10. 2025 03 13 External Audit Plan 2024-25
North Ayrshire Council · 13 March 2025
Back to Audit and Scrutiny Committee — 13 March 2025 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
NORTH AYRSHIRE COUNCIL 13 March 2025 Audit and Scrutiny Committee Title: External Audit Plan 2024/25 Purpose: To inform the Committee of the External Audit Plan for 2024/25. Recommendation: That Committee notes the External Audit Plan for 2024/25. 1. Executive Summary 1.1 Audit Scotland are the Council’s external auditors for the period 2022/23 to 2027/28, with 2024/25 being the third year of this appointment. 1.2 This report provides the Audit and Scrutiny Committee with details of Audit Scotland’s Annual Audit Plan for the 2024/25 audit. 1.3 Following completion of the audit, Audit Scotland will present their annual audit report to the Audit and Scrutiny Committee during September 2025. 1.4 A separate report by the Controller of Audit on North Ayrshire Council’s performance in meeting its Best Value duties will be discussed with the Accounts Commission in October 2025. 2. Background 2.1 Audit Scotland have been appointed as the Council’s external auditors for the period 2022/23 to 2027/28 with 2024/25 being the third year of this appointment. In addition, Audit Scotland are the appointed auditors for the North Ayrshire Integration Joint Board for the same period. 2.2 Audit Scotland’s Annual Audit Plan for the 2024/25 audit is attached at Appendix 1. A representative of Audit Scotland will be in attendance to present the plan to the Committee. 2.3 In planning the audit work, Audit Scotland have identified a number of significant risks, as detailed within Exhibit 2 of the Appendix, and these will form the basis of their audit plans for the year. 2.4 The audit will also include consideration of the arrangements for the consolidation of the subsidiaries and associates included within the Council’s Group statements and the Trustees’ Annual Report for the Council’s charitable trusts.
Page 2
2.5 In addition to the financial statements, the audit will consider the adequacy of the arrangements in place in relation to the wider audit dimensions, including: • Financial Management – consideration of the arrangements to secure sound financial management; • Financial Sustainability – consideration of the challenges arising from uncertainty over Scottish Government funding and costs pressures linked to pay and inflation; • Vision, Leadership and Governance – review of the arrangements in place to deliver the vision, strategy and priorities adopted by the Council; and • Use of Resources to Improve Outcomes – consideration of how the Council demonstrates economy, efficiency and effectiveness. 2.6 Audit Scotland also reports on the Council’s performance in meeting its duties in relation to Best Value. As a result, the Annual Audit Report will include Audit Scotland’s conclusions in relation to the Best Value thematic review of service transformation within the Council. 2.7 North Ayrshire Council has been included within this year’s programme for Best Value reporting. A report by the Controller of Audit on North Ayrshire Council’s performance in meeting its Best Value duties will be discussed with the Accounts Commission in October 2025. 3. Proposals 3.1 That Committee notes the External Audit Plan for 2024/25. 4. Implications/Socio-economic Duty Financial 4.1 The fee which will be charged by Audit Scotland for the 2024/25 audit work will be £384,980. This represents an increase of £7,220 (1.9%) against the 2023/24 fee. Human Resources 4.2 None. Legal 4.3 None. Equality/Socio-economic 4.4 None. Environmental and Sustainability 4.5 None.
Page 3
Key Priorities 4.6 This report directly supports the Council Plan 2023 to 2028 by maximising financial flexibility to support the delivery of our priorities and focussing our investment on priorities. Community Wealth Building 4.7 None. 5. Consultation 5.1 Audit Scotland consulted with the Head of Service (Finance) in preparing their audit plan. Mark Boyd Head of Service (Finance) For further information please contact David Forbes, Senior Manager (Strategic Business Partner), on 01294 324551. Background Papers None
Page 4
North Ayrshire Council Annual Audit Plan 2024/25 Prepared for North Ayrshire Council February 2025
Page 5
North Ayrshire Council Annual Audit Plan | 2 Contents Introduction 3 Audit scope and responsibilities 4 Audit of the annual accounts 6 Wider scope and Best Value 15 Reporting arrangements, timetable and audit fee 17 Other matters 20 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility.
