Agenda item

Report of the External Auditor, Grant Thornton

The Audit and Procurement Committee considered a report of the External Auditors, Grant Thornton, that provided an overview of the planned scope and timing of the statutory audit of Coventry City Council. Zak Francis, Grant Thornton, attended the meeting to present the report.

The National Audit Office had issued a document entitled Code of Audit Practice, which summarised where the responsibilities of auditors began and ended and what was expected from the audited body. Respective responsibilities were also set out in the Terms of Appointment and Statement of Responsibilities issued by Public Sector Audit Appointments (PSAA); the body responsible for appointing Grant Thornton as auditor of the Council.

The scope of the audit was set in accordance with the Code and International Standards on Auditing (ISAs)(UK). Grant Thornton would be responsible for forming and expressing an opinion on the Council and group’s financial statements that have been prepared by management with the oversight of those charged with governance (the Audit and Procurement Committee), and Value for Money arrangements in place at the Council for securing economy, efficiency and effectiveness in its use of resources.

The audit of the financial statements did not relieve management or the Committee of responsibilities. It was the responsibility of the Council to ensure that proper arrangements were in place for the conduct of its business, and that public money was safeguarded and properly accounted for. 

The audit approach was based on a thorough understanding of the Council’s business and was risk based. 

The Audit Plan set out the scope and timing of the audit to be carried out by the External Auditors in relation to Coventry City Council for the year ending 31st March 2021 as follows:

Group audit scope and risk assessment of:

·  Coventry City Council

·  The Coventry and Solihull Waste Disposal Company Limited

·  Tom White Waste Limited

·  UK Battery Industrialisation Centre Ltd

·  Coombe Abbey Park Limited

·  Friargate JV Project Limited

·  North Coventry Holdings Limited

·  Coventry North Regeneration Limited

Significant Risks – Those risks that required special audit consideration and procedures to address the likelihood of a material financial statement error had been identified as:

·  Management override of controls

·  Valuation of land and buildings and investment properties

·  Valuation of pension fund net liability

·  Accounting for the Group and Long-Term investments

Significant findings on these areas, as well as other significant matters arising from the audit would be communicated in the Audit Findings (ISA260) Report.

Materiality –

·  Planning materiality of £12.2m had been determined for the Group and £12m for the Council, equating to 1.5% of the prior year gross expenditure. Uncorrected omissions or misstatements other than those which were ‘clearly trivial’, set at £0.6m, to those charged with governance.

Value for Money Arrangements – the risk assessment regarding arrangements to secure value for money had identified the following risks of significant weakness:

·  Group governance: The Council’s interest in associated companies had grown over the last few years and there were indications that this would continue to grow. Assessment would be made of the Council’s arrangements for managing this diverse group of companies.

·  Investment decisions: The Council had an increasingly diverse portfolio of investments including subsidiaries, associates and joint ventures. The arrangements the Council had in place for making these investment decisions would be reviewed.

Audit Logistics –

·  The Planning stage took place during January-April 2021 and the final stage would take place in August-November 2021. Key deliverables were the Audit Plan and Audit Findings Report. The Audit approach was set out in the Appendix to the Plan.

·  Fees for the audit were £211,414, to be finalised by the PSAA

·  The Financial Reporting Council’s Ethical Standard (revised 2019) have been complied with and the Audit has been carried out independently in order to give an objective opinion on the financial statements.

The Committee also received a further report of the External Auditor, Informing the Audit and Risk Assessment for Coventry City Council 2020/21, the purpose of which was to contribute to two-way communication between the External Auditors and the Audit and Procurement Committee, as ‘those charged with governance’. The report covered important areas of the auditor risk assessment where there was a requirement to make inquiries under auditing standards. It enabled the auditor to obtain information relevant to the audit and supported the Audit and Procurement Committee in fulfilling its responsibilities in relation to the financial reporting process.

As part of the risk assessment procedures there was a requirement to understand management processes and the Authority’s oversight of the following areas:

·  General Enquiries of Management

·  Fraud

·  Laws and Regulations

·  Related Parties

·  Accounting Estimates

The report included a series of questions and responses received from the Council’s management. The Audit and Procurement Committee considered that the responses were consistent with its understanding and had no further comments to make.

Member requested that as part of the governance around the Council’s company arrangements, assurance be given to the Committee that those directly involved receive appropriate training. They further requested that specific training be arranged for Members of Audit and Procurement Committee to understand their roles and responsibilities on the Committee.

RESOLVED that the Audit and Procurement Committee:

1)  Notes the External Audit Plan Year Ending 31^st March 2021 and agrees with the management responses to the Plan.

2)  Requests that as part of the governance around the Council’s company arrangements, assurance be given to the Committee that those directly involved receive appropriate training.

3)  Requests that specific training be arranged for Members of Audit and Procurement Committee to understand their roles and responsibilities on the Committee.