Agenda item

The Committee considered the Annual external Audit Letter 2013/14 produced by Grant Thornton.

The Chief Financial Officer introduced Helen Lillington from Grant Thornton, the external auditor to the Council. He commented that Grant Thornton had issued an unqualified audit opinion on the statement of accounts. He thanked Grant Thornton for their work and noted the very positive relationship with the Council and the high quality of their audit work at a lower fee.

Helen Lillington on behalf of Grant Thornton attended the meeting to discuss their findings. She highlighted the following main points:

·         She confirmed that Grant Thornton was able provide an unqualified audit opinion on the accounts including the Value for Money opinion and the Pension Fund

·         There had been a number of formal objections to the accounts and following discussions with the objectors, it had been agreed to combine them into a single objection. This objection was currently being audited by Grant Thornton

·         The external auditor was required to undertake a whole of government audit of accounts on behalf of the government. This audit drew together the accounts for all public bodies, following a prescribed format. The only area of the accounts that did not comply with this guidance related to cash and accruals and was not considered to be significant in nature.

In the ensuing debate, the following principal points were raised:

·         It was queried how the external auditor had provided an unqualified opinion on the audit despite the accounts not been concluded as a result of an outstanding objection. Helen Lillington advised that the external auditor was permitted to provide an opinion on the accounts if it was considered that the issues raised by objectors would not have a material impact on the accounts or the value for money audit. The external auditor was required to follow a formal process for the consideration of an objection to the accounts which included issuing a statement of reasons. The audit could not be concluded until these had been resolved 

·         There was a danger that by issuing an opinion on the accounts, the external auditor was pre-judging the issues raised in the objections. Helen Lillington responded that the objections had been combined into a single objection. The matter was complicated because it was necessary to liaise with the external auditor for Herefordshire Council. However the issues raised in the objection were not considered to be significant and would not have a material impact on the opinion of the accounts. The Audit Commission allowed the external auditor a period of 9 months in which to resolve objections to the accounts 

·         Was the external auditor in a position to inform members of the cost of the audit work associated with investigating the objections to the accounts? Helen Lillington advised that she was not able to confirm the total fee at this stage. However she had been in consultation with the Audit Commission and the County Council and they were aware of the potential implications for the fee variation. It was necessary for the Audit Commission to approve any fee variation. The Chief Financial Officer added that Grant Thornton were following the usual procedures and were keeping the County Council informed about the fee variation. It was right that they were considering all the issues raised in the objection. The objection ran to 58 pages and therefore had taken some time to consider. He was determined to work with Grant Thornton each year to understand the scope and potential for future fees and ensure that the Council received value for money from the external auditor  

·         In response to a query, the Chief Financial Officer advised that the Council operated a very open approach to dealing with objections. As long as an objection met the necessary criteria, it would be investigated. Helen Lillington added that there was an unusually high volume of correspondence relating to the accounts this year, not only for this Council but throughout the country

·         It was agreed that the Committee would wish to draw Council's attention to the unqualified audit opinion on the accounts issued by the external auditor and the anticipated increase in the fee charged by the external auditor as a result of the additional work associated with the objections made against the accounts.

RESOLVED that:

a)    The Annual Audit Letter 2013/14 be noted;

b)    The Committee would wish to receive an update report regarding the resolution of the outstanding objection to the Annual Statutory Financial Statements for the year ending 31 March 2014 as part of the External Audit Plan; and

c)    Council's attention be drawn to the unqualified audit opinion on the accounts issued by the External Auditor and the anticipated increase in the fee charged by the External Auditor as a result of the additional work associated with the objections made against the accounts.