Page 6
Introduction | 3 Introduction Purpose of the Annual Audit Plan 1. The purpose of this Annual Audit Plan is to provide an overview of the planned scope and timing of the 2024/25 audit of North Ayrshire Council’s annual accounts. It outlines the audit work planned to meet the audit requirements set out in auditing standards and the Code of Audit Practice, including supplementary guidance. Arrangements for the audit of the Annual Accounts of the eight section 106 Charitable Trusts administered by the Council are detailed in paragraphs 21-30. Appointed auditor and independence 2. Fiona Mitchell-Knight, of Audit Scotland, has been appointed by the Accounts Commission as external auditor of North Ayrshire Council for the period from 2022/23 until 2026/27. The 2024/25 financial year is therefore the third of the five-year audit appointment. 3. Fiona Mitchell-Knight and the audit team are independent of North Ayrshire Council in accordance with relevant ethical requirements, including the Financial Reporting Council’s Ethical Standard. This standard imposes stringent rules to ensure the independence and objectivity of auditors. Audit Scotland has robust arrangements in place to ensure compliance with ethical standards. The arrangements are overseen by the Executive Director of Innovation and Quality, who serves as Audit Scotland’s Ethics Partner. 4. The Ethical Standard requires auditors to communicate any relationships that may affect the independence and objectivity of the audit team. There are no such relationships pertaining to the audit of North Ayrshire Council to communicate.
Page 7
Audit scope and responsibilities | 4 Audit scope and responsibilities Scope of the audit 5. The audit is performed in accordance with the Code of Audit Practice, including supplementary guidance, International Standards on Auditing (UK), and relevant legislation. These set out the requirements for the scope of the audit which includes: • An audit of the financial statements and an opinion on whether they give a true and fair view and are free from material misstatement. • An opinion on statutory other information published with the financial statements in the annual accounts, the Management Commentary, and the Annual Governance Statement, and an opinion on the audited part of the Remuneration Report. • Conclusions on North Ayrshire Council’s arrangements in relation to the wider scope areas: Financial Management, Financial Sustainability, Vision, Leadership, and Governance, and Use of Resources to Improve Outcomes. • Reporting on the council’s arrangements for securing Best Value. • Providing assurance on the Housing Benefit Subsidy Claim, Non-Domestic Rates Return, and the Whole of Government Accounts return. • A review of North Ayrshire Council’s arrangements for preparing and publishing statutory performance information. • Provision of an Annual Audit Report setting out significant matters identified from the audit of the annual accounts and the wider scope areas specified in the Code of Audit Practice. Responsibilities 6. The Code of Audit Practice sets out the respective responsibilities of North Ayrshire Council and the auditor. A summary of the key responsibilities is outlined below. Auditor’s responsibilities 7. The responsibilities of auditors in the public sector are established in the Local Government (Scotland) Act 1973. These include providing an independent opinion on the financial statements and other information
Page 8
Audit scope and responsibilities | 5 reported within the annual accounts, and concluding on North Ayrshire Council’s arrangements in place for the wider scope areas. North Ayrshire Council’s responsibilities 8. North Ayrshire Council has primary responsibility for ensuring proper financial stewardship of public funds, compliance with relevant legislation and establishing effective arrangements for governance, propriety and regularity that enables it to successfully deliver its objectives. The features of proper financial stewardship include: • Establishing arrangements to ensure the proper conduct of its affairs. • Preparation of annual accounts, comprising financial statements and other information that gives a true and fair view. • Establishing arrangements for the prevention and detection of fraud, error and irregularities, and bribery and corruption. • Implementing arrangements to ensure its financial position is soundly based. • Making arrangements to secure Best Value. • Establishing an internal audit function. 9. In line with ISA (UK) 240 (The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements), in presenting this plan to the Audit and Scrutiny Committee we seek confirmation from those charged with governance of any instances of actual, suspected, or alleged fraud that should be brought to our attention. During our audit, should members of the council have any such knowledge or concerns relating to the risk of fraud within it, we invite them to communicate this to us for our consideration.
Page 9
Audit of the annual accounts | 6 Audit of the annual accounts Introduction 10. The audit of the annual accounts is driven by materiality and the risks of material misstatement in the financial statements, with greater attention being given to the significant risks of material misstatement. This chapter outlines materiality, the significant risks of material misstatement that have been identified, and the impact these have on the planned audit procedures. Materiality 11. The concept of materiality is applied by auditors in planning and performing an audit, and in evaluating the effect of any uncorrected misstatements on the financial statements or other information reported in the annual accounts. 12. Broadly, the concept of materiality is to determine whether matters identified during the audit could reasonably be expected to influence the decisions of users of the financial statements. Auditors set a monetary threshold when determining materiality, although some issues may be considered material by their nature. Therefore, materiality is ultimately a matter of the auditor’s professional judgement. 13. The materiality levels determined for the audit of North Ayrshire Council and its group are outlined in Exhibit 1. Exhibit 1 2024/25 Materiality levels for North Ayrshire Council and its group Materiality NAC Group Materiality – based on an assessment of the needs of users of the financial statements and the nature of North Ayrshire Council’s operations, the benchmark used to determine materiality is gross expenditure based on the audited 2023/24 financial statements. Materiality has been set at 2% of the benchmark. £16.5 million £20.4 million
Page 10
Audit of the annual accounts | 7 Materiality NAC Group Performance materiality – this acts as a trigger point. If the aggregate of misstatements identified during the audit exceeds performance materiality, this could indicate that further audit procedures are required. Using professional judgement, performance materiality has been set at 70% of planning materiality. £11.5 million £14.3 million Reporting threshold – all misstatements greater than the reporting threshold will be reported. £0.8 million £1.0 million Source: Audit Scotland Significant risks of material misstatement to the financial statements 14. The risk assessment process draws on the audit team’s cumulative knowledge of North Ayrshire Council, including the nature of operations and significant transaction streams, the system of internal control, governance arrangements and processes, and developments that could impact on its financial reporting. 15. Based on the risk assessment process, significant risks of material misstatement to the financial statements have been identified and these are summarised in Exhibit 2, page 8. These are the risks which have the greatest impact on the planned audit approach, and the planned audit procedures in response to the risks are outlined in Exhibit 2. 16. The risk assessment process is an iterative and dynamic process. The assessment of risks set out in this Annual Audit Plan and Exhibit 2 may change as more information and evidence is obtained over the course of the audit. Where such changes occur, these will be reported to North Ayrshire Council and those charged with governance, where relevant.
