Item 07 Appendix 1
West Dunbartonshire Council · 2 September 2026
Back to Audit Committee — 2 September 2026 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
Annual Audit Plan West Dunbartonshire Council – Year ending 31 March 2026 August 2026 Appendix 1
Page 2
Annual Audit Plan Letter Audit Committee West Dunbartonshire Council 16 Church Street Dumbarton Glasgow G82 1QL 17 August 2026 Forvis Mazars 100 Queen Street Glasgow G1 3DN Dear Audit Committee Members, Annual Audit Plan – Year ending 31 March 2026 I am pleased to present our Annual Audit Plan (“AAP”) for West Dunbartonshire Council for the year ended 31 March 2026. This document will be presented at the Audit Committee meeting on 2 September 2026. If you would like to discuss any matters in more detail, please contact me on 0781 6354 994. This report provides an overview of the planned scope and timing of our audit, including the significant and enhanced audit risks we have identified. In addition, as it is a fundamental requirement that we are, and are seen to be, independent of the Council this report also summarises our considerations and conclusions on our independence. Two-way communication with you is key to a successful audit and is important in: • Reaching a mutual understanding of the scope of our audit and our respective responsibilities, • Sharing information to assist each of us with fulfilling our respective responsibilities, • Providing you with constructive observations arising during our audit, and • Ensuring that we gain an understanding of your attitude and views in respect of the risks facing the Council which may affect our audit, including the likelihood of those risks materialising and how they are monitored and managed. Forvis Mazars LLP – 100 Queen Street- Glasgow- G1 3DN Tel: 0141 227 2400 – www.forvismazars.com/uk Forvis Mazars LLP is the UK firm of Forvis Mazars Global, a leading global professional services network. Forvis Mazars LLP is a limited liability partnership registered in England and Wales with registered number OC308299 and with its registered office at 30 Old Bailey, London, EC4M 7AU. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001139861. VAT number: GB 839 8356 73
Page 3
Annual Audit Plan Letter (continued) Annual Audit Plan – Year ending 31 March 2026 (continued) This report, which we have prepared following our initial planning discussions with management, facilitates a discussion with you on our audit approach. We welcome any questions, concerns, or input you may have on our approach. Providing a high-quality service is extremely important to us and we strive to provide technical excellence with the highest level of service quality, together with continuous improvement to exceed your expectations. During the meeting, we would be grateful for your views/ knowledge on the following specific matters: • Whether you have identified any other risks (business, laws & regulation, fraud, going concern, etc.) that may result in material misstatements in the financial statements. • If you are aware of any significant communications between the Council and its regulators. • If there are any matters that you consider warrant particular attention during our audit and/ or any areas where you would like additional procedures to be undertaken. This report has been prepared in accordance with the responsibilities set out within the Audit Scotland’s Code of Audit Practice (“the Code”) and for the sole benefit of the Audit Committee. Except where required by law or regulation, it should not be used, quoted or made available to any other parties without our prior written consent. Yours faithfully, Tom Reid (Director) Forvis Mazars LLP Forvis Mazars LLP – 100 Queen Street- Glasgow- G1 3DN Tel: 0141 227 2400 – www.forvismazars.com/uk Forvis Mazars LLP is the UK firm of Forvis Mazars Global, a leading global professional services network. Forvis Mazars LLP is a limited liability partnership registered in England and Wales with registered number OC308299 and with its registered office at 30 Old Bailey, London, EC4M 7AU. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001139861. VAT number: GB 839 8356 73
Page 4
4 Contents 01 Engagement and responsibilities summary 02 Your audit engagement team 03 Audit scope, approach and timeline 04 Materiality and misstatements 05 Significant risks and other key judgement areas 06 Wider scope and Best Value 07 Audit fees and other services 08 Confirmation of our independence Appendix A – Key communication points Appendix B - Current year updates, forthcoming accounting and other issues This document is to be regarded as confidential to West Dunbartonshire Council. It has been prepared for the sole use of the Audit Committee as the appropriate sub-committee charged with governance. No responsibility is accepted to any other person in respect of the whole or part of its contents. Our written consent must first be obtained before this document, or any part of it, is disclosed to a third party.
Page 5
Executive summary 5 Audit risks and other significant matters (pages 25 – 30) Risk Significant risk Enhanced risk Risk evolution Page Management override of controls (applies to Council and Group) ● ○ = Page 27 Valuation of property, plant and equipment (applies to the Council only) ● ○ = Page 28 Valuation of the net defined benefit (liability)/surplus (applies to the Council only) ● ○ = Page 29 (pages 20 – 24) Consolidated Gross Expenditure at Surplus/deficit on Provision of Services: £651,582,000 Materiality Performance materiality Reporting threshold £13,031,640 £9,773,730 £390,949 Council Gross Expenditure at Surplus/deficit on Provision of Services: £641,743,000 Materiality Performance materiality Reporting threshold £12,834,860 £9,626,145 £385,046 Audit timeline (pages 14 and 43) Planning and Risk Assessment July to August 2026 Review of Key Business Processes August 2026 Presentation of Annual Audit Plan September 2026 Year-End Fieldwork August to December 2026 Presentation of Findings from Thematic Reviews December 2026 Completion Procedures January to February 2027 Presentation of Annual Audit Report and Independent Auditor’s Report February 2027 Fees (page 38) Audit fees £356,220 Non-audit fees N/A Total fees £356,220 Our independence (pages 39 – 41) We are independent of the Council in accordance with the ethical requirements that are relevant to our audit in the UK, including the FRC’s Ethical Standard
Page 6
01Engagement and responsibilities summary
Page 7
7 Engagement and responsibilities summary We are appointed to perform the external audit of West Dunbartonshire Council (the Council) for the year to 31 March 2026. The scope of our engagement is set out in the Code of Audit Practice, issued by the Auditor General and the Accounts Commission available from the Audit Scotland website: Code of audit practice | Audit Scotland (audit-scotland.gov.uk). Our responsibilities are principally derived from the Local Government (Scotland) Act 1973 (the 1973 Act) and the Code of Audit Practice, as outlined below and overleaf. Audit opinion We are responsible for forming and expressing an opinion on whether the financial statements are prepared, in all material respects, in accordance with applicable law and UK adopted international accounting standards as interpreted and adopted by the Code of Practice on Local Authority Accounting un the United Kingdom 2025/26. Our audit does not relieve management or the Audit Committee, as Those Charged With Governance, of their responsibilities. Management is responsible for the assessment of the Council’s ability to continue as a going concern. As auditors, we are required to obtain sufficient, appropriate audit evidence regarding, and conclude on: a) whether a material uncertainty related to going concern exists, and b) the appropriateness of Management’s use of the going concern basis of accounting in the preparation of the financial statements. Fraud The responsibility for safeguarding assets and for the prevention and detection of fraud, error, and non-compliance with law or regulations rests with both you and management. This includes establishing and maintaining internal controls over asset protection, compliance with relevant laws and regulations, and the reliability of financial reporting. As part of our audit procedures in relation to fraud, we are required to inquire of you and key management personnel and internal audit, on their knowledge of instances of fraud, and their views on the risks of fraud and on internal controls that mitigate those risks. In accordance with International Standards on Auditing (UK), we plan and perform our audit to obtain reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether due to fraud or error. However, our audit should not be relied upon to identify all such misstatements.
