1、 2015 Grant Thornton UK LLP |This version of the report is a draft. Its contents and subject matter remain under review and its contents may change and be expanded as part of the finalisation of the report.The Audit Planfor North Hertfordshire District CouncilYear ended 31 March 2015March 2015Iain M
2、urrayEngagement LeadT 020 7728 3328E Hetal MistryAudit ExecutiveT 020 7728 2219E Richard LawsonAudit ManagerT +44 (0)7766 442038E The contents of this report relate only to the matters which have come to our attention, which we believe need to be reported to you as part of our audit process. It is n
3、ot a comprehensive record of all the relevant matters, which may be subject to change, and in particular we cannot be held responsible to you for reporting all of the risks which may affect the Council or any weaknesses in your internal controls. This report has been prepared solely for your benefit
4、 and should not be quoted in whole or in part without our prior written consent. We do not accept any responsibility for any loss occasioned to any third party acting, or refraining from acting on the basis of the content of this report, as this report was not prepared for, nor intended for, any oth
5、er purpose. 2015 Grant Thornton UK LLP |ContentsSection 1. Understanding your business 2. Developments relevant to your business and the audit 3. Our audit approach 4. Significant risks identified5. Other risks 6. Value for Money7. Results of interim work 8. Key dates 9. Fees and independence 10. Co
6、mmunication of audit matters with those charged with governance 2015 Grant Thornton UK LLP |1. Understanding your businessChallenges/opportunities1. Partnership working Shared service working for the administration of building control and anti fraud services. Partnership working with other bodies in
7、cluding Hitchin Town Hall Ltd for the provision of Hitchin museum. Partnership working with neighbouring councils for the provision of waste services.2. Local plan You have recently consulted on the preferred options for the North Herts local plan. Your local plan will play a key part in decisions a
8、bout how you develop your local area and communities.3. Investment and economic growth You are part of the Hertfordshire and The Greater Cambridge-Greater. Peterborough Local Enterprise Partnerships (LEPs). These LEPs are an important part of your plans to create and promote sustainable growth in th
9、e district.4. LG Finance Settlement The local government spending settlement means you are facing a cash reduction in your spending power of 15.5% in 2015-16.Our response We will discuss your plans in these areas through our regular meetings with senior management and those charged with governance,
10、providing a view where appropriate We will discuss your plans in these areas through our regular meetings with senior management and those charged with governance, providing a view where appropriate We will discuss your plans in these areas through our regular meetings with senior management and tho
11、se charged with governance, providing a view where appropriate. We will review your Medium Term Financial Plan and financial strategy as part of our work on your arrangements for financial resilience.Guidance noteConsider the topic heading suggested on this slide, and select those which are relevant
12、 to provide more detailed comment/analysis.In planning our audit we need to understand the challenges and opportunities you are facing. We set out a summary of our understanding below.5. New payroll provider You have recently introduced new payroll system with a third party provider, Serco, replacin
13、g the in-house payroll service. We will perform procedures at the interim stage of the audit to ensure the transfer of data between systems was complete. 2015 Grant Thornton UK LLP |2. Developments relevant to your business and the auditIn planning our audit we also consider the impact of key develo
14、pments in the sector and take account of national audit requirements as set out in the Code of Audit Practice (the code) and associated guidance.Developments and other requirements1.Financial reporting Changes to the CIPFA Code of Practice2. Legislation Local Government Finance settlement Accounts a
15、nd Audit Regulations 20153. Corporate governance Annual Governance Statement (AGS) Explanatory foreword4. Financial Pressures Managing service provision with less resource Progress against savings plans5. Other requirements You are required to submit a Whole of Government accounts pack on which we p
16、rovide an audit opinion You completes grant claims and returns on which audit certification is requiredOur responseWe will ensure that you comply with the requirements of the CIPFA Code of Practice through discussions with management and our substantive testing We will discuss the impact of the legi
17、slative changes with you through our regular meetings with senior management and those charged with governance, providing a view where appropriate We will review the arrangements you have in place for the production of the AGS We will review the AGS and the explanatory foreword to consider whether t
18、hey are consistent with our knowledge We will review the your performance against the 2014/15 budget, including consideration of performance against the savings plan We will undertake a review of Financial Resilience as part of our VfM conclusion We will carry out work on the WGA pack in accordance
19、with requirements We will certify the housing benefit subsidy claim in accordance with the requirements specified by Public Sector Audit Appointments Ltd. This company will take over the Audit Commissions responsibilities for housing benefit grant certification from 1 April 2015.Guidance note“One Fi
20、rm“ - use to bring ideas, issues or opportunities to our clients. Consult with other service lines or sector teams for relevant matters. This is intended to identify issues relevant for audit attention and the prime focus on matters relevant to the current financial period. See AFR DL1000 for crib s
21、heets to assist you with your discussions with your clients on the areas that are of relevance to themRed text is generic and should be updated specifically for your client.Once updated, change text colour back to black. 2015 Grant Thornton UK LLP |Devise audit strategy(planned control reliance?)3.
