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Salford City CouncilConsideration of the financial statements

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Objectives

• An opportunity to refresh audit and the council’s responsibilities

• Provide some context to the items on today's Audit Committee agenda

• Do you recognise your assurance framework?• Consider any issues that you may have

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Audit & Accounts Committee (Those charged with governance)• Ensuring public business is conducted in accordance

with the law and proper standards, and that public money is safeguarded

• Public money properly accounted for, and used economically, efficiently and effectively.

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Establishing arrangements

• You are responsible for putting in place proper arrangements for the governance of your affairs and the stewardship of the resources at your disposal.

• Report on your arrangements in the annual published Annual Governance Statement.

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Audit Committee- sources of assurance include ASSURANCE FRAMEWORK (Handout):• Internal Audit – Annual Governance Review, review of Financial

Systems• Internal Control framework- budget setting and control, constitution, ethical framework,

financial policies and procedures. Contract procedure rules.

• Manager assurance statements• Business Continuity Plan• Risk Management• Standards of conduct• Performance management• Data Quality

These items (AND OTHERS) would feature prominently on the AC agenda throughout the year.

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Financial statements

• It is your responsibility to:• Put in place systems of internal control to ensure the regularity and lawfulness of

transactions;

• Maintain proper accounting records; and

• prepare financial statements that present fairly the financial position of the body and its expenditure and income.

• Auditors’ duties: Audit the financial statements and give their opinion, including:

(a) Whether they present fairly, the financial position of the

audited body and its expenditure and income for the year in question;

(b) Whether they have been prepared properly in accordance with relevant legislation and

applicable accounting standards.

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What do auditors ask? (the Assertions under ISA500)

Are the figures accurate? • Did it happen?• Anything missing?• Is the amount accurate?• Right period?• Correctly classified• Fairly presented?

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How does the Auditor seek assurance? • Completion of ‘accounts testing’ is part of the story• Seek assurance throughout the year• Risk management – anything that could lead to a significant error?• Anything that could lead to a material misrepresentation within the

financial statements?• Concentrate testing /material items, significant estimates and judgements

• Sample only – we don’t check every transaction. ‘Reasonable assurance’ • Reliability of your systems that produce the financial statements• Check consistency with your disclosures in the Annual Governance

Statement• Significant weaknesses are reported to you.WE SEEK TO PLACE RELIANCE ON YOUR OWN ASSURANCE

ARRANGEMENTS

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TCWG review of the accounts

Provide constructive challenge on the annual accounts

Consider whether• there have been significant changes from previous

years• the accounts reflect the activities undertaken during

the year• the position reported is consistent with in year

forecasts

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Elements you might want to consider

• Follow up of previous year’s action points from audit

• SoRP disclosure checklist

• Key accounting policies and the impact on the accounts

• High level analytical review

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SoRP disclosure checklist

• CIPFA’s Statement of Recommended Practice – annual guidance on producing accounts

• State you comply with it in SoA• CIPFA have a checklist for authorities to ensure

guidance met• Review completed checklist with the accounts

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Questions TCWG could consider – General

How do we know that:-

Accounting policies meet relevant requirements, internally and externally?

There has been a proper and robust process for preparing the accounts?

Management have carried out a thorough and effective check of the accounts?

Appropriate advice on accounting treatment has been obtained on any new accounting issues?

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Questions TCWG could consider

- Reserves- Financial Instruments- Housing Revenue Account- Collection Fund- Group Accounts• Do you understand what these are and their

importance?• Do the entries seem reasonable?

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Questions TCWG could consider – Income & Expenditure• Do changes in income and expenditure from the prior

year correspond with your knowledge of the Council’s activities?

• Do the figures seem reasonable and complete, including those entries that are zero?

• Does the reported financial outturn position reflect your understanding of the Council’s position?

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Questions TCWG could consider – Balance Sheet• Are the changes in fixed assets in line with your

knowledge of the Council’s capital programme and activity during the year?

• Does the asset classification agree with your knowledge of the Council’s assets?

• Are changes in other assets in line with your knowledge and expectations?

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Questions TCWG could consider – Balance Sheet• Do the changes in debtors and creditors from the prior

year seem reasonable?• Are there any significant variances, or figures that

seem very high or very low?• Are there any particularly large debtors or creditors

this year, or significant changes from the prior year? Can officers explain the reasons for these?

• What material accruals have officers made and can they explain the basis for them?

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Questions TCWG could consider – Balance Sheet• Has the level of provisions changed significantly from

the previous year? If so, are you satisfied with the reasons for this?

• Are provisions reasonable and sufficiently prudent to cover the Council against future liabilities?

• Does the Balance Sheet balance?

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Questions TCWG could consider –other statements and notes• ‘Cash flow statement’ and ‘Statement of total

recognised gains & losses – can your officers explain them and do the figures seem reasonable and complete?

• Do the income and expenditure figures in the notes appear reasonable and can officers explain the reasons for any significant changes from the previous year?

• Remuneration figures and related party disclosures are often of interest to users of the accounts. Are you satisfied that these are correct?