to address the risks identified We will review the Council s progress in responding to the issues raised in the April 2014 LGA peer review on Member behaviour and setting corporate priorities We will review the Council s reporting and performance against the 2014 15 budget including consideration of performance against the savings plan We will review your Medium Term Financial Plan and financial strategy
14. tanding 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 that 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 To date we have performed early substantive testing in the following are as Review of Housing Benefit System Parameters Trend Analyses on Income Expenditure and Employee Remuneration costs for the first nine months of the year Agreement of Council Tax Precepts Testing of Capital Additions Conclusion Our work has identified no material weaknesses that are likely to adversely impact on the Council s financial statements The work performed to date hasn t identified any material weaknesses or issues that we would like to bring to your attention Testing of the remaining months of the year will be performed as part of our year end visit To date no issues have been identified from the work completed Some areas remain outstanding and will be followed up as part of our work at year end 7 Value for money Value for money The Code requires us to issue a conclusion on whether the C
15. that the risk of Work completed to date management over ride of controls is present in all b a Testing of journal entries for Months 1 to 9 entities Further work planned e Review of accounting estimates judgments and decisions made by management e Testing of journal entries for Months 10 to 12 e Review of unusual significant transactions 2015 Grant Thornton UK LLP 5 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 risks Description Operating expenses Creditors understated or not recorded in the correct period Operating expenses understated Employee remuneration Employee remuneration accruals understated Remuneration expenses not correct Welfare Expenditure Welfare benefit expenditure improperly computed 2015 Grant Thornton UK LLP Audit Approach We have undertaken a walkthrough of the Council s processes and controls over this area to gain an understanding of these A high level trend analysis will be perform
16. 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 Our communication plan Respective responsibilities of auditor and management those charged with governance Overview of the planned scope and timing of the audit Form timing and expected general content of communications Views about the qualitative aspects of the entity s accounting and 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 Identification or suspicion of fraud involving management a
17. 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 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 has not identified any weaknesses which impact on our audit approach To date our work has not identified any weaknesses that impact on our audit approach Our walkthrough of the Council s Employee Remuneration system is in progress and an update will be provided should any issues be identified Our work has identified no material weaknesses that are likely to adversely impact on the Council s financial statements 6 Results of interim audit work cont d Review of information technology controls Journal entry controls Early substantive testing 2015 Grant Thornton UK LLP Work performed We have performed a high level review of the general IT control 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 IT information technology controls were observed to have been implemented in accordance with our documented unders
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