Audit Scotland - Annual Audit Plan 2022-23
North Lanarkshire Council · 18 May 2023
Back to Audit and Scrutiny Panel — 18 May 2023 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
North Lanarkshire Council Report Audit and Scrutiny Panel Does this report require to be approved? ☐ Yes ☒ No ☐approval ☒noting Ref KA/ASP/May23 Date 18/05/23 Audit Scotland – Annual Audit Plan 2022-23 From: Ken Adamson, Chief Officer (Audit and Risk) E-mail: adamsonk@northlan.gov.uk Telephone 07939 280602 Executive Summary The purpose of this report is to provide members with sight of the Annual Audit Plan 2022-23 received from Audit Scotland, the Council’s appointed external auditors. As outlined by Audit Scotland at the February meeting of the Panel, Covid-19 impacted on the completion of the 2021/22 audits with ongoing extensions to statutory deadlines. This, along with the changeover in the appointed auditor, impacted the timing of their planning work on the 2022/23 audits and an interim planning document only was circulated at the previous meeting of the Panel. The formal Annual Audit Plan has now been received and is at Appendix 1. Appendix 1 provides an overview of key issues arising from the audit planning process including a summary of the proposed audit approach, how wider audit scope work will be carried out and a timetable for key audit outputs. The external auditors will speak to the Panel about their plan at the meeting and highlight to members any issues arising that they wish to bring to the Panel’s attention. Recommendations The Panel is requested to invite Audit Scotland to comment on their 2022-23Annual Audit Plan. The Plan for North Lanarkshire Priority All priorities Ambition statement All ambition statements
Page 2
1. Background 1.1 The Accounts Commission appointed Audit Scotland as the Council’s external auditor for the five-year period from 2022-23. 1.2 Audit Scotland’s Code of Audit Practice and International Standards on Auditing stipulate that areas to be examined and expected outputs to be produced by the external auditors require to be outlined each year in their annual planning document. 2. Report 2.1 As outlined by Audit Scotland at the February meeting, Covid-19 impacted on the completion of the 2021/22 audits with ongoing extensions to statutory deadlines. This, along with the changeover in the appointed auditor, has impacted on the timing of their planning work on the 2022/23 audits and an interim planning document only was circulated at that meeting. The formal Annual Audit Plan has now been completed and is at Appendix 1. 2.2 The Plan provides an overview of key issues arising from the audit planning process including a summary of the proposed audit approach, how wider audit scope work will be carried out and a timetable for key audit outputs. 2.3 Panel members should note that good professional practice requires the external auditor to communicate and discuss planned external audit activity with the senior management of a body and with those elected members charged with governance matters, but it is for the external auditor alone to determine the work considered necessary by him/her to fulfil their responsibilities. 3. Measures of success 3.1 The external auditors report annually to the Council and the Controller of Audit on the results of their work. 4. Supporting documentation Appendix 1 Audit Scotland Annual Audit Plan 2022-23 Ken Adamson, Chief Officer (Audit and Risk)
Page 3
5. Impacts ( http://connect/report-template-guidance ) 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact because of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ 5.2 Financial impact Does the report contain any financial impacts? Yes ☐ No ☒ 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ 5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ 5.9 Risk impact Is there a risk impact? Yes ☐ No ☒ 5.10 Armed Forces Covenant Duty Does the report require to take due regard of the Armed Forces Covenant Duty (i.e. does it relate to healthcare, housing, or education services for in-Service or ex- Service personnel, or their families, or widow(er)s)? Yes ☐ No ☒
Page 4
Prepared for North Lanarkshire Council March 2023 North Lanarkshire Council Annual Audit Plan 2022/23
Page 5
North Lanarkshire Council Annual Audit Plan 2022/23 | 2 Contents Introduction 3 Financial statements audit planning 5 Wider Scope and Best Value 11 Reporting arrangements, timetable, and audit fee 15 Other matters 18 Appendix 1. Your audit team 20
Page 6
Introduction | 3 Introduction Summary of planned audit work 1. This document summarises the work plan for our 2022/23 external audit of North Lanarkshire Council. The main elements of our work include: • evaluation of the key controls within the main accounting systems • an audit of the annual accounts, and provision of an Independent Auditor’s Report • an audit opinion on regularity and other statutory information published within the annual accounts including the Management Commentary, the Governance Statement and the Remuneration Report • consideration of arrangements in relation to wider scope areas: financial management; financial sustainability; vision, leadership and governance; and use of resources to improve outcomes • consideration of Best Value arrangements • providing assurance on the Housing Benefit Subsidy Claim, Non- Domestic Rates Return and the Whole of Government Accounts (WGA) return • review North Lanarkshire Council’s arrangements for preparing and publishing statutory performance information. Audit Appointment 2. We are pleased to be appointed as the external auditor of North Lanarkshire Council for the period 2022/23 to 2026/27 inclusive. You can find a brief biography of your audit team at Appendix 1. 3. In the first year of the audit appointment, we invest significant time gaining an understanding of your business and identifying and assessing the risks of material misstatement to the financial statements. While we use our initial assessment of risk to inform our planned audit approach, we keep our assessment of risks under review as the audit progresses. We will inform you of any significant changes in assessed risks and any resulting changes in our planned audit work. 4. The audit team will actively engage with you over the course of the audit to ensure our audit work continues to be focused on risk.