Page 8
8 Engagement and responsibilities summary (continued) Internal control Management is responsible for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. We are responsible for obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Council‘s internal control. Wider reporting We are required to provide assurance on the Whole of Government Accounts (WGA) returns prepared by West Dunbartonshire Council. The level of auditor assurance required depends on monetary thresholds set by HM Treasury. Wider scope and Best Value We are also responsible for reviewing and reporting on the wider scope arrangements that the Council has in place and its arrangements to secure Best Value. We discuss our approach to wider scope and Best Value work further in the ‘Wider scope and Best Value’ section of this report.
Page 9
02Your audit engagement team
Page 10
Tom Reid Engagement Director Caleb Oguche Engagement Manager Mark Ramsay Team Leader Tom.Reid@mazars.co.uk 07816 354 994 Caleb.Oguche@mazars.co.uk 07974 124 504 Mark.Ramsay@mazars.co.uk 07816 209 265 Your audit team Your audit team Wewill utilise internal and external expertson this engagementin thefollowing areas: • Forvis Mazars Internal Property Team for Property, Plant and Equipment valuation • PwC Actuarial Services in relation to Pension valuation. 9
Page 11
03Audit scope, approach, and timeline
Page 12
Audit scope, approach, and timeline Audit scope Our audit approach is designed to provide an audit that complies with all professional requirements. Our audit of the financial statements will be conducted in accordance with International Standards on Auditing (UK), relevant ethical and professional standards, our own audit methodology, and in accordance with the terms of our engagement. Our work is focused on those aspects of your business which we consider to have a higher risk of material misstatement, such as those impacted by management judgement and estimation, application of new accounting standards, changes of accounting policy, changes to operations, or areas found to contain material errors in the past. Audit approach Our audit approach is risk-based, and the nature, extent, and timing of our audit procedures are primarily driven by the areas of the financial statements we consider to be more susceptible to material misstatement. Following our risk assessment where we assess the inherent risk factors (subjectivity, complexity, uncertainty, change and susceptibility to misstatement due to management bias or fraud) to aid in our risk assessment, we develop our audit strategy and design audit procedures to respond to the risks we have identified. If we conclude that appropriately designed controls are in place, we may plan to test and rely on those controls. If we decide controls are not appropriately designed, or we decide that it would be more efficient to do so, we may take a wholly substantive approach to our audit testing where, in our professional judgement, substantive procedures alone will provide sufficient appropriate audit evidence. Substantive procedures are audit procedures designed to detect material misstatements at the assertion level and comprise tests of detail (of classes of transaction, account balances, and disclosures), and substantive analytical procedures. Irrespective of our assessed risks of material misstatement, which takes account of our evaluation of the operating effectiveness of controls, we are required to design and perform substantive procedures for each material class of transaction, account balance, and disclosure. Our audit has been planned and will be performed to provide reasonable assurance that the financial statements are free from material misstatement and give a true and fair view. The concept of materiality and how we define a misstatement is explained in the ‘Materiality and misstatements’ section of this report. Where appropriate our Annual Audit Plan reflects discussions with the Local Area Network. The diagram on page 14 outlines the procedures we perform at the different stages of our audit. We have also provided, later in this report, a table setting out the procedures we perform for the significant financial statement areas. 12
Page 13
Audit scope, approach, and timeline (continued) 13 Management’s and our experts Management makes use of experts in specific areas when preparing West Dunbartonshire Council’s financial statements. We also use experts to assist us to obtain sufficient appropriate audit evidence on specific items of account. Item of account Management’s expert Our expert Property, Plant and Equipment Newmark Gerald Eve LLP Forvis Mazars Internal Property Team will assist us in reviewing the management expert’s valuation of council dwellings. Net Defined Benefit Liability/Surplus Hymans Robertson We have identified PwC as an auditor’s expert. PwC assist in providing assurance over pension calculations and assumptions. We have also identified EY, auditors of the Fund Administrator (Strathclyde Pension Fund), as another auditor. We will request assurances under the Audit Scotland protocol. Financial Instruments Fair value Calculations and Disclosures MUFG Pension & Market Services We do not intend to engage an internal expert, but we will take into consideration relevant information available from third parties. Service organisations International Auditing Standards (UK) (ISAs) define service organisations as third party organisations that provide services to West Dunbartonshire Council that are part of its information systems relevant to financial reporting. We are required to obtain an understanding of the services provided by service organisations as well as evaluating the design and implementation of controls over those services. We are not aware, from our planning procedures and enquiries of management, that the Council uses any service organisations Reliance on internal audit Where possible, we will use the work performed by internal audit when designing the nature, extent, and timing of our audit procedures. We will discuss with internal audit the progress of their work and their findings prior to commencing our controls evaluation procedures. Where we intend to rely on the work on internal audit, we will evaluate the work performed by them and perform our own procedures to determine the adequacy of that work for our audit.
