Agenda item

The Senior Finance Manager (Client) introduced his report setting out Grant Thornton’s planned approach to completing the audit of the 2021/22 financial statements and Value for Money Conclusion.  It was noted that:

·  The report from Grant Thornton covered several areas including significant risks identified in their work to date, accounting estimates and the materiality limit they were planning to adopt for the audit this year.

·  The report also included details of the anticipated audit fee which was £64,666 (£41,666 for the scale audit fee set by Public Sector Audit Appointments Ltd (PSAA), £14,000 to cover the impact of revised accounting standards and requirements and £9,000 for the Value for Money work).  The amounts above and beyond the scale fee were subject to agreement by PSAA, and the Council would be given the opportunity to make representations about the additional charges.

Mr Paul Dossett of Grant Thornton advised the Committee that:

·  The Audit Plan for 2021/22 covered the risks identified and Grant Thornton’s responsibilities, and it was very similar to last year’s Audit Plan and to those of other local authorities.  Grant Thornton was required to set the materiality limit, which had risen slightly to reflect changes in expenditure in year, and to highlight the risks.  For local government audits, the main risks related to investment property valuations and management over-ride of controls which involved the auditing of estimates and journals.

·  The Audit Plan also covered Grant Thornton’s approach to the Value for Money work for 2021/22.  The 2020/21 Value for Money assessment did not identify any significant weaknesses.  Auditors were required to consider whether the Council had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources.

·  The only new piece of work this year related to International Standards on Auditing (UK) 315 which required Grant Thornton to obtain an understanding of the information systems relevant to financial reporting to identify and assess the risks of material misstatement.

In response to questions:

Mr Dossett advised Members that:

·  In terms of tasks, timelines and staffing levels, a lot of the background planning had been done.  The second main task was to audit the financial statements which required audit and sample testing.  Grant Thornton had started some of the 2021/22 audits, but none had been signed-off yet.  The 2021/22 audits were proving to be more difficult than previously, not just in terms of audit resources but in terms of accounts being prepared in time.  From a resources point of view, there would continue to be challenges.  To complete an audit to the level and depth that was now required was very time-consuming on the part of Grant Thornton.  The aspiration was to proceed with the work as soon as possible, but no guarantees could be given as to when it would be completed.  Even since work commenced on the first round of audits for this year at the beginning of July, there had been a significant turnover in staff and replacing them took time.  All other firms in the market were experiencing the same problems.

·  Detailed requests for samples, journals and invoices etc. would be sent to the Officers and timelines for responding agreed with them.  The detail of that would not normally be included in the Audit Plan.  The process was iterative by nature.

·  The deadline for completion of the audit was 30 November 2022.  Grant Thornton might not necessarily meet that deadline but would try to progress the audit as soon as possible.  A detailed timetable could be provided once the audit had started.

·  In terms of the risks associated with the valuation of the Council’s pension fund liability, the processes identified in the Audit Plan for responding to the risks would be carried forward for 2022/23.  He was the auditor of the Kent Pension Fund and he had completed the work necessary for Maidstone already and there would not be any delays with it.

·  The Value for Money Conclusion was a statutory requirement which had to be completed every year for every audited body.  If no significant issues were identified as part of the planning process or execution, the time taken to complete the assessment would be less than it would otherwise be with consequential cost implications.

·  The Audit Plan was based on a combination of statutory requirements such as the Value for Money Conclusion work and International Standards on Auditing requirements such as the identification of significant risks.  Most Audit Plans would look very similar.  The Committee could make comments and suggestions, but as an independently appointed auditor, Grant Thornton had to execute the Plan in accordance with statutory requirements and the International Standards on Auditing.

The Director of Finance, Resources and Business Improvement advised Members that:

·  The contractual arrangement Grant Thornton had was with PSAA, the appointing body, which held the firm to account in delivering the audit.  The Council paid the audit fee, but PSAA was the body that procured the audit.  If there was a dispute about the audit fee, the Council could make representations to PSAA, but it was PSAA that set the fee.

RESOLVED:  That the External Auditor’s Audit Plan, attached as Appendix 1 to the report of the Senior Finance Manager (Client), be noted with disappointment that the document already has a timeline that it appears will slip.