Agenda item

Report from Mazars is attached.

Alistair Newall, Audit Director, Mazars will present the report.

Alastair Newall, Senior Manager at Forvis Mazars the Council’s external auditors presented the External Auditors Audit Progress Report year ending 31 March 2025.

Alastair reported that the final remaining responsibility in respect of the 2023/24 audit relates to the Council’s whole of government accounts (WGA) return.

Forvis Mazars had submitted the National Audit Office’s (NAO) assurance statement in February 2025 as required by their Group Audit Instructions. However, the NAO’s instructions state they may request further work from auditors on local authorities WGA returns as they complete their work. Until the NAO confirms no further work is required, it cannot be confirmed that all of the audit work is complete. It was explained that consequently, Forvis Mazars have not yet issued the Audit Certificate concluding the 2023/24 audit. As soon as the NAO confirm no further work is required, or any work they require is complete the certificate will be issued.

The report gave an update on that latest NAO guidance and the NAO has prepared Local Audit Reset and Recovery Implementation Guidance (LARRIG) 06 with the endorsement of the Financial Reporting Council (FRC). The NAO issued its suite of LARRIGs to support auditors.

To meet the backstop requirements, Mazars issued a disclaimed audit opinion on the Council’s 2023/24 statement of accounts. As part of the audit of the 2024/25 audit, Mazars will consider LARRIG 06 in determining how and when they rebuild assurance.

The LARRIG makes clear the work required to rebuild assurance following a disclaimer of opinion(s) may be significant and will vary between authorities. In part, this is because rebuilding assurance on opening balances is complicated by the different reserves and balances held, their link to income and expenditure and the application of statutory overrides.

The LARRIG emphasises the timely delivery of audited financial statements is a collective enterprise where both accounts preparers and auditors have important responsibilities. Effective governance and internal controls, allied to accurate and timely financial reporting, are essential conditions to support a return to the timely delivery of unqualified audited financial statements

Risk assessment

The guidance requires auditors to consider the facts and circumstances impacting the Council’s statement of accounts and the different classes of transactions, account balances and disclosures, and to apply professional judgement in determining the appropriate level of audit work to recover assurance, taking account of the reasons why previous financial years were disclaimed. Disclaimed periods of more than one year present a greater risk of material misstatement.

The guidance places an emphasis on the risk assessment procedures auditors should undertake. This means we will conduct a comprehensive risk assessment covering:

• the Council’s system of internal control for the periods subject to disclaimed audit opinions

• the areas of the accounts where there is a risk of material misstatement and the associated planned responses and

• undertake special considerations for specified matters:

a. property, plant and equipment,

b. responses to identified risks of fraudulent financial reporting in previous reporting periods subject to disclaimers of opinion, and

c. pensions related balances.

The assurance approach for certain classes of account balances, transactions and disclosures usually relies on assurance from the prior year audit for the opening balances, and audit procedures over in-year transactions to obtain sufficient appropriate audit evidence that year end balances are true and fair and in accordance with the applicable financial reporting framework. This approach typically applies to reserves balances. However, this approach is not always practicable where a prior year audit has received a disclaimer of opinion.

This means that where the preceding financial year has been subject to a disclaimer of opinion, it is highly probable regaining assurances over opening balances on reserves will be a significant matter. Additional risk assessment procedures will be necessary to identify the likelihood and magnitude of risks of material misstatements in reserves balances. The risk assessment will enable the auditor to design and perform responses to identified risks. This will apply to:

• usable reserves, with specific procedures for the General Fund and HRA

• unusable reserves and

• property, plant and equipment.

Since the last Audit Committee meeting the external auditors have met with key officers to discuss the Council’s progress in addressing the statutory recommendation they made in audit report issued in December 2024.

The external auditors have continued to receive updates on progress with the Council’s improvement plan and will continue to liaise over the coming months.

The Code of Audit Practice was updated in 2024 and revises the timetable for completing our work on the Council’s value for money arrangements. From 2024-25, we are required to issue our draft Auditor’s Annual Report by 30 November each year.

This will conclude on whether there are any significant weaknesses in the Council’s arrangements based on work completed to date. Should we identify any further significant weaknesses between issuing our draft Auditor’s Annual Report and concluding our audit of the Council’s financial statements, we are able to reissue our Auditor’s Annual Report to report on any additional weaknesses identified.

Those present were given the opportunity to ask questions:

·         Councillor Gartside referred to disclaimer of opinion and asked whether the rebuilding work would allow the council to be in a position with a system in place where disclaimers would not be required?

Alastair explained that that would be the goal but also explained that the statutory dates get earlier year on year so an efficient process would be key.

·         Councillor Rubinstein referred to the terminology that was used in the report and his understanding of certain terms and asked for these to be clarified:

Unmodified – True and fair view

Disclaim – Unable to form an opinion

Qualify – Except for

Councillor Rubinstein asked if an explanation of the auditing terminology  could be included  within the external auditors reports.

·         Councillor Rubinstein referred to the risk assessment work which was reported as commencing in November, Councillor Rubinstein asked why the wait until November and whether it was possible for the work to start sooner?

Alastair explained that the work could commence earlier but that would depend on the information available to start the work as it very complex. It was explained that the work required was similar to most local authorities.

·         Councillor Hayes stated that the rebuilding assurance work would be significant and asked if this would impact on the fees?

It was explained that there would be an impact on the fees. Public Sector Audit set the fees for the External Audit work. The fee would also be driven by the amount of work required. It was explained that this would be become clearer as the work progressed.

The S.151 officer explained that the cost to the council was not just the fees payable to the external auditors but also the work of council colleagues to support external audit.

·         Councillor Gartside asked whether the Audit Committee could monitor the fees as the work was progressing.

The S.151 Officer stated that this would come back through the committee.

It was agreed:

1.    That the contents of the report be noted 

2.    That Alastair be thanked for his attendance at the meeting.