Page 14
Audit scope, approach, and timeline (continued) 14 Planning and risk assessment July to August 2026 • Planning our visit and developing our understanding of the Council • Documenting systems and controls and performing walkthroughs • Risk identification and assessment • Considering proposed accounting policies and accounting treatments • Developing our audit strategy and planning the audit work to be performed • Agreeing timetable and deadlines • Preliminary analytical review • Determination of materiality • Undertake planning work for our wider scope and best value responsibilities Fieldwork August to December 2026 • Executing our strategy, starting with significant risks and other higher-risk areas • Receiving and reviewing the draft financial statements • Form a view on the adequacy of the Council’s arrangements across the four wider scope areas and in relation to securing best value Communication Throughout Audit • Communicating progress and any issues arising • Clearance meeting(s) Completion January to February 2027 • Final review of financial statements, and disclosure checklist • Final Engagement Director review • Agreeing the content of the letter of representation • Preparing our auditor’s report • Reporting to the Audit Committee including wider scope/best value reporting • Subsequent events procedures • Signing our auditor’s report
Page 15
15 Audit scope, approach, and timeline (continued) Audit approach for significant financial statement areas Our audit approach on significant financial statement areas is set out below. Financial statement area Significant risk Key judgement area or enhanced risk Testing of controls Substantive procedures Comments Property, Plant and Equipment Yes No No Yes See page 28 for details of significant risk. Net Pensions Liability Yes No No Yes See page 29fordetails of significant risk. Short Term Debtors No No No Yes Standard risk Cash and Cash Equivalents (net) No No No Yes Standard risk Short Term Creditors No No No Yes Standard risk Loans and Borrowings No No No Yes Standardrisk PPP and Finance Lease Liabilities No No No Yes Standardrisk Provisions and Contingencies No No No Yes Standardrisk Usable and Unusable Reserves No No No Yes Standardrisk Housing Revenue Account No No No Yes Standardrisk Non-Domestic Rate Account No No No Yes Standardrisk Financial Instruments No No No Yes Standardrisk Cost of Services Income No No No Yes Standard risk Cost of Services Expenditure No No No Yes Standard risk OtherComprehensive Operating (Income)/Expenditure No No No Yes Standard risk Financing and investment (Income)/Expenditure No No No Yes Standard risk Taxation and Non-specific GrantIncome No No No Yes Standard risk Consolidation and Investment in Associates & Joint Ventures No No No Yes Standard risk
Page 16
16 Audit scope, approach, and timeline (continued) Audit approach for significant financial statement areas Our audit approach on significant financial statement areas is set out below. Financial statement area (Disclosures) Significant risk Key judgement area or enhanced risk Testing of controls Substantive procedures Comments Cash Flow Statement No No No Yes Related partytransactions No No No Yes RemunerationReport No No No Yes ManagementCommentary No No No Yes Annual GovernanceStatement No No No Yes
Page 17
17 Audit scope, approach, and timeline (continued) Group audit approach The preliminary scope of our group audit is set out below. When scoping our group audit, we have considered quantitative criteria (the contribution of each of the group’s consolidated components to the group financial statements); qualitative criteria (the risks of material misstatement of the group financial statements that consolidated components may present individually at component level); and we have assessed the risk of material misstatement across the group’s consolidated components in aggregate. The nature and extent of audit work we plan to perform on the consolidated components is set out below. Component name % (of net operating activity) Location Auditor Scope West Dunbartonshire Council 98 Dumbarton,Scotland Forvis Mazars LLP An audit of the financial information WestDunbartonshire Integration Joint Board - Dumbarton,Scotland Forvis Mazars LLP Not in scope Dunbartonshire and Argyll and Bute Valuation Joint Board - Dumbarton,Scotland Forvis Mazars LLP Not in scope WestDunbartonshire Leisure Trust 2 Alexandria, Scotland Wbg(Audit Limited) Not in scope Clydebank PropertyCompany - Clydebank, Scotland Azets Audit Services Not in scope WestDunbartonshire Energy Limited Liability Partnership - Dumbarton,Scotland Azets Audit Services Not in scope DumbartonCommonGood - Dumbarton,Scotland Forvis Mazars LLP Not in scope TrustFunds - Dumbarton,Scotland Forvis Mazars LLP Not in scope
Page 18
18 Audit scope, approach, and timeline (continued) Group audit approach The significant financial statement areas in the consolidated financial statements are set out below, including the work that we plan to perform and the coverage we plan to achieve through our group audit approach. Financial statement area Consolidated balance (£’000) Work to be performed % coverage Property, Plant and Equipment 1,272 Substantive audit procedures 99.63 Investment in Associates & Joint Ventures 11,831 Substantive audit procedures 100 Short Term Debtors 77,011 Substantive audit procedures 99.81 Cash and Cash Equivalents (net) 29,670 Substantive audit procedures 92.41 Short Term Creditors (62,938) Substantive audit procedures 99.67 PPP and Finance Lease Liabilities (78,508) Substantive audit procedures 100 Net Pensions Liability (37,020) Substantive audit procedures 100 Loans and Borrowings (870,083) Substantive audit procedures 100 Usable Reserves (39,791) Substantive audit procedures 66.06 Unusable Reserves (309,356) Substantive audit procedures 97.93 Cost of Services Income (280,886) Substantive audit procedures 96.49 Cost of Services Expenditure (596,730) Substantive audit procedures 98.35 Other Operating Expenditure and (income) - (Gain) / loss on Disposal of non-current assets 8,229 Substantive audit procedures 100 Financing and Investment (Income) and Expenditure 41,285 Substantive audit procedures 100 Taxation and Non-specific GrantIncome (350,927) Substantive audit procedures 100 Other Comprehensive (Income) and Expenditure 20,958 Substantive audit procedures 100
Page 19
19 Audit scope, approach, and timeline (continued) Audit of trusts registered as Scottish charities The Charities Accounts (Scotland) Regulations 2006 outline the accounting and auditing requirements for charitable bodies. The 2006 Regulations require charities to prepare annual accounts and an auditor to prepare a report to the charity trustees 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. Members of the Council are the sole trustees for four trusts registered as West Dunbartonshire Council Charitable Trusts, with total assets of £261,365. 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. We have not identified any significant risks, other than the risk of management override of controls which we have also identified as a risk for the Council’s annual accounts, for the financial statements of the West Dunbartonshire Council Charitable Trusts.
Page 20
04Materiality and misstatements
Page 21
Materiality and misstatements 21 Definitions Materiality is an expression of the relative significance or importance of a particular matter in the context of the financial statements as a whole. Misstatements in the financial statements are considered to be material if they could, individually or in aggregate, reasonably be expected to influence the economic decisions of users based on the financial statements. Materiality We determine materiality for the financial statements as a whole (overall materiality) using a benchmark that, in our professional judgement, is most appropriate to entity. We also determine an amount less than materiality (performance materiality), which is applied when we carry out our audit procedures and is designed to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Further, we set a threshold above which all misstatements we identify during our audit (adjusted and unadjusted) will be reported to the Audit Committee. Judgements on materiality are made in light of surrounding circumstances and are affected by the size and nature of a misstatement, or a combination of both. Judgements about materiality are based on a consideration of the common financial information needs of users as a group and not on specific individual users. An assessment of what is material is a matter of professional judgement and is affected by our perception of the financial information needs of the users of the financial statements. In making our assessment we assume that users: • Have a reasonable knowledge of business, economic activities, and accounts; • Have a willingness to study the information in the financial statements with reasonable diligence; • Understand that financial statements are prepared, presented, and audited to levels of materiality; • Recognise the uncertainties inherent in the measurement of amounts based on the use of estimates, judgement, and consideration of future events; and • Will make reasonable economic decisions based on the information in the financial statements. We consider overall materiality and performance materiality while planning and performing our audit based on quantitative and qualitative factors. When planning our audit, we make judgements about the size of misstatements we consider to be material. This provide a basis for our risk assessment procedures, including identifying and assessing the risks of material misstatement, and determining the nature, timing and extent of our responses to those risks. The overall materiality and performance materiality that we determine does not necessarily mean that uncorrected misstatements that are below materiality, individually or in aggregate, will be considered immaterial. We revise materiality as our audit progresses should we become aware of information that would have caused us to determine a different amount had we been aware of that information at the planning stage.