Page 7
Introduction | 4 Adding value 5. We aim to add value to North Lanarkshire Council through our external audit work by being constructive and forward looking, by attending meetings of the Audit and Scrutiny Panel and by recommending and encouraging good practice. In so doing, we will help the Council promote improved standards of governance, better management and decision making and more effective use of resources. Respective responsibilities of the auditor and Audited Body 6. The Code of Audit Practice 2021 sets out in detail the respective responsibilities of the auditor and North Lanarkshire Council. Key responsibilities are summarised below. Auditor responsibilities 7. Our responsibilities as independent auditors are established by the Local Government (Scotland) Act 1973 and the Code of Audit Practice (including supplementary guidance) and guided by the Financial Reporting Council’s Ethical Standard. 8. Auditors in the public sector give an independent opinion on the financial statements and other information within the annual accounts. We also review and report on the wider scope arrangements in place at North Lanarkshire Council. In doing this, we aim to support improvement and accountability. North Lanarkshire Council responsibilities 9. The Council is responsible for maintaining accounting records and preparing financial statements that give a true and fair view. 10. The Council has the primary responsibility for ensuring the proper financial stewardship of public funds, compliance with relevant legislation and establishing effective arrangements for governance, propriety and regularity that enable them to deliver their objectives.
Page 8
Financial statements audit planning | 5 Financial statements audit planning Introduction 11. The annual accounts are an essential part of demonstrating the Council’s stewardship of resources and its performance in the use of those resources. 12. We focus our work on the areas of highest risk. As part of our planning process, we prepare a risk assessment highlighting the audit risks relating to each of the main financial systems relevant to the production of the financial statements. Materiality 13. The concept of materiality is applied by auditors in planning and performing the audit, and in evaluating the effect of any uncorrected misstatements on the financial statements. We are required to plan our audit to obtain reasonable assurance that the financial statements are free from material misstatement. The assessment of what is material is a matter of professional judgement over both the amount and the nature of the misstatement. Materiality levels for the 2022/23 audit 14. We assess materiality at different levels as described in Exhibit 1. The materiality values for North Lanarkshire Council and its group are set out in Exhibit 1. Exhibit 1 2022/23 Materiality levels for North Lanarkshire Council and its group Materiality Council Group Planning materiality – This is the figure we calculate to assess the overall impact of audit adjustments on the financial statements. Materiality has been set based on our assessment of the needs of the users of the financial statements and the nature of North Lanarkshire Council’s operations. For the year ended 31 March 2023 we have set our materiality at 2% of gross expenditure adjusted for IJB contributions based on the audited financial statements for 2021/22. £24.5 million £26.4 million Performance materiality – This acts as a trigger point. If the aggregate of errors identified during the financial statements audit exceeds performance materiality, this could indicate that further audit procedures should be considered. Using our professional judgement, £14.7 million £15.8 million
Page 9
Financial statements audit planning | 6 we have assessed performance materiality at 60% of planning materiality. Reporting threshold (ie clearly trivial) – We are required to report to those charged with governance on all unadjusted misstatements more than the ‘reporting threshold' amount. Our reporting threshold is set at 5% overall materiality up to a maximum of £250,000 as prescribed in the Audit Scotland audit planning guidance. £250 thousand £250 thousand Source: Audit Scotland Significant risks of material misstatement to the financial statements 15. Our risk assessment draws on our cumulative knowledge of North Lanarkshire Council, its major transaction streams, key systems of internal control and risk management processes. It is informed by our discussions with management, meetings with internal audit, attendance at committees and a review of supporting information. 16. Audit risk assessment is an iterative and dynamic process. Our assessment of risks set out in this plan may change as more information and evidence becomes available during the progress of the audit. Where such changes occur, we will advise management and where relevant, report them to those charged with governance. 17. Based on our risk assessment process, we identified the following significant risks of material misstatement to the financial statements. These are risks which have the greatest impact on our planned audit procedures. Exhibit 2 summarises the nature of the risk, the sources of assurance from management arrangements and the further audit procedures we plan to perform to gain assurance over the risk. Exhibit 2 2022/23 Significant risks of material misstatement to the financial statements Significant risk of material misstatement Sources of assurance Planned audit response 1. Risk of material misstatement due to fraud caused by management override of controls As stated in International Standard on Auditing (UK) 240, management are in a unique position to Owing to the nature of this risk, assurances from management are not applicable in this instance • Assess the design and implementation of controls over journal entry processing. • Make inquiries of individuals involved in the financial reporting process about inappropriate or unusual activity relating to the processing of journal entries and other adjustments.
