Agenda item

The Committee received a report from the External Auditor providing an overview of the planned scope and timing of the statutory audit of the Council.

The report outlined factors impacting the Audit and the Audit Plan and particularly reference was made to the significant impact on the Council of the Covid 19 pandemic.  In addition, ISA (UK) 540 (revised) Auditing Accounting Estimates and Related Disclosures included significant enhancements in respect of the audit risk assessment process for accounting estimates.  This would require greater disclosure by the Council as well as additional work by the auditor.  The Financial Reporting Council had also set out its expectation of improved financial reporting from organisation and the need for auditors to demonstrate increased scepticism and challenge and to undertake more robust testing.  The External Auditors work in 2019/20 had highlighted areas where financial reporting in the public sector needed to be improved with a corresponding increase in audit procedures.  They had also identified an increase in the complexity of financial transactions in the sector which required greater audit scrutiny.

It was noted that the Council was required to prepare group financial statements that consolidated the financial information for both the Council, Bernesali Homes and Penistone Grammar School Trust

In relation to significant risks, the External Auditor would communicate any significant findings in relation to Management override of controls, Valuation of Land and Buildings and Valuation of the Pension Fund Liability (as well as other significant matters arising from the audit) in their Audit Findings Report.

The planning materiality had been determined to be £8.632m for the Group and £8.593m for the Council which equated to 1.5% of the gross expenditure on the cost of services in the previous year.  The External Auditor would also continue to report uncorrected omissions and misstatements other than those that were ‘clearly trivial’ – the ‘clearly trivial’ threshold had been set at £430,000.  Reference was also made to the way in which the materiality levels had been set.

The risk assessments regarding the arrangements to secure Value for Money had not identified any risks of significant weaknesses at this time but this would be kept under review as the audit progressed.

The planning work for 2020/21 had commenced in February 2021 and would be completed along with the interim audit during July.  The final accounts audit would take place from late July to early November.  The key deliverables were outlined in the Audit Plan and the Audit Findings report and the Annual Report on the VFM work.  Revisions and updates to certain ISA (UK) which were applicable to the 2020/21 audit and beyond were reported in detail within Appendix A.  The audit fee had been set at £180,218 (an increase from £144,718 in the previous year) but was subject to the Council meeting their requirements. 

The report also detailed other matters within the External Auditor’s responsibilities together with the progress made against prior year audit recommendations and the risk assessment against each item.

Details of the additional work to be undertaken were provided within the report.

There was a discussion of the role of the Committee under the Financial Reporting Council update ISA (UK) 540 (revised) and to how it could be demonstrated that Members had fulfilled this role.  Thilina De Zoysa, representing the External Auditor, did not feel that this would be an issue.  The Committee would be given oversight and would be able to check and challenge the methods and models used to make the accounting estimates and the risks related to them.  In addition, the External Auditors had already enquired and held discussions with the Service Director Finance and his Team about the process for making accounting estimates, including the monitoring activities undertaken by management.  This information would be shared with the Committee.  This should enable the Committee to make a satisfactory evaluation of how the accounting estimates were made.

It was noted that as part of the planning risk assessment procedures, letters of enquiry had been sent to management in April 2021.  The responses would be considered by this Committee at a subsequent meeting.  In response to specific questioning, it was agreed the letters themselves could be shared with Members of the Committee.  This information would give the Committee an insight into the assumptions made in relation to the estimates and risks related to them.

RESOLVED that the External Audit Plan 2020/21 be noted and, insofar as this Committee is concerned, the action to be taken be supported.