Page 22
Materiality and misstatements (continued) 22 Materiality and misstatements (continued) Materiality (continued) For the consolidated and single-entity financial statements, we consider that Gross Expenditure at Surplus/deficit on Provision of Services is the key focus of users of the financial statements. We have therefore determined our initial materiality levels using Gross Expenditure at Surplus/Deficit on Provision of Services as the benchmark. We expect to set a materiality of 2% of Gross Expenditure at Surplus/Deficit on Provision of Services for the consolidated financial statements, and a materiality of 2% of Gross Expenditure at Surplus/deficit on Provision of Services for the single-entity. As set out in the tables alongside, based on currently available information being the unaudited 2025/26 financial statements, we anticipate overall Group materiality for the year ended 31 March 2026 to be in the region of £13.032m (£11.924m in the prior year), and performance materiality to be in the region of £9.774m (£8.347m in the prior year). This represents 75% of headline materiality (70% in 2024/25). The choice of this percentage reflects our assessment that For the single-entity, we anticipate overall materiality for the year ended 31 March 2026 to be in the region of £12.835m (£11.806m in the prior year), and performance materiality to be in the region of £9.626m (£7.674m in the prior year). This represents 75% of headline materiality (65% in 2024/25). The choice of this percentages for both the Group and single entity reflects our assessment that: • that the main users of the financial statementsare the Scottish Government,other Local Authorities,Regulators,Elected Members, Local Communities,and otherStakeholders; • that the primaryaggregatethat users tend to focuson is grossrevenue expenditure at surplus/deficit level, as it reflectsthe extent of services delivered by the Council; • thatusers of thefinancial statementsand decision makers(theCouncil, Audit Committee and ScottishGovernment)have an understandingof theinherent uncertaintiesaround accounting estimatesand judgements; • that setting 2% of the chosen benchmarkis consistent with prior period and as part of our audit, we have gained an understandingthattheCouncil has a well established and experienced financeteamcapable of applying therelevant accounting standards;and • thatAudit Committeemembersdemonstratean ability toscrutinise financial informationat a high level. As set out in the tables overleaf, forthe WestDunbartonshire Council Charitable Trusts,we anticipate overall materiality forthe year ended 31 March 2026 to be in the region of £0.005m (£0.005m in the prior year), and performance materiality to be in the region of £0.004m (£0.004min the prior year). Wewill continue to monitor materialitythroughoutour audit to ensure it is set at an appropriatelevel. Group financial statements 2025/26 £’000s 2024/25 £’000s Overall materiality 13,032 11,924 Performancemateriality 9,774 8,347 Clearly trivial 391 358
Page 23
Materiality and misstatements (continued) Materiality and misstatements (continued) 23 Materiality(continued) Council’s single-entity financial statements 2025/26 £’000s 2024/25 £’000s Overall materiality 12,835 11,806 Performancemateriality 9,626 7,674 Clearly trivial 385 354 Specific materiality We assess the Remuneration Report as sensitive given user’s interest in this specific section of the annual accounts. • For senior councillors and senior employees' remunerationand pensions benefits,our specific materialitywill be £1,000. • For other employees' remuneration,these are disclosed in bands, hence we have set a specific materialityof £5,000 which equatesto one banding. • For exit packages,we have set a specific materiality of £30,000 (2024/25:£50,000). West Dunbartonshire Council Charitable Trusts financial statements 2025/26 £ 2024/25 £ Overall materiality 5,227 5,336 Performancemateriality 4,182 4,269 Clearly trivial 125 160
Page 24
Materiality and misstatements (continued) Misstatements We will accumulate misstatements identified during our audit that are above our determined clearly trivial threshold. We have set a clearly trivial threshold for individual misstatements we identify (a reporting threshold) for reporting to the Audit Committee and management that is consistent with a threshold where misstatements below that amount would not need to be accumulated because we expect that the accumulation of such amounts would not have a material effect on the financial statements. Based on our preliminary assessment of overall materiality, our proposed clearly trivial threshold is £390k for the Group and £384k for the single-entity, based on 3% of overall materiality. If you have any queries about this, please raise these with the Engagement Director, Tom Reid. Each misstatement above the reporting threshold that we identify will be classified as: • Adjusted: Those misstatements that we identify and are corrected by management. • Unadjusted: Those misstatements that we identify that are not corrected by management. We will report all misstatements above the reporting threshold to management and request that they are corrected. If they are not corrected, we will report each misstatement to the Audit Committee as unadjusted misstatements and, if they remain uncorrected, we will communicate the effect that they may have individually, or in aggregate, on the financial statements and on our audit opinion. Misstatements also cover qualitative misstatements and include quantitative and qualitative misstatements and omissions relating to the notes of the financial statements. Reporting In summary, we will categorise and report misstatements above the reporting threshold to the Audit Committee as follows: • Adjusted misstatements; • Unadjusted misstatements; and • Disclosure misstatements (adjusted and unadjusted). 24
Page 25
05Significant risks and other key judgement areas
Page 26
Significant risks and other key judgement areas Definitions Following the risk assessment approach set out in the ‘Audit scope, approach, and timeline’ section, we have identified the risks of material misstatement in the financial statements. These risks are categorised as significant, enhanced, or standard. The definitions of these risk ratings are set out below. 26 Risk Level Definition Significant A risk that is assessed as being at or close to the upper end of the spectrum of inherent risk, based on a combination of the likelihood of a misstatement occurring and the magnitude of any potential misstatement. A fraud risk is always assessed as a significant risk (as required by auditing standards), including management override of controls and revenue recognition. Enhanced An area with an elevated risk of material misstatement at the assertion level, other than a significant risk, based on factors/ information inherent to that area. Enhanced risks require additional consideration but do not rise to the level of a significant risk. These include but are not limited to: • Key areas of management judgement and estimation uncertainty, including accounting estimates related to material classes of transaction, account balances, and disclosures but which are not considered to give rise to a significant risk of material misstatement; and • Risks relating to other assertions and arising from significant events or transactions that occurred during the period. Standard A risk related to assertions over classes of transaction, account balances, and disclosures that are relatively routine, non-complex, tend to be subject to systematic processing, and require little or no management judgement/ estimation. Although it is considered that there is a risk of material misstatement, there are no elevated or special factors related to the nature of the financial statement area, the likely magnitude of potential misstatements, or the likelihood of a risk occurring.
Page 27
Significant risks and other key judgement areas (continued) 27 Audit risks and planned responses In this section, we have set out the risks that we deem to be significant and enhanced, and our planned response. An audit is a dynamic process, and should we change our view of risk and/ or our approach to address those risks during our audit, we will report this to the Audit Committee. Significant risks Blank Risk name Fraud Error Judgement Risk description Planned response 1 Management override of controls (applies to Council and Group) Yes No Yes Management at various levels within an organisation are in a unique position to perpetrate fraud because of their ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. Due to the unpredictable way in which such override could occur there is a risk of material misstatement due to fraud on all audits. You should assess this risk as part of your oversight of the financial reporting process. In line with our methodology, we plan to address the management override of controls risk for the Council through performing audit work over: • accounting estimates: by evaluating the methods and assumptions used by management to develop the estimate; • journal entries: testing journals that meet our fraud risk criteria, and other adjustments made in preparing the financial statements; and • significant transactions: considering and testing any significant transactions outside the normal course of business or otherwise unusual. For the Group, we will review the consolidation adjustments made by officers in preparing the Group financial statements.