Page 10
Financial statements audit planning | 7 Significant risk of material misstatement Sources of assurance Planned audit response perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. • Test journals at the year-end and post- closing entries where there may be increased incentive for fraud and management override. • Consider the need to test journal entries and other adjustments during the period. • Evaluate significant transactions outside the normal course of business. • Assess the adequacy of controls in place for identifying and disclosing related party relationship and transactions in the financial statements. 2. Estimation in the valuation of land and buildings The Council held land and buildings with a net book value of £2,860 million as at 31 March 2022. There is a significant degree of complexity and subjectivity in the valuation of land and buildings. Changes in assumptions can result in material changes to valuations. Valuations should reflect conditions at 31st March 2023 including those subject to valuation at the year end, earlier in the year and those not re- valued. This is particularly relevant given the significant inflationary pressures on build cost rates. There is a risk that the carrying value of land and buildings does not reflect the current value as at 31 March 2023. • Discussions with internal valuers, external valuers, and management • Valuations carried out every five years as part of rolling revaluation programme • Detailed working papers to support year end reconciliation of assets to valuations, asset reviews and impairments • Review the information provided to the external valuer to assess for completeness. • Evaluate the competence, capabilities, and objectivity of the internal and external professional valuers. • Obtain an understanding of the management’s involvement in the valuation process to assess if appropriate oversight has occurred. • Assessing the reasonableness of the assumptions used in the valuation applied. • Critically assess the approach North Lanarkshire Council has adopted to assess the risk that assets not subject to valuation at 31 March 2023 are materially misstated, consider the robustness of that approach and the appropriateness of any assumptions made. • Test the reconciliation between the financial ledger and the property asset register. • Critically assess the adequacy of North Lanarkshire Council’s disclosures regarding the assumptions in relation to the valuation of land and buildings. Source: Audit Scotland
Page 11
Financial statements audit planning | 8 18. As set out in International Standard on Auditing (UK) 240: The auditor’s responsibilities relating to fraud in an audit of financial statement, there is a presumed risk of fraud over the recognition of revenue. There is a risk that revenue may be misstated resulting in a material misstatement in the financial statements. 19. We have rebutted this risk as funding received from the Scottish Government is clearly communicated and can be readily agreed to third party confirmations. In addition, the Council’s other income streams comprise of a high volume of low valued transactions and we have concluded there is limited opportunity or incentive to manipulate the recognition of income in the financial statements. 20. In line with Practice Note 10: Audit of financial statements and regularity of public sector bodies in the United Kingdom, as most public-sector bodies are net spending bodies, the risk of material misstatement due to fraud related to expenditure recognition may in some cases be greater than the risk relating to revenue recognition. 21. We have rebutted this risk as the main expenditure streams of the Council can be readily forecast based on a predictable pattern of spend and mainly comprise a high volume of relatively low value items. We also consider there to be limited incentive and opportunity for the manipulation of expenditure recognition in the financial statements. 22. We have not, therefore, incorporated specific work into our audit plan in these areas over and above our standard audit procedures. Other areas of audit focus 23. As part of our assessment of audit risks, we have identified other areas where we consider there are also risks of material misstatement to the financial statements. Based on our assessment of the likelihood and magnitude of the risk, we do not consider these to represent significant risks. We will keep these areas under review as our audit progresses. 24. The areas of specific audit focus are: • The pension liability valuation due to the material value and significant assumptions used in the calculation of the liability. We will utilise the work of PwC as auditor expert in assessing the reasonableness of the methodology used and assumptions made by the Council’s actuary, Hymans Robertson LLP, in arriving at the IAS 19 pension valuation as at 31 March 2023. Group Consideration 25. As group auditors, we are required under International Standard on Auditing (ISA) (UK) 600: Audits of group financial statements (including the work of component auditors) to obtain sufficient appropriate audit evidence on which to base our audit opinion on the group financial statements. 26. North Lanarkshire Council has a group which comprises the following component entities:
