Agenda item

Report CEO1405

This report was written to review the external auditor’s annual plan arrangements for 2013-14.It was noted by the Sub Committee that the cost element in auditing the accounts for 2013-14 would be in the region of £196,000.It was further noted that there was a legal requirement to externally audit the accounts and subsequently report back to the Audit Commission. 

The Sub Committee was informed of external audit activity for 2013-2014 within the scope of the Annual Audit Plan 2013-14. The Plan had been prepared to inform officers and Members about the responsibilities the external auditors had, and how they planned to discharge them.

Janet Dawson from PwC explained that the audit approach would be based around Risk Management, and the classification of these risks as either “significant” or “elevated”. The differences between these terms was explained. 

Clarification was sought from the Sub Committee by PwC on their views of the proposed de minimus thresholds; these were proposed at £650,000 in respect of the main accounts and £500,000 with respect to the Pension Fund. The “de minimus” level (proposed at £650,000) had been referred to in the PwC audit report by another term which was the level of “Triviality”. Several of the Committee Members felt that this was not an appropriate term as this was not a trivial amount of money. Members requested assurances that all errors would be highlighted by the auditors to management, and assurances were provided to this effect. It was pointed out that the term “trivial” was terminology used in the International Standards on Auditing.

Clarification was sought by Members with respect to elevated risk regarding Pensions. Councillor Grainger pointed out that there was a 20% average volatility risk associated with core equity funds, but that now the council had agreed to move to a Diversified Growth Fund where volatility was decreased to 14%, so risk should decrease. 

A Member noted Appendix C, and the sub heading, “The Local State We’re In.” The question was asked if Bromley was going to be solvent in the future. Janet Dawson responded by stating that the auditors were going to meet shortly with the Chief Executive and Senior Officers to discuss a strategy to understand key risks and long term planning. 

PwC assured that they believed fundamentally in the value of audit, and that they were looking to provide value for money and meaningful conclusions. 

The Audit Plan would also look at the risk of fraud, identifying fraud, and how detected or suspected fraud could be responded to. The Audit Fees were clarified and noted that they would be £196,668 this compared with £210, 653 for the previous financial year. It was noted by the Committee that the total fee for 2012/13 did not include current work ongoing to respond to an objection to the 2012/13 accounts raised by a local elector. At the time of writing the audit report, the estimated cost of this work was £15,000.

RESOLVED that

(1) The external auditor’s arrangements for the Annual Audit Plan 2013-14 are noted.

(2) A de-minimus level of £650,000 for the reporting of differences and misstatements to the Sub Committee is agreed.

(3) The proposed audit fees for 2014/15 are agreed.

(4) Members of Audit Sub Committee were satisfied with the arrangements for fraud detection, fraud monitoring and fraud prevention procedures.