Agenda item

The Council’s external auditors introduced themselves and presented the 2023/24 External Audit Planning Report. The External Audit referred to the unusual situation in that the previous 2022/23 audit report was unfinished. He referred to the challenges faced by previous auditors in completing audits.

Members were advised that the External Auditor would do as much as they possibly could regarding the 2023/24 audit before the close of the financial year. Members were advised that the aim was to pick up any outstanding issues from the 2023/24 audit years to minimise the delays and then to complete future audits in a timely manner and within statutory deadlines.

The external auditors detailed the key aspects of the external audit plan and said that in the context of the accounts, the figure of £72,500 was the triviality threshold below which errors or disagreements would not be reported.

The External Auditor referred to the challenge posed by the unknowns following the backlog. He referred to challenges in getting assurances regarding opening balances and the lack of previous assurances.

The External Audit referred to the significant risks of material misstatement and said that this was standard from council to council or auditor to auditor. He summarised these mandated risks and set out the work required to prove that these risks had not materialised.

Members were advised that gaps in assurance from prior years was a significant risk and there might be additional risks that would be reported to the Audit and Governance Committee.

The External Auditor referred to the inherent risks of East Herts changing its financial system and additional work would be undertaken to ensure that data was transferred accurately to the new system. He said that assurances would also be needed that new systems to close the accounts were materially accurate.

The External Auditor said that normal testing would be carried out in respect of income and expenditure and additional testing was not required as the risk of fraud in revenue recognition and expenditure could be rebutted as the risk was very low. Members were advised of risks faced by councils in terms of incorrect capitalisation of revenue and capital additions and the work that would be carried out to ensure that classification of those items of spend was materially correct.

Members were advised that the minimum revenue provision was another risk for councils facing medium- and long-term financial challenges. The External Auditor said that this matter would be assessed along with the work in respect of the value for money arrangements.

Members were advised that detailed field work in respect of a number of non-significant risks would continue in the spring and this work would also cover the longer-term financial resilience, the commercial and other aspects of the council’s capital schemes and the impact of current financial constraints.

The External Auditor explained that up to date value for money assessments would need to be produced by the previous auditor and these would need to be considered. He said that the overarching materiality threshold was £1.45m and any misstatements in the accounts below that figure would not materially impact the reader of the accounts.

Mr N Sharman asked what opinion the External Auditor would be able to give the council and what assurances could be given.

The External Auditor explained that, in terms of 2022/23 and possible 2021/22 as well, if there was a disclaimer from the previous auditors there would be no assurances over the opening balances. He said that the FRC consultation should enable the 2023/24 audit to move forward by issuing a rolled forward disclaimer regarding the opening balances for 2023/24. An opinion would be given on any closing balances and in respect of in year transactions.

Councillor Jacobs said that he would be more comfortable if the external audit plan reflected that there was a way of navigating the lack of a previous completed audit. The External Auditor said that audit from the previous year was technically completed in respect of the issuing of either a clean opinion or a disclaimed opinion.

Members received the report.

RESOLVED – that the presentation and the External Audit Planning Report 2023/24, be noted.