Page 12
Financial statements audit planning | 9 North Lanarkshire Council Group Structure Significance and audit approach Subsidiaries Fusion Assets Ltd North Lanarkshire properties LLP Both subsidiaries have been assessed as not significant, and not material. Assurance will be through overall analytical procedures and agreement to Council’s records. Associates Strathclyde Concessionary Travel Joint Board Strathclyde Partnership for transport Lanarkshire Valuation Joint Board Routes to work Ltd All four associates have been assessed as not significant, and not material. Assurance will be through overall analytical procedures and agreement to Council’s records. Joint Ventures North Lanarkshire Integration Joint Board Amey Public Services LLP Mears Scotland LLP All three joint ventures have been assessed as not significant, and not material. Assurance will be through overall analytical procedures and agreement to Council’s records. Source: Audit Scotland 27. Our planned audit approach for the components is informed by our assessment of risk at the component bodies and our consideration of the size and nature of assets, liabilities and transaction streams. 28. The audits of the financial information of some of the components are performed by other auditors. These components have been assessed as being not significant through our audit planning process. No reliance will be placed on the work of these auditors. 29. We will obtain sufficient appropriate audit evidence in relation to the consolidation process and the financial information of the components on which to base our group audit opinion. Audit of the trusts registered as Scottish charities 30. The 2006 Regulations require charities to prepare annual accounts and require an accompanying auditor’s report where any legislation requires an audit. The Local Government (Scotland) Act 1973 specifies the audit requirements for any trust fund where some or all members of a council are the sole trustees. Therefore, a full and separate audit and independent auditor’s report is required for each registered charity where members of the Council are sole trustees, irrespective of the size of the charity.
Page 13
Financial statements audit planning | 10 31. Members of North Lanarkshire Council are sole trustees for the JC McNaught Poor Children’s Holiday Fund and the North Lanarkshire Council Educational Endowments trusts registered as Scottish charities, with total assets of £0.7 million. The preparation and audit of financial statements of registered charities is regulated by the Charities and Trustee Investment (Scotland) Act 2005 and the Charities Accounts (Scotland) Regulations 2006. Materiality levels for the 2022/23 audit of trusts registered as Scottish charities 32. Materiality levels for the various trusts are set out in Exhibit 3. Exhibit 3 2022/23 Materiality levels for charitable trusts Charitable trust Planning Materiality Performance Materiality Reporting Threshold JC McNaught Poor Children’s Holiday Fund £74 (Based on 1% of audited 2021/22 net asset value) £56 (Based on 75% of planning materiality) £4 North Lanarkshire Council Educational Endowments trusts £189 (Based on 1% gross expenditure) £142 (Based on 75% of planning materiality) £9 Source: Audit Scotland
Page 14
Wider Scope and Best Value | 11 Wider Scope and Best Value Introduction 33. The Code of Audit Practice sets out the four areas that frame the wider scope of public sector audit. The Code of Audit Practice requires auditors to consider the adequacy of the arrangements in place for the wider scope areas in audited bodies. 34. In summary, the four wider scope areas cover the following: • Financial management means having sound budgetary processes. We will consider the arrangements to secure sound financial management including the strength of the financial management culture, accountability and arrangements to prevent and detect fraud, error and other irregularities. • Financial sustainability – as auditors, we consider the appropriateness of the use of the going concern basis of accounting as part of the annual audit. We will also comment on financial sustainability in the longer term. We define this as medium term (two to five years) and longer term (longer than five years). • Vision, leadership and governance – we conclude on the arrangements in place to deliver the vision, strategy and priorities adopted by the Council. We also consider the effectiveness of the governance arrangements to support delivery. • Use of resources to improve outcomes – we will consider how the Council demonstrates economy, efficiency and effectiveness through the use of financial and other resources. Wider scope risks 35. We have identified wider scope audit risks in the areas set out in Exhibit 4. This exhibit sets out the risks, sources of assurance from management arrangements and the further audit procedures we plan to perform to gain assurances over the risks.
