The Audit Plan Manchester City Council 2014 15
The Audit Plan Manchester City Council 2014 15
The Audit Plan Manchester City Council 2014 15
Mark Heap
Engagement Lead
T 0161 234 6375
M 07880 456204
E mark.r.heap@uk.gt.com
John Farrar
Engagement Manager
T 0161 234 6384
M 07880 456200
E john.farrar@uk.gt.com
Simon Livesey
Engagement Team Lead
T 0161 234 6370
M 07887 958437
161
E simon.d.livesey@uk.gt.com
© 2015 Grant Thornton UK LLP Manchester City Council Audit Plan
Manchester City Council Item 10
Audit Committee 11 June 2015
The contents of this report relate only to the matters which have come to
our attention, which we believe need to be reported to you as part of our
audit process. It is not a comprehensive record of all the relevant matters,
which may be subject to change, and in particular we cannot be held
responsible to you for reporting all of the risks which may affect the
Council or any weaknesses in your internal controls. This report has been
prepared solely for your benefit and should not be quoted in whole or in
part without our prior written consent. We do not accept any responsibility
for any loss occasioned to any third party acting, or refraining from acting
on the basis of the content of this report, as this report was not prepared
for, nor intended for, any other purpose.
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Contents
Section Page
1. Understanding your business 4-5
2. Developments relevant to your business and the audit 6-7
3. Our audit approach 8-9
4. Significant risks identified 10 - 11
5. Other risks 12
6. Group scope and risk assessment 13
7. Interim audit work 14
8. Value for Money 15
9. Logistics and our team 16
10. Fees and independence 17
11. Communication of audit matters with those charged with governance 18 - 19
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Our response
We will review your Medium Term Financial Plan and financial We will discuss your plans in these areas through our regular
strategy as part of our work on your arrangements for financial meetings with senior management and those charged with
resilience. governance, providing a view where appropriate.
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Manchester City Council Item 10
Understanding
Audit Committee your business (continued) 11 June 2015
Challenges/opportunities
Our response
As part of our work to inform our Value for Money We will continue to liaise closely with the Council's finance team in
Conclusion we will monitor the Council's progress in relation to accounting for business rates. In particular, we will take
securing improvements. In particular, we will consider: account of the Council's arrangements for refreshing its provision for
business rates appeals
• performance against key indicators that the Council has
agreed to monitor outcomes
• the governance arrangements surrounding the
Improvement Action Plan and the Children's Services
Investment Plan.
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Our response
Our response
We will consider whether the We will review the Council's We will carry out work on the
BCF is a risk in the context of performance against the WGA pack in accordance with
our VfM conclusion and will 2014/15 budget, including requirements
carry out further work if consideration of performance We will certify the housing benefit
required. against the savings plan subsidy claim in accordance with
We will undertake a review of the requirements specified by
Financial Resilience as part of Public Sector Audit Appointments
our VfM conclusion. Ltd. This company took on the
Audit Commission's
responsibilities for housing benefit
grant certification from 1 April
2015.
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Risk assessment
Our audit is risk-based and we develop an Audit Plan that responds to the risks and issues we have identified at the initial planning and control
evaluation stages. We consider different types of risks including inherent risks, significant risks and other risks such as those arising from system
changes and issues identified in prior years. Our audit focuses on risks of material misstatement of the financial statements, and we prioritise identified
risks and determine the nature and extent of audit work necessary to address them. Pages 10 to 13 of this Audit Plan provide more detail on our risk-
based approach to the audit.
Control evaluation
Auditing standards require that we evaluate the design effectiveness of internal controls over the financial reporting process to identify areas of
weakness that could lead to material misstatement. We consider an item as being material to the financial statements if, through its omission or non-
disclosure, the financial statements would no longer show a true or fair view. We focus our control evaluation work on the high risk areas of the financial
statements. In order to assess whether controls have been implemented as intended, we conduct a combination of inquiry and observation procedures,
and, where appropriate, transaction walkthroughs.
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Throughout the course of our audit we document our work using Grant Thornton's "Voyager" audit software. Voyager is an intelligent software
program that stores audit evidence and creates tailored audit testing programmes that ensure compliance with International Standards on Auditing
(ISAs).