22、Our audit approachGlobal audit technology Ensures compliance with International Standards on Auditing (ISAs)Creates and tailors audit programsStores auditevidenceDocuments processes and controlsUnderstanding the environment and the entityUnderstanding managements focusUnderstanding the businessEvalu
23、ating the years resultsInherent risksSignificant risksOtherrisksMaterial balancesYes NoTest controlsSubstantive analytical reviewTests of detailTest of detailSubstantive analytical reviewFinancial statementsConclude and reportGeneral audit proceduresIDEAExtract your dataReport output to teamsAnalyse
24、 data using relevant parametersDevelop audit plan to obtain reasonable assurance that the Financial Statements as a whole are free from material misstatement and prepared in all materiala respects with the CIPFA Code of Practice framework using our global methodology and audit softwareNote:a. An ite
25、m would be considered material to the financial statements if, through its omission or non-disclosure, the financial statements would no longer show a true and fair view. 2015 Grant Thornton UK LLP |4. Significant risks identifiedSignificant risks often relate to significant non-routine transactions
26、 and judgmental matters. Non-routine transactions are transactions that are unusual, either due to size or nature, and that therefore occur infrequently. Judgmental matters may include the development of accounting estimates for which there is significant measurement uncertainty (ISA 315). In this s
27、ection we outline the significant risks of material misstatement which we have identified. There are two presumed significant risks which are applicable to all audits under auditing standards (International Standards on Auditing ISAs) which are listed below:Guidance noteRed text is generic and shoul
28、d be updated specifically for your client.Once updated, change text colour back to black.Delete unused rows if there are no other entity-specific risks.Significant risk Description Work plannedThe revenue cycle includes fraudulent transactionsUnder ISA 240 there is a presumed risk that revenue may b
29、e misstated due to the improper recognition of revenue. This presumption can be rebutted if the auditor concludes that there is no risk of material misstatement due to fraud relating to revenue recognition.Having considered the risk factors set out in ISA240 and the nature of the revenue streams at
30、North Hertfordshire District Council, we have determined that the risk of fraud arising from revenue recognition can be rebutted, because: there is little incentive to manipulate revenue recognition opportunities to manipulate revenue recognition are very limited the culture and ethical frameworks o
31、f local authorities, including North Hertfordshire District Council, mean that all forms of fraud are seen as unacceptable.Management over-ride of controls Under ISA 240 the presumption that the risk of management over-ride of controls is present in all entities.Work planned at interim: Testing of j
32、ournal entries for months 1-10Further work planned: Review of accounting estimates, judgments and decisions made by management Testing of journal entries for months 11-12 Review of unusual significant transactionsCompleteness of payroll The provision of payroll services has been transferred from in-
33、house to an external provider, Serco, from 1 April 2014.No parallel running of systems took place and there is a risk over the completeness of the data transfer.Work planned at interim: An assessment of the procedures in place to facilitate the data transfer between systems. Testing to confirm that
34、the data transferred between systems was complete. 2015 Grant Thornton UK LLP |5. Other risks identifiedThe auditor should evaluate the design and determine the implementation of the entitys controls, including relevant control activities, over those risks for which, in the auditors judgment, it is
35、not possible or practicable to reduce the risks of material misstatement at the assertion level to an acceptably low level with audit evidence obtained only from substantive procedures (ISA 315). In this section we outline the other risks of material misstatement which we have identified as a result