Page 28
Significant risks and other key judgement areas (continued) 28 Significant risks (continued) Blank Risk name Fraud Error Judgement Risk description Planned response 2 Valuation of property, plant and equipment (applies to the Council only) No Yes Yes The Council held land and buildings (including council dwellings) with a net book value of £1.27 billion at 31 March 2026. The Council has adopted a rolling revaluation model with other land and buildings revalued over a five-year cycle, with indexation being applied in the intervening years. There is an inherent risk of material misstatement in asset valuations as these are based on specialist and management assumptions and changes in these can result in material changes to asset values. We have also determined there is a significant risk of material misstatement from assumptions that are incorrect and/or not supported by relevant evidence being applied. The CIPFA Code of Practice on Local Authority Accounting in the United Kingdom introduced changes to the valuation requirements for non-investment property, plant and equipment assets, effective from 1 April 2025 (for the 2025/26 Code). A key change is the move to a quinquennial (five-year) revaluation cycle for relevant non-investment assets, supplemented by annual indexation in the intervening years. Authorities using locally derived indices should maintain sufficient evidence to demonstrate that the indices are appropriate to their asset base and local circumstances and should be able to provide that evidence to auditors. See page 49 for more details. We plan to address this risk by: • assessing the scope and terms of engagement with the valuer; • assessing the competence, skills and objectivity of the valuer; • assessing how management use the valuer’s report to value land and buildings included in the financial statements; • testing the accuracy of the data used in valuations; • challenging the Council and the valuer’s assumptions and judgements applied in the valuations; • reviewing the valuation methodology used, including the appropriateness of the valuation basis; • considering the reasonableness of the valuation by comparing the valuation output with market intelligence; • testing a sample of revaluations in the year, by agreeing the revaluations recorded in the Annual Accounts to the Valuer’s reports. As part of this testing, we will check whether the movements have been accounted for in accordance with the Code; and • reviewing management’s application of indexation to confirm that appropriate and relevant indices have been selected and applied correctly. .
Page 29
Significant risks and other key judgement areas (continued) 29 Significant risks (continued) Blank Risk name Fraud Error Judgement Risk description Planned response 3 Valuation of the net defined benefit (liability)/ surplus (applies to the Council only) No Yes Yes The Council’s net defined benefit liability was £37 million as at 31 March 2026. Estimation of the net pension asset or liability depends on several complex judgements which are sensitive to changes. These include the discount rate used, the rate at which salaries are predicted to increase, inflation rates and life expectancy. Due to the high degree of estimation uncertainty associated with the valuations, we have determined there is a significant risk in this area. In addressing this risk, we will: • challenge the reasonableness of the Actuary’s assumptions that underpin the relevant entries made in the financial statements; • critically assess the competency, objectivity and independence of the Actuary; • liaise with the auditors of the Pension Fund Administrator to gain assurance that the overall procedures and controls in place at the Pension Fund are operating effectively; • compare assumptions to expected ranges; • review the accuracy and completeness of the membership data used by the actuary in preparation of the Actuary’s valuation report; • independently obtain confirmation of pension contributions, benefits paid and any material transfers from the Pension Fund Administrator and compare with the data used by the Actuary in the actuarial valuation; and • agree data in the Actuary’s valuation report for accounting purposes to the relevant accounting entries and disclosures in the Council’s financial statements.
Page 30
Significant risks and other key judgement areas (continued) 30 Other considerations In consideration of ISA (UK) 260 Communication with Those Charged with Governance, we would like to seek the Audit Committee’s views/ knowledge of the following matters: • Did you identify any other risks (business, laws & regulation, fraud, going concern etc.) that may result in material misstatements? • Are you aware of any significant communications between the Council and regulators? • Are there any matters that you consider warrant particular attention during the course of our audit, and any areas where you would like additional procedures to be undertaken? Internal audit function We do not expect to use the work of the internal audit function for the purpose of our audit. Nonetheless, we will obtain a copy of the reports issued by internal audit relating to the financial period under audit to determine whether any findings will have an impact on our risk assessment and planned audit procedures.
Page 31
06Wider scope and Best Value
Page 32
Wider scope and Best Value 32 The framework for wider scope work The Code of Audit Practice sets out the four areas that frame the wider scope of public sector audit. We are required to form a view on the adequacy of the Council’s arrangements in four areas: 1. Financial management 2. Financial sustainability 3. Vision, leadership, and governance 4. Use of resources to improve outcomes Financial management Financial management means having sound budgetary processes. Audited bodies require the ability to understand the financial environment and whether internal controls are operating effectively. Auditors consider whether the body has effective arrangements to secure sound financial management. Vision, leadership and governance Audited bodies must have a clear vision and strategy, and set priorities for improvement within this vision and strategy. They work together with partners and communities to improve outcomes and foster a culture of innovation. Auditors consider the clarity of plans to implement the vision, strategy and priorities adopted by the leaders of the audited body. They also consider the effectiveness of governance arrangements for delivery. Financial sustainability Financial sustainability means being able to meet the needs of the present without compromising the ability of future generations to meet their own needs. Auditors consider the extent to which audited bodies have shown regard to financial sustainability. They look ahead to the medium term (two to five years) and longer term (over five years) to consider whether the body is planning effectively so that it can continue to deliver services. Use of resources to improve outcomes Audited bodies need to make best use of their resources to meet stated outcomes and improvement objectives, through effective planning and working with strategic partners and communities. Auditors consider the clarity of the arrangements in place to ensure that resources are deployed to improve strategic outcomes, meet the needs of service users taking account of equalities, and deliver continuous improvements in priority services.
Page 33
Wider scope and Best Value (continued) 33 Our approach Our planned audit work against the four wider scope areas is risk based and proportionate. We need to gather sufficient evidence to support our commentary on the Council’s arrangements and to identify and report on any significant risks. We will carry out more detailed work where we identify significant risks. Where significant risks are identified we will report these to the Council and make recommendations for improvement. In addition to local risks, we consider challenges that are affecting the public sector as a whole. Best Value Under the Code of Audit Practice, the audit of Best Value in councils is fully integrated within our annual audit work. We are required to consider the seven Best Value themes which are: 1. Vision and leadership 2. Governance and accountability 3. Effective use of resources 4. Partnerships and collaborative working 5. Working with communities 6. Sustainability 7. Fairness and equality We are required to consider the Council’s arrangements in respect of the seven Best Value themes to identify any significant risks. Best Value at the Council will be assessed over the period of the audit appointment. Where we identify risks or improvement areas we will plan appropriate coverage over the period of the audit appointment on a risk basis. We have not identified any significant risks planned for coverage in 2025/26. We will also follow up previously reported Best Value findings to assess the pace and depth of improvement. This work will be integrated into our audit approach, including our work on the wider scope areas. We are required to undertake work on performance reporting each year. Specifically in respect of assessing the Council’s effectiveness of performance reporting we will consider the following matters for compliance with the Direction from the Accounts Commission: • Using resources effectively; • Financial sustainability; and • timeliness. We will also conduct thematic reviews as directed by the Accounts Commission. In 2025/26 this will be on asset management. We will prepare a separate management report to document the findings of this work. At least once every five years, the Controller of Audit will report to the Accounts Commission on the Council’s performance in meeting its Best Value duties. The Council’s Controller of Audit report is due to be presented to the Accounts Commission on 17 September 2026.
