Agenda item

Jon Roberts and Beth Bowers (Grant Thornton) introduced the report and drew attention to the following:

1.  As a general introduction, external audits in local authorities do not follow the Companies Act, there was a broader scope as public money was involved.

2.  Risk assessment standards had been refreshed this year - ISA 315 (Identifying and assessing the risks of material misstatement) and ISA 240 (the auditor's responsibilities relating to fraud in an audit of financial statement).

3.  The risk assessment regarding arrangements to secure value for money would take place in July 2023. The External Auditors would report the results should any risks of significant weakness be identified.

4.  The framework for the audit was set by National Audit Office.

5.  The audit identified a variety of levels of risk with the highest level being a significant risk.

6.  Significant risks identified:

a.  Income from the roman baths and investment estate.

b.  Management override of controls.

c.  Valuation of land and buildings.

d.  Valuation of investment properties.

e.  Valuation of the pension fund net liability.

7.  The Council had amended its group structure, with Aequus Group Holdings Limited being introduced as parent company of Aequus Developments Limited and Aequus Construction Limited. The Council was required to prepare group financial statements that consolidated the financial information of the 3 group subsidiary companies. 

8.  Materiality was set at £7.5m (PY £7.1m) for the group and £7.4m (PY £7.0m) for the Council, which equated to approximately 1.9% of the prior year gross operating costs for the year. External Auditors were obliged to report uncorrected omissions or misstatements other than those which were ‘clearly trivial’ to those charged with governance.  Clearly trivial had been set at £0.37m (PY£0.35m). 

9.  A training session would be offered to Members of the Committee on the technical details.

In response to questions from members, it was confirmed that:

1.  The external audit plan was a response to financial statements and the value for money was a separate audit.

2.  The audit of IT systems was a key part of the audit. As well as security and data protection, the audit would look at the structure of the systems to make sure data was complete and accurate.

3.  In terms of timescales, the audit had started and was due to be completed by November.

4.  The delays which had an impact on the previous year’s audit were caused by issues that were outside of the Council’s control e.g., how structures such as roads could be valued and Covid-19.  It was not anticipated that there would be similar issues this year.

5.  The slippage on the value for money work would be clawed back.

6.  In relation to fees and current issues affecting the audit market, Sir Tony Redmond had led an independent review into the effectiveness of external audits and transparency of financial reporting in local authorities which recommended a number of changes.  There was a frailty in the audit market as there were not enough companies to undertake all of the available work.  Retention of staff was a challenge and fees were increasing to allow investment in people.

In considering the recommendation set out in the report, it was moved by Cllr Malcolm Treby, seconded by Cllr Sam Ross and:

RESOLVED that the 2022/23 External Audit Plan for the Council (as set out in Appendix 1 of the report) be endorsed.