The External Auditor presented the Audit Planning Report for the year ending 31 March 2016.
The Auditor's current assessment of the financial statement risks facing the Council, identified through knowledge of the Council's operations and discussions with Officers included the following:
Risk of fraud in revenue and expenditure recognition.
Risk of management override of controls.
It was highlighted that both of these risks were required to be included in the Audit Plan by Auditing Standards.
Implementation of a new finance system.
In addition to the significant risk areas, the external audit work would also consider the following audit risks, which although unlikely to result in a material misstatement of financial statements, did require special audit attention:
Valuation of land and buildings.
Accounting for pension obligations.
Financial statement close process.
Members' voiced some concern in relation to the implementation of the new Agresso financial system and the forthcoming year end closure of accounts. The Accounting Services Manager provided reassurance that regular testing of the system was being carried out and a Consultant with substantial knowledge of the Agresso system had been employed to support the year end processes. Both internal and external IT support was also on hand to assist with any Agresso software issues.
The External Auditor confirmed that the audit work would be undertaken, in conjunction with Internal Audit, to ensure that the accounts were fully complete.
It was acknowledged by the Deputy Chief Finance Officer that, as with the implementation of any new system, it was still being developed and embedded and adjustments made as appropriate.
The Value for Money risks identified were:
Project Management and Property Disposals.
Leadership Team Review.
The External Auditor confirmed that the issues documented by the previous auditor and the Internal Auditor in relation to Property Management and Property Disposals would be followed up. Whilst the Internal Auditor had documented that the Council had made progress in these areas, the External Auditor would consider whether the Council had made sufficient progress during the financial year for an unqualified opinion to be issued or whether the current qualified opinion would remain.
The External Auditor stated that EY were anticipating a materiality figure of 2% and this would be confirmed at the June meeting of the Corporate Affairs and Audit Committee. It was highlighted that the amount considered material at the end of the audit might differ from the initial determination.
In response to a query from a Member regarding the risk of cyber fraud, the External Auditor agreed that this was a hot topic at the current time. It was noted that the risk of cyber fraud could be mitigated by IT controls and the overall control environment that the Council operated within.
In relation to financial resilience, reference was made to the recent Peer Review of the Council. Members had considered how the Council could continue to invest in spite of the current economic climate. The Deputy Chief Finance Officer commented that the recently approved Budget Report set out details of the Council's current reserves and plans for the use of those reserves over the next three years. The External Auditor confirmed that as part of their audit they would examine the Council's Medium Term Financial Plan and test the assumptions.
AGREED that the information provided was received and noted.