Page 34
34 Wider scope and Best Value (continued) Wider scope risks The Code of Audit Practice requires us to consider the significant audit risks in areas defined in the Code as the wider scope audit. The table below outlines the wider scope audit risks that we have identified to date. We will report any further identified risks to the Audit Committee on completion of our planning and risk identification work. Blank Significant Risk Description Financial management Financial sustainability Vision, leadership and governance Use of resources to improve outcomes Planned procedures 1 Financial sustainability The council has forecast significant cumulative budget gaps increasing from £10 million in 2026/27 to £44 million by 2030/31. This presents a significant risk to the Council's long-term financial sustainability. Continued financial pressures arising from inflation, pay awards, increasing demand for services, and wider economic uncertainty could further widen the funding gap. The measures required to achieve a sustainable financial position may adversely affect the Council's ability to maintain service levels, deliver strategic priorities, and meet the needs of the people of West Dunbartonshire. No Yes No No In responding to this risk, we will; • review the Council’s medium to long term financial strategy, financial position and achievement of recurring and non-recurring savings in 2025/26; • evaluate the timeliness and effectiveness of the Council's reporting to elected members on its financial position and savings plans; and • review progress in developing plans to address future years' budget gaps.
Page 35
35 Wider scope and Best Value (continued) Our work to follow-up on previous wider scope recommendations As part of our 2024/25 audit, we identified wider scope risks in the Council’s arrangements. The table below sets out the risks identified, our previous recommendations and the work we intend to carry out as part of our 2025/26 audit. Previously identified significant risks in arrangements Relevant reporting criteria Our 2024/25 recommendations Planned procedures for 2025/26 Financial sustainability – Level 1 The Council is forecasting cumulative budget gaps rising from £5.21m in 2026/27 to £52.88m by 2030/31. It understands the scale and drivers of its medium and long- term financial pressures, but its capacity to respond to these is constrained by limited reserves and reliance on service reductions to balance budgets. It is unsustainable for the Council to continue to rely on reserves and other short-term measures to address funding gaps. Financial sustainability The Council should ensure it has a clear approach to addressing its longer-term financial challenges, including the extent to which this will be supported by use of reserves. This includes ensuring its reserves and financial strategy are aligned. As part of our follow up procedures, we will: • review the progress of the Council’s budget working group in considering options for addressing budget gaps; and • review the Council’s revised medium to long term financial strategy which is due to be submitted to Council in October 2026. Progress in delivering strategic priorities – Level 2 The Council has a clear strategic framework, but improvement activity is not progressing at a pace sufficient to mitigate its financial and operational pressures. Its performance reporting against the 2022–27 Strategic Plan shows mixed progress, with under performance in areas including environmental quality, neighbourhood maintenance, customer experience and resident satisfaction. If the pace and depth of improvement does not accelerate, the Council risks declining service quality and reduced public satisfaction. This may undermine its ability to deliver its strategic priorities. Use of resources to improve outcomes The Council should review the areas where it is not on track to achieve its strategic priorities and identify actions to address this. As part of our follow up procedures, we will: • review the Council’s performance in the areas where it is underperforming; and • review the action plans developed by the Council for these areas.
Page 36
36 Wider scope and Best Value (continued) Best Value risks The Code of Audit Practice requires us to consider the significant audit risks in areas defined in the Code as the Best Value audit. Although we have not fully completed our planning and risk assessment work, we have not identified any Best Value audit risks to date. If we identify any Best Value audit risks as our work progresses, we will report details of them to the Audit Committee on completion of our planning and risk identification work. Our work to follow-up on previous best value recommendations As part of our 2024/25 audit, we identified Best Value risks in the Councils arrangements. The table below sets out the risks identified, our previous recommendations and the work we intend to carry out as part of our 2025/26 audit. Previously identified significant risks in arrangements Relevant reporting criteria Our 2024/25 recommendations Planned procedures for 2025/26 Staff absence– Level 2 Some staff are finding the pace of change challenging and staff absence remains an issue. The council is taking positive steps to try and address this and should continue to explore opportunities for improvement. Effective use of resources The Council should implement a focused attendance improvement plan that strengthens early intervention, enhances management capability, and uses data more effectively to address the main drivers of short-term absence. This should be supported by clearer performance measures to assess the impact of wellbeing initiatives on reducing absence and associated costs As part of our follow up procedures, we will: • review the Council’s reported absence levels; and • review the outcomes of the Council’s ‘Fit for Future’ review of Employee Wellbeing.
Page 37
07Audit fees and other services
Page 38
Audit fees and other services Audit fees and other services 38 Our fees for the audit of West Dunbartonshire Council‘s financial statements for the year ended 31 March 2025, are outlined below. At this stage of the audit, we are not planning any divergence from the expected fees set by Audit Scotland, which is available on the Audit Scotland website: Audit Scotland expected fees for 2025/26 audits. Area of work 2025-26 Proposed Fee 2024-25 Actual Fee Auditor remuneration £287,130 £276,620 Pooled costs £9,900 £6,950 Contribution toPABV costs £64,870 £64,060 Sectoralcap adjustment (£5,680) (£6,220) 2024/25 additional fees for additional work required due to the application of accounting standard IFRS 16 (Leases) and overruns. N/A TBC Total fees £356,220 £TBC Wehave not provided any non-audit services to WestDunbartonshire Council during the year. Fees for work as the West Dunbartonshire Charitable Trusts appointed auditor Wepropose setting a fee forthe audit of WestDunbartonshire Trust Funds of £10,628 (2024/25 feewas £10,190). Wehave not provided any non-audit services to the Charitable Trustsin 2025/26. Servicesprovided to other entities within the Council’s group Weprovide audit services to the following group entities; • WestDunbartonshire IntegrationJoint Board with a total feeof £35,480 (2024/25feewas £34,000) • Dunbartonshire and Argyle and Bute Valuation Joint Board with a totalfeeof £9,910 (2024/25 feewas £9,500).