36、 of our planning.Other risks Description Audit ApproachOperating expenses Creditors understated or not recorded in the correct period(Operating expenses understated)Work planned at interim: We will perform a walkthrough to gain assurance that the in-year controls were operating in accordance with ou
37、r documented understanding. We will test journal entries from months 1 10 on a sample basis to gain assurance that there are adequate controls in place over inputting and processing and that these have operated effectively through the financial year.Further work planned: We will review and test year
38、 end creditor and accruals. We will test a sample of items of expenditure to gain assurance that expenditure has been correctly classified and for occurrence and allocation. We will perform tests of journals from months 11 12. We will carry out procedures to confirm that expenditure cut-off is mater
39、ially correct and that there are no material unrecorded liabilities.Employee remunerationEmployee remuneration accruals understated(Remuneration expenses not correct)Work planned at interim: We will perform a walkthrough to gain assurance that the in-year controls were operating in accordance with o
40、ur documented understanding. We will test a sample of payroll payments made during months 1 10 to gain assurance that employees have been remunerated at the correct rates. We will perform procedures to gain assurance over the data transfer between the old in house payroll system and the new outsourc
41、ed Serco payroll system.Further work planned: We will perform tests of payroll from months 11 12. We will perform cut-off testing to ensure that transactions have been recorded in the correct accounting period. In addition to a review of the work of the pension fund actuary, we will perform substant
42、ive tests on the cost of pensions. 2015 Grant Thornton UK LLP |6. Value for moneyValue for moneyThe Code requires us to issue a conclusion on whether you have put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. This is known as the Value for M
43、oney (VfM) conclusion. Our VfM conclusion is based on the following criteria specified by the Audit Commission:We are in the process of undertaking a risk assessment to identify areas of risk to our VfM conclusion. We will update the Finance, Audit & Risk committee the outcome of the initial risk as
44、sessment via our next audit update report.The results of our VfM audit work and the key messages arising will be reported in our Audit Findings report and in the Annual Audit Letter. VfM criteria Focus of the criteriaThe organisation has proper arrangements in place for securing financial resilience
45、The organisation has robust systems and processes to manage financial risks and opportunities effectively, and to secure a stable financial position that enables it to continue to operate for the foreseeable futureThe organisation has proper arrangements for challenging how it secures economy, effic
46、iency and effectivenessThe organisation is prioritising its resources within tighter budgets, for example by achieving cost reductions and by improving efficiency and productivity 2015 Grant Thornton UK LLP |7. Programme of interim audit workArea Work plannedInternal audit Our review of internal aud
47、it will encompass: review of internal audits overall arrangements in accordance with auditing standards. review of internal audits work on your key financial systems to date. Walkthrough testing We will complete walkthrough tests of controls operating in areas where we consider that there is a risk
48、of material misstatement to the financial statements. Review of information technology controls Work to be performed on your IT controls: Our information systems specialist will perform a high level review of the general IT control environment, as part of the overall review of the internal controls
49、system. We will perform a follow up of the issues that were raised last year. Journal entry controls We will be reviewing your journal entry policies and procedures as part of determining our journal entry testing strategy.Value for money We will be carrying out an initial risk assessment of your value for money arrangements to ascertain if any further work is required
