To review and agree the external auditor’s draft plan for 2022/23.

The Director, Grant Thornton UK LLP advised the committee that the responsibilities of the external auditor were twofold, to provide an opinion on the council’s financial statements and to issue a Value for Money conclusion, and the Annual Plan set out the detail of the approach to discharging these responsibilities. 

The Director explained:

i.             that planning and risk assessment had informed the draft Annual Plan 2022/23;

ii.            the process for undertaking substantive testing on the accounts;

iii.          the challenges presented by the national timeline;

iv.          that the council was one of few councils that had met the deadline for producing draft accounts by the end of May 2023 and the aspiration was to issue an opinion by the end of September 2023;

v.           the increasing complexity of local government accounts, including group accounts;

vi.          that materiality had been determined to be £9.0m for the council and £9.1m for the group;

vii.         the significant risks identified (agenda pages 69 - 72) were ‘default risks’ that would apply to most councils audited by Grant Thornton;

viii.       further details were provided about the approach to the risks relating to management over-ride of controls, the valuation of land and buildings and investment properties, and the valuation of pension fund net liability;

ix.          further details were provided about the approach to Value for Money work;

x.           the indicative audit fee for 2022/23 was £164,302; and

xi.          the 2021/22 final audit fee had been reduced by £1500 (to £190,167) following submission of the additional fees to Public Sector Audit Appointments.

On behalf of the committee, the Chairperson welcomed the work that was being undertaken to meet the statutory deadlines.

In response to questions, the Director commented on:

1.           The increasing financial pressures in the public sector and why this could increase the risk of financial misreporting but it was emphasised that there was no indication of this in Herefordshire in the work undertaken to date.

2.           The reasons for the higher audit fee in 2021/22, in part driven by an infrastructure issue nationally which required further work in all councils.

3.           An overview was provided of the resource provided from international offices, predominantly in India and the Philippines, to support the capacity of UK based audit teams.  There was a brief discussion about the labour and skills shortages in the sector and the associated risks.

4.           How the budget setting process could continue in councils where the accounts were still open, albeit without confirmation of the accuracy of assumptions.

Resolved: That:

a)      The ‘Herefordshire Council Audit Plan, year ending 31 March 2023’, Appendix A to the report, be approved;

b)      The ‘Informing the audit risk assessment’, Appendix B to the report, be noted; and

c)      The committee did not determine any further recommendations it wished to make to maximise the value of the combined internal and external audit processes at this time.