Page 15
Wider Scope and Best Value | 12 Exhibit 4 2022/23 wider scope risks Description of risk Sources of assurance Planned audit response 1. Financial sustainability North Lanarkshire Council continues to operate in an increasingly complex and challenging environment where they aim to provide the best possible service within the resources available. Although plans are in place to meet the 2023/24 shortfall, the Council, like many authorities face significant financial challenges over the medium term. Officers have identified a considerable gap to be addressed in the medium term with £65 million for the three years to 2025/26. The delivery of this level of savings is likely to require careful consideration of the services the Council delivers and how these are delivered. There is a risk that the Council does not have robust plans to identify and deliver the required savings, including assessment of the impact on services of decisions made. • Regular budget monitoring and reporting • Regular scrutiny of financial plans at governance committees • Review of the Council’s annual budget setting arrangements • Review and assessment of budget monitoring arrangements • Review of the Council’s medium to longer-term financial planning • On-going review of the Council’s financial position and delivery of planned savings Source: Audit Scotland 2. Our planned work on our wider scope responsibilities is risk based and proportionate and in addition to local risks we consider challenges which are impacting the public sector as a whole. In 2022/23 we will consider tackling climate change and responding to cyber security threats. Climate Change 3. Tackling climate change is one of the greatest global challenges. The Scottish Parliament has set a legally binding target of becoming net zero by 2045 and has interim targets including a 75% reduction in greenhouse gas emissions by 2030. The public sector in Scotland has a key role to play in ensuring these targets are met and in adapting to the impacts of climate change.
Page 16
Wider Scope and Best Value | 13 4. The Auditor General and Accounts Commission are developing a programme of work on climate change. In 2022/23, we will gather information on (audited body’s) arrangements for responding to climate change covering areas such as the development of climate change strategies and the monitoring and reporting of progress against targets for reducing emissions. Cyber Security 5. There continues to be a significant risk of cyber-attacks to public bodies, and it is important that they have appropriate cyber security arrangements in place. A number of recent incidents have demonstrated the significant impact that a cyber-attack can have on both the finances and operation of an organisation. In 2022/23, we will consider North Lanarkshire Council’s arrangements for managing and mitigating cyber security risks. Best Value 6. Under the 2021 Code of Audit Practice, the audit of Best Value in councils is fully integrated within our annual audit work. 7. Best Value at North Lanarkshire Council will be assessed comprehensively over the period of the audit appointment and will include an annual evaluation of North Lanarkshire Council’s approach to demonstrating improvement in its strategic priorities and public performance reporting. We will also follow up findings reported previously on Best Value to assess the pace and depth of improvement. This work will be integrated with the wider scope audit areas discussed above. 8. In addition to our annual work on Best Value we will conduct thematic reviews as directed by the Accounts Commission. In 2022/23 the thematic review across the sector will be on the effectiveness of council leadership in developing new local strategic priorities following the elections in May 2022. Our conclusions and judgements will be reported in a separate report to management and summarised in our Annual Audit Report. 9. At least once every five years, the Controller of Audit will report to the Accounts Commission on North Lanarkshire Council’s performance in meeting its Best Value duties. The first year of the programme will be form October 2023 to August and will cover the councils listed in Exhibit 5.
