Agenda item

Report by KPMG

Rachael Tonkin from KPMG introduced the Financial Statements Audit Plan 2010/11 as circulated with the agenda.

The document described KPMG’s approach to audit work for CBC in the coming year (2011/12).  The work was divided into two streams, value for money (VFM) and financial statements. 

VFM (formerly Use of Resources) work would change following new guidance from the Audit Commission and focus on financial stability.

Page 3 detailed the schedule of work, which was currently in the planning stage.

CBC like all local authorities, was required to implement IFRS for the 2010/11 financial statements.  The year end work would be bought forward by a month, to July, to alleviate the busy closedown and final accounts audit season, prior to consideration by the Audit Committee in September.

The diagram on page 5 showed the key financial statement risks identified by KPMG for 2011/12.  Two areas of increased risk assessment would be;

• Implementation of IFRS
• ‘GO’ project

The ‘GO’ project raised issues about resources and the control environment.

The document then detailed the key audit risks and outlined the impact on the KPMG audit plan.  The transition to IFRS impacted all areas. 

Materiality items below £20k and considered trivial, would not be reported to the Audit Commission. 

Ian Pennington queried the layout of page 9 of the document which he felt could have been clearer. 

CBC had a good track record in preparing accounts of a high standard and as such KPMG would focus their testing on a sample of transactions that were more likely to be prone to significant fraud or error, rather than everything.  This would reduce the level of work required by KPMG and as such, their fee.

The independence confirmation was set out on page 10 of the document and confirmed that KPMG were independent of CBC.

Pages 11 and 12 detailed the Audit fees for 2011/12, though the fee for the follow up work to the public interest report could be reduced based on the level of work required.  CBC would be reimbursed directly by the Audit Commission for IFRS.

The audit timeline and deliverables, on pages 13 and 14, also highlighted the Audit Committee involvement.  The suggestion from KPMG was that the September meeting of the Audit Committee for year end conclusions, be scheduled for earlier in the month than in previous years.

The following responses were given to questions from members of the committee;

• The £119m referred to in the document included housing benefits and CBC turnover.
• A lot of work was being done by Officers now in order that it was possible for KPMG to bring forward their audit of the accounts and the sign off of the financial statements.
• IFRS did apply across Europe but only to larger plcs rather than smaller ones, though over time, it would apply to all.
• The Elector Challenge had the potential to create more work and result in additional costs, but unfortunately this was the right of electors.  However, challenges were often dealt with immediately or passed to Officers and members were reminded that the accounts had been challenged for the past 3 years.