Page 39
08Confirmation of our independence
Page 40
Confirmation of our independence 40 Requirements We comply with the International Code of Ethics for Professional Accountants, including International Independence Standards issued by the International Ethics Standards Board for Accountants together with the ethical requirements that are relevant to our audit of the financial statements in the UK reflected in the ICAEW Code of Ethics and the FRC Revised Ethical Standard. Compliance We are not aware of any relationship between Forvis Mazars and West Dunbartonshire Council that, in our professional judgement, may reasonably be thought to impair our independence. We are independent of West Dunbartonshire Council and have fulfilled our independence and ethical responsibilities in accordance with the requirements applicable to our audit. Non-audit and Audit fees We have set out a summary of the non-audit services provided by Forvis Mazars (with related fees) to West Dunbartonshire Council, together with our audit fees and independence assessment. We are committed to independence and confirm that we comply with the FRC’s Revised Ethical Standard. In addition, we have set out in this section any matters or relationships we believe may have a bearing on our independence or the objectivity of our audit team. Based on the information provided by you and our own internal procedures to safeguard our independence as auditors, we confirm that in our professional judgement there are no relationships between us and any of our related or subsidiary entities, and you and your related entities, that create any unacceptable threats to our independence within the regulatory or professional requirements governing us as your auditors. We have policies and procedures in place that are designed to ensure that we carry out our work with integrity, objectivity, and independence. These policies include: • All partners and staff are required to complete an annual independence declaration. • All new partners and staff are required to complete an independence confirmation and complete annual ethical training. • Rotation policies covering audit engagement partners and other key members of the audit team. • Use by managers and partners of our client and engagement acceptance system, which requires all non-audit services to be approved in advance by the audit engagement partner. We confirm, as at the date of this report, that the engagement team and others in the firm as appropriate, Forvis Mazars LLP are independent and comply with relevant ethical requirements. However, if at any time you have concerns or questions about our integrity, objectivity or independence, please discuss these with me in the first instance.
Page 41
Confirmation of our independence Prior to the provision of any non-audit services, I will undertake appropriate procedures to consider and fully assess the impact that providing the service may have on our independence as auditor. Principal threats to our independence and the associated safeguards we have identified and/ or put in place are set out in Framework Agreement issued by Audit Scotland available from the Audit Scotland website: Audit Scotland Framework Agreement (audit-scotland.gov.uk). Any emerging independence threats and associated identified safeguards will be communicated in our Annual Audit Report. 41
Page 42
Appendices A: Key communication points B: Current year updates, forthcoming accounting and other issues
Page 43
Appendix A: Key communication points We value communication with you, as a two-way feedback process is at the heart of our client service commitment. ISA (UK) 260 Communication with Those Charged with Governance and ISA (UK) 265 Communicating Deficiencies In Internal Control To Those Charged With Governance And Management specifically require us to communicate a number of points with you. Relevant points that need to be communicated with you at each stage of the audit are outlined below. Form, timing and content of our communications We will present the following reports: Our Annual Audit Plan in September 2026; Our Annual Audit Report in February 2027; Our independent auditor’s report in February 2027; and Our thematic report in December 2026. These documents will be discussed with management prior to being presented to yourselves and their comments will be incorporated as appropriate. Key communication points at the planning stage as included in this Annual Audit Plan Our responsibilities in relation to the audit of the financial statements; • The planned scope and timing of the audit; • Significant audit risks and areas of management judgement; • Our commitment to independence; • Responsibilities for preventing and detecting errors; • Materiality and misstatements; and • Fees for audit and other services. Key communication points at the completion stage to be included in our Annual Audit Report Significant deficiencies in internal control; Significant findings from the audit; Significant matters discussed with management; Significant difficulties, if any, encountered during the audit; Qualitative aspects of the entity’s accounting practices, including accounting policies, accounting estimates and financial statement disclosures; Our conclusions on the significant audit risks and areas of management judgement; Summary of misstatements; Management representation letter; Our proposed draft audit report; and Independence. 43
Page 44
Appendix A: Key communication points ISA (UK) 260 Communication with Those Charged with Governance, ISA (UK) 265 Communicating Deficiencies In Internal Control To Those Charged With Governance And Management and other ISAs (UK) specifically require us to communicate the following: Required communication Where addressed Our responsibilities in relation to the financial statement audit and those of management and Those Charged with Governance. Annual Audit Plan The planned scope and timing of the audit including any limitations, specifically including with respect to significant risks. Annual Audit Plan With respect to misstatements: • Uncorrected misstatements and their effect on our audit opinion; • The effect of uncorrected misstatements related to prior periods; • A request that any uncorrected misstatement is corrected; and • In writing, corrected misstatements that are significant. Annual Audit Report With respect to fraud communications: • Inquiries with the Audit Committee to determine whether you have knowledge of any actual, suspected, or alleged fraud affecting the entity; • Any fraud that we have identified or information we have obtained that indicates that fraud may exist; and • A discussion of any other matters related to fraud. Annual Audit Report and discussion at Audit Committee Audit planning and clearance meetings Where relevant, any issues identified with respect to authority to obtain external confirmations or inability to obtain relevant and reliable audit evidence from other procedures. Annual Audit Report 44
Page 45
Appendix A: Key communication points (continued) Required communication Where addressed Significant matters arising during the audit in connection with the entity’s related parties including, when applicable: • Non-disclosure by management; • Inappropriate authorisation and approval of transactions; • Disagreement over disclosures; • Non-compliance with laws and regulations; and • Difficulty in identifying the party that ultimately controls the entity. Annual Audit Report Significant findings from the audit including: • Our view about the significant qualitative aspects of accounting practices including accounting policies, accounting estimates and financial statement disclosures; • Significant difficulties, if any, encountered during the audit; • Significant matters, if any, arising from the audit that were discussed with management or were the subject of correspondence with management; • Written representations that we are seeking; • Expected modifications to the audit report; and • Other matters, if any, significant to the oversight of the financial reporting process or otherwise identified in the course of the audit that we believe will be relevant to the Council or the Audit Committee in the context of fulfilling their responsibilities. Annual Audit Report Significant deficiencies in internal controls identified during the audit. Annual Audit Report 45
Page 46
Appendix A: Key communication points (continued) Required communication Where addressed Audit findings regarding non-compliance with laws and regulations where the non-compliance is material and believed to be intentional (subject to compliance with legislation on tipping off)} and inquiry of the Audit Committee into possible instances of non-compliance with laws and regulations that may have a material effect on the financial statements that the Audit Committee may be aware of. Annual Audit Report and Audit Committee meetings With respect to going concern, events or conditions identified that may cast significant doubt on the entity’s ability to continue as a going concern, including: • Whether the events or conditions constitute a material uncertainty; • Whether the use of the going concern assumption is appropriate in the preparation and presentation of the financial statements; and • The adequacy of related disclosures in the financial statements. Annual Audit Report Communication regarding our system of quality management, compliant with ISQM (UK) 1, developed to support the consistent performance of quality audit engagements. To address the requirements of ISQM (UK) 1, our firm’s system of quality management team completes, as part of an ongoing and iterative process, key steps to assess and conclude on our firm’s system of quality management, including: • Ensuring there is an appropriate assignment of responsibilities, • Establishing and reviewing quality objectives each year, ensuring our firm’s quality objectives align with our strategies and priorities, • Identifying, reviewing, and updating quality risks each quarter, taking into consideration multiple input sources (such as FRC/ ICAEW review findings, internal monitoring findings, findings from our firm’s root cause analysis and remediation functions, etc.), • Identifying, designing, and implementing responses to strengthen our firm's internal control environment and overall quality, and • Evaluating our quality responses and remediating control gaps or deficiencies. We perform an evaluation of our system of quality management on an annual basis. We publish the details of our annual evaluation, and our conclusion, in our Transparency Report, which can be accessed on our website at: https://www.forvismazars.com/uk/en/who-we- are/corporate-publications/transparency-reports. Annual Audit Plan 46