Page 17
Wider Scope and Best Value | 14 Exhibit 5 Controller of Audit reports Falkirk South Ayrshire Moray Dumfries and Galloway Clackmannanshire West Dunbartonshire Orkney Islands City of Dundee Source: Audit Scotland
Page 18
Reporting arrangements, timetable, and audit fee | 15 Reporting arrangements, timetable, and audit fee Reporting arrangements 10. Audit reporting is the visible output for the annual audit. All Annual Audit Plans and the outputs, as detailed in Exhibit 6, and any other outputs on matters of public interest will be published on our website: www.audit-scotland.gov.uk. 11. Matters arising from our audit will be reported on a timely basis and will include agreed action plans. Draft management reports will be issued to the relevant officers to confirm factual accuracy. 12. We will provide an independent auditor’s report to Audited Body, the Scottish Parliament and Accounts Commission setting out our opinions on the annual report and accounts. We will provide North Lanarkshire Council and the Accounts Commission with an annual report on the audit containing observations and recommendations on significant matters which have arisen during the audit. 13. Exhibit 6 outlines the target dates for our audit outputs, and we aim to issue the independent auditor’s report by the statutory deadline of 30 September 2023. Exhibit 6 2022/23 Audit outputs Audit Output Target date Audit and Scrutiny Panel Date Annual Audit Plan 31 March 2023 Agreed via correspondence Best Value Management Report 30 June 2023 31 August 2023 Independent Auditor's Report 30 September 2023 September 2023 Annual Audit Report 30 September 2023 September 2023 Source: Audit Scotland
Page 19
Reporting arrangements, timetable, and audit fee | 16 Timetable 14. To support an efficient audit, it is critical that the timetable for producing the annual report and accounts for audit is achieved. We have included a proposed timetable for the audit at Exhibit 7 that has been discussed with management. 15. Covid-19 has had a considerable impact on the conduct and timeliness of the audit. We recognise that it is in the best interests of public accountability to get the reporting of audited accounts back to pre-pandemic timelines. We are identifying ways to work more efficiently to expedite the 2022/23 audits whilst at the same time maintaining high standards of quality. 16. We intend to take a hybrid approach to the 2022/23 audit with a blend of onsite and remote working. We will continue to work closely with management to identify the most efficient approach as appropriate and will keep timeframes and logistics for the completion of the audit under review. Progress will be discussed with management and finance officers over the course of the audit. Exhibit 7 Proposed annual report and accounts timetable Key stage Provisional Date Consideration of the unaudited annual report and accounts by those charged with governance June 2023 Latest submission date for the receipt of the unaudited annual report and accounts with complete working papers package. 30 June 2023 Latest date for final clearance meeting with the Head of Financial Solutions September 2023 Issue of draft Letter of Representation and proposed Independent Auditor’s Report September 2023 Agreement of audited and unsigned annual report and accounts September 2023 Issue of Annual Audit Report to those charged with governance. September 2023 Signed Independent Auditor’s Report September 2023 Certified Non-Domestic Rates Return October 2023 Certified Housing Benefit subsidy claim October 2023 Latest date for WGA assurance To be confirmed Source: Audit Scotland
Page 20
Reporting arrangements, timetable, and audit fee | 17 Audit fee 17. In determining the audit fee, we have taken account of the risk exposure of the North Lanarkshire Council and the planned management assurances in place. The proposed audit fee for 2022/23 is £607,796 as set out in Exhibit 8. 18. Our fees have increased in 2022/23 and this is a reflection of the current audit market and the rising costs in delivering high quality audit work. There are increased regulatory expectations and risks placed on audit and its quality, as well as a widening in the scope of work audit must cover. Exhibit 8 Audit fees (including VAT) Fee component Fees (£) External Auditor Remuneration 356,320 Contribution to Audit Scotland costs 13,510 Contribution to Performance and Best Value 118,120 Sectoral Cap Adjustment 115,660 2022/23 Audit fee 603,610 Audit of Charitable Trusts 4,186 Total 2022/23 fee 607,796 Source: Audit Scotland 19. In setting the fee for 2022/23 we have assumed that North Lanarkshire Council has effective governance arrangements and will prepare comprehensive and accurate accounts for audit in line with the agreed timetable for the audit. The audit fee assumes there will be no major change in respect of the scope of the audit during the year and where our audit cannot proceed as planned, a supplementary fee may be levied.
