Agenda item

To present the report of Audit Wales.

The report of Audit Wales incorporating the Outline Audit Plan 2023 for the Isle of Anglesey County Council was presented for the Committee’s consideration.

Yvonne Thomas, Financial Audit Manager for Audit Wales provided an overview of the Outline Plan and advised that normally a detailed audit plan would be presented to the Committee at this time but because of changes to operations as a result of revisions to ISA 315 which have become effective for audits of financial statements from 2022/23 onwards, that has not been possible for this meeting. The changes to ISA315 mean that auditors are required to carry out significantly more work with regard to risk assessment in relation to the audit before reporting to the Committee. This year therefore Audit Wales will be issuing an outline audit plan which explains the Auditors’ statutory responsibilities, details of the audit team and the audit timeline as well as a summary of the key changes to ISA315 and potential impact on the Council, which is the report presented to this meeting. A detailed plan confirming the audit fees and setting out the areas of risk identified and the audit approach to them as well as any other matters arising from the audit planning work will be issued to the Committee in July following completion of the planning work. The aim is to complete the audit of the financial statements from August onwards and to report the audit opinion to the Committee at the end of November, 2023. The timeline is challenging and the Committee will be kept informed of any changes should they arise.

The Performance Audit work involves four work streams in relation to the annual assurance and risk assessment, two thematic reviews, the one on commissioning and contract management and the other on financial sustainability in local government and a local project following up on WHQS 2018. The project briefings for the thematic reviews and WHQS follow up will be created this year with further details to follow. Outstanding work from the 2022/23 Performance Audit Programme will be completed before work on the four audit projects noted commences in September, 2023.

The Committee referred to the implications of the changes to ISA315 and noted that in assessing the risk of material misstatements auditors are likely to encounter a significant amount of immaterial misstatements which will add to the workload. The Committee queried how this would be managed in terms of time and staff resources.

Yvonne Thomas in reply advised that the focus remains on material misstatements. The effects of the changes mean that significantly more work will be undertaken in relation to risk assessment procedures but in order to identify the risk of material misstatements auditors will have to go through the process of identifying what is immaterial and to document why it has been assessed as such. While matters reported in the 2021/22 audit will also have to be assessed to establish whether they affect the 2022/23 accounts, consideration will be given to the mitigations the Council has put in place to address those matters for the 2022/23 accounts. The assessment of risk whether it be high, medium, or low must be supported by documentation. The changes to ISA315 therefore require more input by the auditors to document the assessment of risk and any consequent impact on the accounts. The Council may therefore be affected in terms of the number of enquiries made by the auditors at the planning stage. Should the risks be assessed as low then that might require less testing than previously. If the risks are assessed as high then more extensive testing will be necessary. The level of testing for the accounts work will only become apparent after the risk assessment has been completed. A new staff plan has been created to meet the need and is fully resourced and a recruitment process has also taken place and additional staff recruited for the North Wales cluster. Additionally, resources will be rebalanced between the clusters to ensure the completion of audits in a timely manner.

It was resolved to note the Outline Audit Plan and to thank the Financial Audit Manager for the report.