Page 47
Appendix A: Key communication points (continued) Required communication Where addressed We are required to communicate certain matters to you which include, but are not limited to, significant difficulties, if any, that are encountered during our audit. Such difficulties may include: • Significant delays in management providing information that we require to perform our audit. • An unnecessarily brief time within which to complete our audit. • Extensive and unexpected effort to obtain sufficient, appropriate audit evidence. • Unavailability of expected information. • Restrictions imposed on us by management. • Unwillingness by management to make or extend their assessment of the entity’s ability to continue as a going concern when requested. We will highlight to you on a timely basis should we encounter any such difficulties (if our audit process is unduly impeded, this could require us to issue a modified auditor’s report). Annual Audit Report and audit clearance meetings 47
Page 48
Appendix A: Key communication points (continued) Required communication Where addressed Any limitations on the scope of the group audit, for example, significant matters related to restrictions on access to people or information. Annual Audit Plan and Annual Audit Report, as necessary Fraud or suspected fraud involving group management, component management, employees who have significant roles in the group’s system of internal control or others when the fraud resulted in a material misstatement of the group financial statements. Annual Audit Report and discussion at Audit Committee meetings, audit planning meetings, and audit clearance meetings 48
Page 49
49 Appendix B: Current year updates, forthcoming accounting & other issues HM Treasury changes to non-investment asset valuation Code of Practice on Local Authority Accounting in the United Kingdom 2025/26 (the “Code”) Following a thematic review of non-current asset valuations for financial reporting in the public sector, HMT has made a number of changes to its requirements for the valuation frequency, valuation methodology and classification of non-investment property assets. The changes are effective from 1 April 2025 as set out in the 2025-26 Code and include: • A change to the requirements regarding revaluation frequency. Rather than adhering to paragraph 34 of IAS 16 which requires an asset to be revalued whenever its carrying value differs materially from its fair value, entities will be required to revalue assets on a quinquennial basis, i.e. every five years, supplemented by annual indexation in the intervening years. This requirement can be adhered to either as part of a full revaluation or as part of a rolling programme. The Code requires bodies to use the best index available to them. Should management determine that there is no appropriate index to use, then the quinquennial valuation is supplemented by a valuation in the third year. • Revaluations carried out prior to 2025/26, in line with former requirements of the Code, remain valid throughout the transition period (being 1 April 2025 to the date the next revaluation is due for a given asset). During the transition period, the maximum period between revaluations must not exceed five years. • The requirement to consider indicators of impairment under IAS 36 remains, so management will still be required to undertake an annual assessment of whether there are indicators of impairment, and where these are present, it may be necessary to undertake valuations outside of the 5-yearly valuation programme. Whilst management will no longer need to consider annually whether it is necessary to revalue non-investment assets, they will need to be satisfied that they have appointed a suitably qualified valuer to undertake the valuation of assets whenever they fall due either as part of a full valuation or a rolling programme. If local indices are used, management will need to have sufficient evidence to demonstrate these indices are appropriate and relevant to the entity’s circumstances, and to provide this evidence to the auditor. Effective for accounting periods beginning on or after 1 January 2027 IFRS 18 Presentation and Disclosure in Financial Statements The standard was UK-adopted in December 2025, and the date of incorporation into the Code is not confirmed, though expected to be within the 2028/29 financial year. It is not yet confirmed what interpretations and adaptations HMT will determine are necessary for implementation in the public sector. We have provided an outline of the main changes arising from IFRS 18 as unadapted and without interpretation and will provide an update on the expected impact on the Council as and when detail is available as to when and how the standard is incorporated into the Code. IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18) is a new standard that replaces IAS 1 Presentation of Financial Statements. The new standard aims to increase the comparability, transparency and usefulness of information about companies’ financial performance. It introduces three key new requirements focusing on the presentation of information in the statement of profit or loss and enhancing certain guidance on disclosures within the financial statements.
Page 50
50 Appendix B: Current year updates, forthcoming accounting & other issues Effective for accounting periods beginning on or after 1 January 2027 (continued) IFRS 18 Presentation and Disclosure in Financial Statements • New categories and subtotals for inclusion within the statement of profit or loss • Income and expenses are to be classified into three new defined categories: operating, investing and financing, in addition to the income taxes and discontinued operations categories. • All companies are to present new defined subtotals – operating profit and loss, and profit or loss before financing and income taxes. • New reporting requirements on Management Performance Measures (MPMs) • New requirements are introduced for management-defined performance measures (MPMs), which may also be called Alternative Performance Measures (APMs). These are described as subtotals of income and expenses that an entity: (a) uses in public communications outside financial statements; (b) uses to communicate to users of financial statements management’s view of an aspect of the financial performance; and (c) are not listed within IFRS 18 or specifically required to be presented or disclosed by another IFRS Accounting Standard. • All MPMs are required to be disclosed in a single note in the financial statements setting out: • an explanation of why the MPM is reported, and • a reconciliation to a directly comparable GAAP measure within IFRS 18 or another IFRS Accounting Standard. • Enhanced requirements for aggregation & disaggregating information • Enhanced requirements are set out for the aggregation and disaggregation of items based on similar and dissimilar characteristics. Items that have dissimilar characteristics must be disaggregated when the resulting information is material. Guidance is also included on how to describe items within the financial statements, requiring an entity to label items presented or disclosed as ‘other’ only if a more informative label cannot be found. • New guidance is provided on whether information should be reported in the primary financial statements or the notes. This includes guidance on presentation and disclosure of expenses classified in the operating category, alongside introducing more prescribed requirements for an entity that classifies expenses by function as well as the requirement to disclose expenses by nature in a single note for certain amounts - depreciation, amortisation, employee benefits, impairment and write-downs of inventories Many principles and requirements have been brought forward from IAS 1 to IFRS 18 such as frequency of reporting, comparative information, offsetting, capital disclosures and the requirements for the statement of financial position and for the statement of changes in equity.
Page 51
Contact Forvis Mazars Forvis Mazars LLP is the UK firm of Forvis Mazars Global, a leading global professional services network. Forvis Mazars LLP is a limited liability partnership registered in England and Wales with registered number OC308299 and with its registered office at 30 Old Bailey, London, EC4M 7AU. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001139861. VAT number: GB 839 8356 73 © Forvis Mazars 2026. All rights reserved. Tom Reid Audit Director Tel: +44 781 635 4994 Tom.Reid@mazars.co.uk