Verbal Report of the External Auditor (KPMG)
Minutes:
The Committee received a verbal report from Richard Lee, the External Auditor from KPMG. The update provided an introduction to the new external auditors and the team who would be working on both the County Council and Pension Fund accounts from the 2023/24 period onwards.
Richard provided background into the organisation and the Committee noted the arrangements of KPMG and the team heading up the audits moving forward.
The concern of capacity was addressed, and assurance was provided that sufficient capacity was available, and the decision to re-enter the market had been scrutinised to ensure that KPMG was well-equipped to deliver the work.
It was noted by the Committee that the external auditors would be responsible for signing off the financial statements of the authority, along with issuing a full-scale value for money commentary (previously known as a conclusion) which covered the arrangements around financial sustainability, governance and economy, efficiency and effectiveness in the use of resources.
In terms of the process to date, KPMG had been working with officers throughout the Council and the Committee to get to know responsible people in the authority and develop their understanding of systems and processes. It was confirmed that an Audit Plan would be brought through to the next Committee which was expected to cover the work to date on financial statements of the authority and Pension Fund, including the value for money risk assessment.
Following this, work would move into year-end testing in July 2024 with a view to reporting as soon as possible following that work. It was clarified that this would be a full audit.
The Committee noted that disclaimed/modified opinions for the next three audits would be likely due to not receiving the relevant assurances from the previous external auditors and subsequent impact from the backstop, however, timely reporting and sign off of accounts would be in place.
Next steps were outlined to the Committee, which included bringing the audit plan which would set out the audit risks with a focus on judgemental aspects and statutory risk areas. Attention would then turn to the year-end position.
Members queried whether any demonstrable milestones had been identified to reflect on the smooth transition between external auditors. In response, it was noted that the Audit Plan would strive to satisfy the point made, and whilst the previous external auditors had not been engaged with directly, KPMG had been working closely with the finance team to drive understanding.
Members sought confidence that the work being undertaken was within scope of the fees set. It was clarified that the fees were set by the Public Sector Audit Appointments (PSAA) and made available online. Those fees did not include the audit impact of the implementation of an audit standard (ISA315) which would be on top of the scale fee, which all local authorities would experience. Any variations to scope, such as emerging issues which required specific audit focus, would have financial implications. Any elector challenge would also incur a fee.
It was explained that the previous external auditors, EY, were responsible for all reporting to March 2023. KPMG would be responsible from 1st April 2023 to end of March 2024, and whilst they were separate reporting periods, consideration would be given to their findings on value for money. As part of the transition period, it was expected that the work undertaken by the previous auditors would be reviewed.
Members queried if the previous external auditors would be providing an audit plan for the outstanding accounts. In response, the backstop date was identified as a point of ‘drawing a line in the sand’ for the reporting period up to 31st March 2023, with an audit plan being issued by KPMG for the next reporting period.
Resolved – that the update be noted.