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Management over-ride of Under ISA 240 there is a presumed risk that Planned audit work:
controls. the risk of management over-ride of controls Review of accounting estimates, judgments and decisions made by
is present in all entities. management
Testing of journal entries
Review of expected unusual significant transactions
Tests of detail on unusual significant transactions.
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Other risks
"The auditor should evaluate the design and determine the implementation of the entity's controls, including relevant control activities, over
those risks for which, in the auditor's judgment, it is not possible or practicable to reduce the risks of material misstatement at the assertion
level to an acceptably low level with audit evidence obtained only from substantive procedures" (ISA 315).
Other reasonably
possible risks Description Planned audit work
Operating expenses Operating expenses understated Update our accounting system and key controls documentation and undertake system
or not recorded in correct period. walkthroughs
Substantive testing of expenditure ensuring valid spend and appropriate categorisation
within net cost of services headings in the comprehensive income and expenditure
statement.
Operating expenses Creditors understated or not Update our accounting system and key controls documentation and undertake system
recorded in the correct period. walkthroughs
Sample test payables and accrued expenditure, including reviewing post year end
invoices and payments.
Employee remuneration Remuneration expenses not Update our accounting system and key controls documentation and undertake system
correct. walkthroughs
Sample test employee expenses to staff records, pay rates and classification in the
nominal ledger.
Welfare expenditure Welfare benefits improperly Update our accounting system and key controls documentation and undertake system
computed. walkthroughs
Completion of "HB Count" testing Module 2 (uprating), Module 3 (detailed testing),
Module 4 (analytical review) and Module 5 (software diagnostic tool).
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Level of response
Component Significant? required under ISA 600 Risks identified Planned audit approach
Manchester Yes Comprehensive Alignment of group accounting policies Early audit engagement with
Airport Holdings Adequacy of disclosures within the group the Council's finance team.
Limited (MAHL) financial statements.
Early engagement with
MAHL's external auditor
KPMG UK LLP to
understand and inform their
audit risk assessment
procedures. We will review
the outcome of the full
scope UK statutory audit to
be performed by KPMG on
MAHL's 2014/15 financial
statements.
Destination No Analytical N/A Desktop review.
Manchester Ltd
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As part of the interim audit work and in advance of our final accounts audit fieldwork, we have considered:
• risk assessment procedures to inform our audit plan and the work we need to perform on the Council's financial statements.
• the Council's arrangements for estimating a provision for business rates appeals
• walkthrough testing to confirm whether controls are implemented as per our understanding in areas where we have identified a risk of material
misstatement
• the Council's arrangements for the production of its 2014/15 Annual Governance Statement (AGS) and review a draft of the AGS.
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March / April 2015 July-August 2015 September 2015 November 2015 Date Activity
2014-2015 June
2015
The audit plan
presented to Audit
Our team Committee
Mark Heap John Farrar 1 July Year end fieldwork
Engagement Lead Engagement Manager 2015 commences
T 0161 234 6475 T 0161 234 6384
M 07880 456204 M 07880 456200 Sept Audit findings
E mark.r.heap@uk.gt.com E john.farrar@uk.gt.com 2015 clearance meeting
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International Standards on Auditing (ISA) 260, as well as other ISAs, prescribe matters which we are required to communicate with those
charged with governance, and which we set out in the table on the following page.
This document, The Audit Plan, outlines our audit strategy and plan to deliver the audit, while The Audit Findings will be issued prior to
approval of the financial statements and will present key issues and other matters arising from the audit, together with an explanation as to
how these have been resolved.
We will communicate any adverse or unexpected findings affecting the audit on a timely basis, either informally or via a report to the
Council.
Respective responsibilities
This plan has been prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit
Commission (www.audit-commission.gov.uk).
We have been appointed as the Council's independent external auditors by the Audit Commission, the body responsible for appointing
external auditors to local public bodies in England. As external auditors, we have a broad remit covering finance and governance matters.
Our annual work programme is set in accordance with the Code of Audit Practice ("the Code") issued by the Audit Commission and
includes nationally prescribed and locally determined work. Our work considers the Council's key risks when reaching our conclusions
under the Code.
It is the responsibility of the Council to ensure that proper arrangements are in place for the conduct of its business, and that public money
is safeguarded and properly accounted for. We have considered how the Council is fulfilling these responsibilities.
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