To consider a report by the Head of Resources on the External Audit Plan for 2016/17.
Contact:C Mason 388157 A Forth 388605
Minutes:
(Mr Neil Harris, Hayley Clark and Sadaf Zahid of Ernst and Young, the Council’s External Auditors, were in attendance for consideration of this item).
The Panel received a report by the Head of Resources (a copy of which is appended in the Minute Book) to which was attached the Council’s External Audit Plan 2016/17 produced by the External Auditors Ernst and Young. In introducing his Team to the Committee, Mr Harris explained how they had intended to complete the audit looking at the risks relevant to the financial statements and conclusion on arrangements to secure a value for money opinion.
Attention was drawn to the current assessment of financial risks, specifically the significant risks of fraud in revenue recognition and risk of management override, both not unique to the Council but driven by the Auditor’s professional audit standards as issued by the National Audit Office. Furthermore Members noted the other financial risks in the presentation of financial statements, valuation of fixed assets and the pension liability. Mr Harris reported upon the materiality of the financial statements of £1.7m based upon 2% of gross revenue expenditure, with any uncorrected audit misstatements greater than £86,479 to be reported to the Council.
Members noted the indicative fee scale for the audit of the Council, not taking into account any additional work that may be required, and the timetable detailing the key stages of the audit. Particular mention was made of the difficulties experienced by Ernst and Young last year with the delay in completion of the audit and requirement to reschedule the meeting of the Committee. Mr Harris reassured Members that he was keen not to repeat the same issue and had allocated appropriate resources to complete the work. As last year had also been the first year Ernst and Young had undertaken the audit of the Council, Mr Harris intimated that they had a clearer understanding of the business and there was not the requirement for detailed handover discussions to be undertaken with the previous External Auditors, PricewaterhouseCoopers.
Following commendation on the clarity of the report, Councillor Ms R E Mathews questioned the level of materiality, whereupon Mr Harris explained that this had been prescribed by the audit methodology and confirmed that anything identified below the £86k would be highlighted in the audit report.
In commending the report, Councillor Mrs S J Conboy indicated her concerns with the challenge of budget setting and Mr Harris explained that even if the value for money conclusion was not significant the audit would continue to look at the budget setting process and assumptions made for future years with any concerns raised with Officers and Members.
The Chairman referred to the Council’s Commercial Investment Strategy and the fact that some local authorities were over extending themselves but he had been reassured that the Auditors had been reviewing progress. Whereupon Mr Harris suggested that the Council had been investing at the right pace and not exposing itself to any unnecessary risk, whilst commending its outlook in identifying other ways to remain sustainable.
The Chairman requested to meet privately with the External Auditors before the 2016/17 annual accounts were submitted to the Committee for approval and Mr Harris agreed that a meeting would be arranged. Whereupon, the Committee
RESOLVED
(a) that the content of the External Audit Plan for 2016/17 be noted as set in Appendix 1 to the report now submitted; and
(b) that the timetable and level of updates reported to the Committee during the audit process be noted.
Supporting documents: