A.9/21
The Chairman reminded the
Committee that, at its last meeting held on 1 July 2021, there had
remained some outstanding questions for the attention of Grant
Thornton (the Council’s External Auditors) during
consideration of the annual Audit Plan (Minute A.3/21
refers).
It was noted that responses had
now been received and they were outlined as set out
below:
Question 1: ‘the Committee reiterated its previously held
view that a 27% increase in Audit Fees was excessive. Would the Council therefore receive 27% extra
auditor hours on its audit to reflect the increased Fee?
Grant Thornton representatives
had subsequently provided the following response:
‘The increase
in Fees addresses a number of additional requirements and
responsibilities placed on us as auditors. Whilst the Audit Fee does not cover a set number
of ‘days’ as an internal audit contract would and
instead covers the cost of delivering the external audit, the
increase in costs arise directly as a result of the increased time
that is required to compete our external audit. Audits are taking significantly longer
to deliver to the required quality standard for a number of reasons
and this can be seen quite clearly in the number of audit opinions
that were issued by the target date of 30 November 2020 for the
2019/20 and the deterioration in performance over the last few
years. This is a direct impact of more
work meaning audits take significantly longer to complete which can
be seen by the number of audits completed by the target date of the
last few years:
|
2016/17
|
2017/18
|
2018/19
|
2019/20
|
2020/21
|
Draft Accounts
|
30
June
|
31
May
|
31
May
|
31
Aug
|
31
July
|
Audited Accounts target
|
30
Sept
|
31
July
|
31
July
|
30
Nov
|
30
Sept
|
%
achieving audit target
|
95%
|
87%
|
57%
|
45%
|
?
|
Our
expectation is that the audit will take at least the 27% extra that
was quoted to complete and in all likelihood even longer than
this.
PSAA
(Public Sector Audit Appointments) ultimately will determine the
appropriateness of these fees in their statutory
role.’
Question 2: ‘Do Grant Thornton have the
relevant knowledge and expertise in Pensions for the increased work
on Pensions in the audit?’
The Council had since received
the following response from Grant Thornton
representatives:
‘As your external auditors, we possess the relevant
experience and qualifications to consider the financial statements
and related accounting entries. This
also includes the estimates that management include in the
financial statements and that you as those charged with Governance
oversee. For the pension liability,
management conclude that they need external expertise in the form
of their actuary in order to calculate the estimate. This calculation is complex and relies on a number
of assumptions. The outputs are also
dependent upon the information provided to the actuary by the
Council and the Pension Fund.
For
our audit work, we (the audit team) are able to confirm:
-
The accounting entries are appropriately
disclosed and included in the accounts, with reference to the
actuary’s report;
-
That the data submitted to the actuary
by the Council was appropriate, can be reconciled to payroll
systems and is consistent with the payroll information provided to
us to support our other testing and with the wider financial
statements; and
-
That the data submitted by the Pension
Fund is appropriate (by writing to the Pension Fund auditor and
requesting various assurances).
We
are not trained actuaries and therefore the National Audit Office
engage Price Waterhouse Coopers (PWC) as an auditor’s expert
on behalf of all local government auditors. PWC consider the methodologies and assumptions
applied by the various Local Government actuaries and provide
information and assurance to us as external auditor which we review
and consider as part of our work in order to provide us with the
expert input on methodology and assumptions.
We
are also able to call on other expert advice as and when it is
needed, be that from actuaries employed by Grant Thornton or by
other organisations. An example of when
Grant Thornton did this nationally was 2018/19, the first year that
the McCloud ruling had a potential impact on Local Government
financial statements. This provided us
as auditors with further subject matter expert advice. This would tend to be an exception rather than the
norm and would be for one-off events or if the methods and
assumptions applied by the actuarial firms and considered on our
behalf by PWC.’