Issue - meetings
External Auditor's Audit Plan 2020/21
Ms Tina James of Grant Thornton, the External Auditor, introduced the External Audit Plan for the year ending 31 March 2021. The significant risks related to expenditure recognition, management of override controls, valuation of land and buildings and valuation of net pension liability. The additional risks concerning expenditure recognition had been included following the annual risk assessment and review of the areas of focus.
The Committee were informed of the new Auditing Standards concerning Accounting Estimates and that additional work by Grant Thornton was necessary to provide assurance on the management approach and oversight from Members.
Ms James explained that the new Code of Audit Practice included a new approach to the Audit for Value for Money (VFM), which meant that further work concerning financial sustainability, governance and improving economy, efficient and effectiveness was needed. This was due to the widened scope of the VFM; however no significant areas of weakness had been identified thus far. An annual report would be presented to the Committee later in the year to outline the work undertaken in response.
There were concerns expressed that the triviality figure was too high and should be reduced. Ms James stated that the triviality figure was set in relation to the value of the Council’s accounts and expenditure and that a 5% triviality figure was the standard value applied to Local Government Audits. Anything below £85,000 would be discussed with the finance team but not reported to the Committee.
In response to further questions, Mr Paul Dossett of Grant Thornton advised that the triviality factor could be reduced, but that the report produced as a result would be longer and that the purpose of an Audit was to highlight matters of significance. Mr Dossett confirmed that the Audit Fee would unlikely be increased by reducing the triviality figure as the Audit testing was driven by materiality. The reporting threshold would not have an impact on the Audit Fees paid by the Council.
Mr Dossett explained that the ‘Valuation of the pension fund net liability’ as shown in Appendix 1 to the report, was a significant risk as it represented a significant value within the Council’s accounts. Assessing the competence of the actuary that carried out the Council’s pension fund valuation was completed through PWC (in this instance) as an Auditor’s expert. Grant Thornton would then be given an assessment of the actuary’s judgments and set a range in which the Council’s valuations of the pension fund net liability should be situated.
By auditing standards, external auditors were not allowed to rely on the internal audit work on the Council’s accounts, but that where reviews had taken place these would factor into the external auditor’s risk assessments.
1. The triviality figure be reduced to 2.5% for one year only; and
2. The External Auditor’s Audit Plan be noted.