Issue - meetings

Ms Dawson attended the Committee to answer any questions Members had regarding the External Audit Plan for 2018-2019.

Members were asked to note the External Auditor’s arrangements for the Audit Plan for 2018—2019. Members were also being asked to note and agree the materiality and reporting levels that were detailed in the Plan. Members were also being asked to note the significant risks outlined in the Plan, along with the Value for Money (VFM) arrangements that had been set out. It was noted that Ernst & Young LLP were also responsible for developing a similar plan for the Pension Fund which would follow. 

Ms Dawson referred the Committee to page 5 of Ernst & Young’s Audit Planning Report for the year ending 31^st March 2019. She highlighted and explained the four main areas of risk that had been identified:

·  Misstatements due to fraud or error—especially associated with the possibility of management overriding controls

·  Risk of fraud in revenue and expenditure recognition, through the inappropriate capitalisation of revenue expenditure

·  Inherent risk associated with Asset Valuations

·  ISA 19 valuations relating to pensions liabilities

(ISA refers to the ‘International Standards on Auditing’ and are auditing guidelines from the Financial Reporting Council).

The Committee heard that risks associated with pensions were complex and so actuaries would need to be involved in the risk assessment process.

Ms Dawson explained that in addition to the risks mentioned above, two areas of audit focus had been identified.

·  Spring Capital Loan

·  New Accounting Standards—IFRS 9 & IFRS 15

Members were briefed concerning the Materiality limits which were as follows:

·  Planning Materiality--£9.59m

·  Performance Materiality--£7.19m

·  Audit Differences set at--£479,500

Ms Dawson highlighted the figures and asked if the Committee could confirm whether or not they agreed with them. The Committee was happy to agree with the proposed Materiality limits and the Audit Differences figure. The Committee was pleased to note that there had been a reduction in the external audit fees. A discussion took place about the issue of ‘Independence’ and how important it was that the External Auditors were independent from both Members and officers.

Ms Dawson reported that there was still a Member who had not made an independence declaration. She asked if this could be followed up as a matter of urgency.

Post Meeting Note:

This matter was reported by the Committee Clerk to the Head of Democratic Services the following day. The Head of Democratic Services took immediate steps to clarify who the Member was, and to attempt to resolve the issue. 

Ms Dawson explained how Ernst & Young identified what they regarded as significant risks. A Member asked about the use of consultants. It was clarified that Ernst & Young used their own internal consultants and that Cushman and Wakefield acted as consultants for LBB. A discussion took place concerning the testing for capital and revenue expenditures.

The Chairman enquired why the Spring Capital Loan had been identified as an area of focus. Ms Dawson responded that the Spring Capital Loan had been highlighted previously by KPMG and it  ...  view the full minutes text for item 32