Annual Audit Opinion Plan

Annual Audit Opinion Plan

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Agenda Item 4 Audit Opinion Plan Eastleigh Borough Council Audit 2009/10 7 Contents Introduction 3 Responsibilities 4 Fee for the audit of financial statements 5 Auditors report on the financial statements 6 Identification of specific risks 7 Testing strategy 9 Key milestones and deadlines 10 The audit team 11 Appendix 1 – Basis for fee 13 Appendix 2 – Independence and objectivity 14 Appendix 3 – Working together 16 Status of our reports The Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission explains the respective responsibilities of auditors and of the audited body. Reports prepared by appointed auditors are addressed to non-executive directors/ members or officers. They are prepared for the sole use of the audited body. Auditors accept no responsibility to: • any director/member or officer in their individual capacity; or • any third party. 8Introduction Introduction 1 This plan sets out the audit work that we propose to undertake for the audit of financial statements 2009/10. The plan is based on the Audit Commission’s risk-based approach to audit planning. It reflects: • audit work specified by the Audit Commission for 2009/10; • current national risks relevant to your local circumstances; and • your local risks. 3 Eastleigh Borough Council 9 Responsibilities Responsibilities 2 The Audit Commission’s Statement of Responsibilities of Auditors and of Audited ...

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Agenda Item 4
Audit Opinion Plan
Eastleigh Borough Council
Audit 2009/10
 
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Contents   Introduction Responsibilities Fee for the audit of financial statements Auditors report on the financial statements Identification of specific risks Testing strategy Key milestones and deadlines The audit team Appendix 1 – Basis for fee Appendix 2 – Independence and objectivity Appendix 3 – Working together  
Status of our reports The Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission explains the respective responsibilities of auditors and of the audited body. Reports prepared by appointed auditors are addressed to non-executive directors/ members or officers. They are prepared for the sole use of the audited body. Auditors accept no responsibility to: any director/member or officer in their individual capacity; or   any third party.  
 
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Introduction 
Introduction
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This plan sets out the audit work that we propose to undertake for the audit of financial statements 2009/10. The plan is based on the Audit Commission’s risk-based approach to audit planning. It reflects:  audit work specified by the Audit Commission for 2009/10;  current national risks relevant to your local circumstances; and  your local risks.
Eastleigh Borough Council
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Responsibilities
Responsibilities
 2 The Audit Commission’s Statement of Responsibilities of Auditors and of Audited Bodies sets out the respective responsibilities of the auditor and the audited body. The Audit Commission has issued a copy of the Statement to every audited body. 3 The Statement summarises where the different responsibilities of auditors and of the audited body begin and end, and our audit work is undertaken in the context of these responsibilities. 4 We comply with the statutory requirements governing our audit work, in particular:  the Audit Commission Act 1998; and  the Code of Audit Practice.
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Eastleigh Borough Council 4
Fee for the audit of financial statements
Fee for the audit of financial statements
 5 The fee for the audit of the financial statements is £72,260 as indicated in my letter of September 2009. 6 In setting the fee, we have assumed that:   financial statements provided for audit will be materially accurate, supported by good quality working papers; and  Internal Audit undertakes appropriate work on material systems and this is available for our review. 7 Where these assumptions are not met, I will be required to undertake additional work which is likely to result in an increased audit fee. Where this is the case, we will discuss this in the first instance with the Corporate Director (CFO) and we will issue supplements to the plan to record any revisions to the risk and the impact on the fee. 8 Further information on the basis for the fee is set out in Appendix 1.
Specific actions Eastleigh Borough Council could take to reduce its audit fees 9 The Audit Commission requires its auditors to inform audited bodies of specific actions it could take to reduce its audit fees. We will work with staff to identify any specific actions that the Council could take and to provide ongoing audit support.
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Auditors report on the financial statements
Auditors report on the financial statements
 10 I will carry out the audit of the financial statements in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board (APB). 11 I am required to issue an audit report giving my opinion on whether the accounts give a true and fair view of the financial position of the Council as at 31 March 2010.
Identifying opinion audit risks 12 As part of our audit risk identification process, we need to fully understand the audited body to identify any risk of material misstatement (whether due to fraud or error) in the financial statements. We do this by:  identifying the business risks facing the Council, including assessing your own risk management arrangements;  considering the financial performance of the Council;  assessing internal control - including reviewing the control environment, the IT control environment and Internal Audit; and  assessing the risk of material misstatement arising from the activities and controls within the Council information systems.
  