Page 21
Other matters | 18 Other matters Internal audit 20. It is the responsibility of North Lanarkshire Council to establish adequate internal audit arrangements. We will review the internal audit plan and the results of internal audit’s work. 21. While we are not planning to place formal reliance on the work of internal audit in 2022/23, we will review internal audit reports and assess the impact of the findings on our financial statements and wider scope audit responsibilities. Independence and objectivity 22. Auditors appointed by the Auditor General for Scotland or Accounts Commission must comply with the Code of Audit Practice and relevant supporting guidance. When auditing the financial statements, auditors must also comply with professional standards issued by the Financial Reporting Council and those of the professional accountancy bodies. These standards impose stringent rules to ensure the independence and objectivity of auditors. 23. Audit Scotland has robust arrangements in place to ensure compliance with these standards including an annual ‘fit and proper’ declaration for all members of staff. The arrangements are overseen by the Executive Director of Innovation and Quality, who serves as Audit Scotland’s Ethics Partner. 24. The appointed auditor for North Lanarkshire Council is John Boyd, Audit Director. Auditing and ethical standards require the appointed auditor to communicate any relationships that may affect the independence and objectivity of audit staff. We are not aware of any such relationships pertaining to the audit of North Lanarkshire Council. Audit Quality 25. Quality is at the core of public audit in Scotland and is the foundation for building consistency and confidence across all audit work. High quality audits provide assurance, add value and can support public bodies to achieve their objectives. 26. Until 2021/22, the applicable audit quality standard was International Standard on Quality Control 1 (ISQC (UK) 1). This set out an audit practice’s responsibilities for its system of quality control for audits. 27. ISQC(UK) 1 has been replaced by two new audit quality standards: Internal Standards on Quality Management (ISQM (UK) 1) applicable from 15 December 2022 and (ISQM(UK) 2) effective for the 2023/24 audits. Work is underway at Audit Scotland to meet the requirements of these quality standards.
Page 22
Other matters | 19 28. Audit Scotland is committed to delivering high quality audits. The foundation of our quality framework is our Audit Guide, which incorporates the application of professional auditing, quality and ethical standards and the Code of Audit Practice (and supplementary guidance) issued by Audit Scotland and approved by the Auditor General for Scotland. To ensure that we achieve the required quality standards, Audit Scotland conducts peer reviews and internal quality reviews. Additionally, the Institute of Chartered Accountants of England and Wales (ICAEW) have been commissioned to carry out external quality reviews. 29. As part of our commitment to quality and continuous improvement, Audit Scotland will periodically seek your views on the quality of our service provision. We welcome feedback at any time, and this may be directed to the engagement lead.
Page 23
Appendix 1. Your audit team | 20 Appendix 1. Your audit team 30. The audit team involved in the audit of North Lanarkshire Council have significant experience in public sector audit. John Boyd Audit Director JBoyd@audit- scotland.gov.uk John has overall responsibility for the Audit Engagement. He has considerable audit experience across public sector audits including local government, IJB, pension, health and central government sectors. John is the Audit Scotland Audit Services Group Lead for local authority audit and is a member of the Local Authority (Scotland) Accounting Advisory Committee (LASAAC). Pauline Murray Senior Audit Manager PMurray@audit- scotland.gov.uk Pauline has over 14 years of public sector audit experience and has delivered external audit services to a range of bodies including local authorities, health boards and central government bodies. Fiona Owens Audit Manager FOwens@audit- scotland.gov.uk Fiona has 10 years of experience in planning and delivering audits and has delivered external audit services to a range of bodies including local authorities, health boards and central government bodies. Fiona will manage the team and work alongside the Senior Audit Manager and Audit Director to deliver the audit. Emma Carrigan Senior Auditor ECarrigan@audit- scotland.gov.uk Emma has considerable experience in planning and delivering audits across the public sector. Emma will work alongside the Audit Manager to deliver the audit. Lindsay Stother Best Value Auditor LStother@audit- scotland.gov.uk Lindsay has 14 years of experience working in local government across a number of different local authorities and over four years of public sector audit experience. She has worked on five local authority best value audits and one performance audit. She has also been involved in the most recent review of the Accounts Commission’s SPI Direction in 2021
Page 24
Appendix 1. Your audit team | 21 31. The local audit team is supported by a specialist technical accounting team, all of whom have significant experience of public bodies and work with accounting regulatory bodies. 32. Where possible and appropriate, we use our data analytics team to enable us to capture whole populations of your financial data. This analysis allows us to identify specific exceptions and anomalies within populations to enhance the focus of audit testing and support efficiency.
Page 25
Appendix 1. Your audit team | 22 North Lanarkshire Council Annual Audit Plan 2022/23 Audit Scotland’s published material is available for download on the website in a number of formats. For information on our accessibility principles, please visit: www.audit-scotland.gov.uk/accessibility For the latest news follow us on social media or subscribe to our email alerts. Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit-scotland.gov.uk www.audit-scotland.gov.uk AS.4.0