  
Eastleigh Borough Council 6
Identification of specific risks
Identification of specific risks 13 We have considered the additional risks that are appropriate to the current opinion audit and have set these out below. Table 1 Specific risks Specific opinion risks identified Risk area Audit response The 2009 SoRP makes changes to We will review the Council's approach to the accountin for local taxation. There new accountin re uirements, includin is no anticipated effect on the assessing the basis of the Council's decision Collection Fund but the changes, whether a prior period adjustment is required. which clarif the billin authorit 's role as an agent of other major rece tin bodies, are antici ated to affect the Income and Expenditure Account and the Balance Sheet. This is a chan e of accountin policy, and could result in a prior eriod ad ustment under FRS3 if it is material to the accounts. The 2009 SoRP a lies IFRIC12 We will review: Service Concessions to PFI and other similar arrangements.  ttho ei daerrnatifng eanmde natcsc tohuen tC fooru nacnil  hsaesr vimcaed e While not havin an PFI schemes, arran ements the Council will need to demonstrate IFRICg12; and  that may fall within that it has im lemented and com leted a ro riate rocesses to  the accounting treatment for those identify its contractual and other arran ements. arran ements that would be affected by the adoption of this accounting standard. The im lementation is full retrospective as a change of accountin olic and, if material, requires information on the arran ements to be restated from their ince tion as a rior eriod adjustment. There ma be a risk that the re uired information may not be easily available for some service arrangements.
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Identification of specific risks
Risk area Audit response There are a lack of regular processes We will assess the Council's response to our and controls o eratin over fixed recommendations, and if im lemented seek to aWses eht aavcec tohuenrteifnogr ed ubreinegn  tuhnea ybeleart. rely as far as possible on those controls.  o undertake a controls based testin strategy in this area as part of our re-statements work. We have made recommendations to the Council on some controls that could still be im lemented durin the financial year. The Council has en a ed the District We will test that the Council has: Valu asseetsr  fino r 2a0 f0u9ll/ 1r0eview of its property  included the valuations provided by the . District Valuer within its accounts; and  correctl accounted for an revaluations or impairments identified. Recent amendments made to the We will test the Council has complied with the Accounts and Audit Re ulations SI new re ulations, includin the definition of senior 2009/3322), issued in December employee. 2009, mean that from 2009/2010 The nature and sensitivit of these disclosures local authorities will be required to mean that we will apply a lower level of disclose the names, pay and benefits materiality than to the rest of the financial includin an severance a ments statements. of senior employees in a note to the financial statements. Further guidance is expected in a forthcoming LAAP bulletin. There is a lack of audit We will assess the evidence that has been used independence of Chief Internal to provide assurance of the effectiveness of Auditor in his role as Chair of the internal control that under ins the Annual Risk Management Committee. This Governance Statement. may impact on his ability to provide inde endent assurance over the system of internal control linking into the Annual Governance Statement.
Eastleigh Borough Council 8
Testing strategy
Testing strategy
 14 On the basis of risks identified above we will produce a testing strategy which will consist of testing key controls and/or substantive tests of transaction streams and material account balances at year end. 15 Our testing can be carried out both before and after the draft financial statements have been produced (pre- and post-statement testing).  16 Wherever possible, we will complete some substantive testing earlier in the year before the financial statements are available for audit. We have identified the following areas where substantive testing could be carried out early.  Bank reconciliation.  Borrowings and Investments. Year-end feeder system reconciliations.   Arrangements to identify schemes that may be service concessions under IFRIC12; and  Approach to the implementing the SoRP changes for local taxation. 17 Where other early testing is identified as being possible, this will be discussed with officers. 18 Wherever possible, we seek to rely on the work of Internal Audit to help meet our responsibilities. For 2009/10, we expect to be able to use the results of the following reviews.  Accounting System;  Cash and Banking;  Sundry Debtors;  Local Taxation;  Ordering, receipting of goods and payments;  Housing Benefits; and  Payroll.
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Key milestones and deadlines
Key milestones and deadlines
 19 The Council is required to prepare the financial statements by 30 June 2010. We are required to complete our audit and issue our opinion by 30 September 2010. The key stages in the process of producing and auditing the financial statements are shown in Table 2. 20 We will agree with you a schedule of working papers required to support the entries in the financial statements. 21 Every week, we will meet with the key contact and review the status of all queries. If appropriate, we will meet at a different frequency depending upon the need and the number of issues arising. Table 2 Proposed timetable  Task Deadline Control and early substantive testing March 2010 Receipt of accounts 30 June 2010 Forwarding audit working papers to the auditor July 2010 Start of detailed testing July 2010 Progress meetings Weekly Present report to those charged with governance at the Audit September 2010 committee Issue opinion By 30 September 2010
       
  
Eastleigh Borough Council 10
The audit team
The audit team
 22 The key members of the audit team for the 2009/10 audit are shown in the table below. Table 3 Audit team  
Name Patrick Jarvis District Auditor
Kevin Suter Audit Manager Ian Young Team Leader
Contact details Responsibilities p-jarvis@audit- Responsible for the overall delivery of commission.gov.uk the audit including the quality of 0844 798 8986 out uts, si nin the o inion and conclusion, and liaison with the Chief Executive. k-suter audit- Mana es and coordinates the commission.gov.uk different elements of the audit work. 0844 798 4634 Ke oint of contact for the Cor orate Director (CFO). i- oun audit- Undertakes detailed as ects of the commission.gov.uk audit work, supervising the other 0844 798 4662 members of the team. Ke oint of contact for the Chief Accountant.
Independence and objectivity 23 I am not aware of any relationships that may affect the independence and objectivity of the District Auditor and the audit staff, which we are required by auditing and ethical standards to communicate to you. 24 I comply with the ethical standards issued by the APB and with the Commission’s requirements in respect of independence and objectivity as summarised in Appendix 2.
Meetings 25 The audit team will maintain knowledge of your issues to inform our risk-based audit through regular liaison with key officers. Our proposals are set out in Appendix 3.
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