Page 11
Audit of the annual accounts | 8 Exhibit 2 Significant risks of material misstatement to the financial statements Risk of material misstatement Planned audit response Fraud caused by management override of controls Management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. The audit team will: • Evaluate 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. • Test journals entries, focusing on those that are assessed as higher risk, such as those affecting revenue and expenditure recognition around the year-end. • Evaluate significant transactions outside the normal course of business. • Assess the adequacy of controls in place for identifying and disclosing related party relationships and transactions in the financial statements. • Assess changes to the methods and underlying assumptions used to prepare accounting estimates and assess these for evidence of management bias. Valuation of property, plant and equipment North Ayrshire Council held £1,313.3 million of property, plant, and equipment (PPE) at 31 March 2024, of which £1,052.4 million was land and building assets. North Ayrshire Council is required to value land and building assets at existing use value where an active market exists for these assets. Where there is no active market, these assets are valued on a depreciated cost replacement (DRC) basis. As a result, there is a significant degree of subjectivity in these valuations which are based on specialist assumptions, and changes in the assumptions can result in material changes to valuations. The audit team will: • Evaluate the design and implementation of controls over the valuation process. • Review the information provided to the valuer and assess this for completeness and accuracy. • Evaluate the competence, capabilities, and objectivity of the valuer. • Obtain an understanding of management’s involvement in the valuation process to assess if appropriate oversight has occurred. • Review the appropriateness of the key data and assumptions used in the 2024/25 valuation process, and challenge these where required. • Review management’s assessment that the value in the balance sheet of assets not subject to a valuation process in 2024/25 is not materially different to current value at the year- end, and challenge this where required.
Page 12
Audit of the annual accounts | 9 Risk of material misstatement Planned audit response Implementation of IFRS 16 From 1 April 2024, a new International Financial Reporting Standard, IFRS 16, came into effect for Local Authorities. IFRS 16 introduces a new ‘Right of Use’ asset class to the Balance Sheet and recognises the corresponding lease liability. This applies to all leases – property, land, vehicles, plant, and equipment. Specifically, this will also impact on the council’s school service concession arrangements (PPP and DBFM). IFRS 16 will change the way in which the council accounts for operating leases, including recognising assets and liabilities for the rights and obligations arising from leases previously classified as operating leases. The audit team will: • Evaluate the design and implementation of controls established by the council over the implementation of IFRS 16. • Assess whether service concession arrangements have been accounted for in accordance with the requirements of IFRS 16. • Test the IFRS 16 transitional accounting adjustments and confirm these are accurate and comply with the financial reporting framework. Source: Audit Scotland Key audit matters 17. The Code of Audit Practice requires public sector auditors to communicate key audit matters. Key audit matters are those matters, that in the auditor’s professional judgement, are of most significance to the audit of the financial statements and require most attention when performing the audit. 18. In determining key audit matters, auditors consider: • Areas of higher or significant risk of material misstatement. • Areas where significant judgement is required, including accounting estimates that are subject to a high degree of estimation uncertainty. • Significant events or transactions that occurred during the year. 19. The matters determined to be key audit matters will be communicated in the Annual Audit Report. Exhibit 2 outlines the significant risks of material misstatement to the financial statements that have been identified, including those that have greatest impact on the planned audit procedures and require most attention when performing the audit.
Page 13
Audit of the annual accounts | 10 Group audit 20. North Ayrshire Council is part of a group and prepares group financial statements. The group is made up of nine components, including North Ayrshire Council, which is the parent of the group. Risk assessment procedures have been performed on the group audit to identify if there are any risks of material misstatement to the group financial statements, or any components where audit procedures are required for the purposes of the group audit. The outcome of the risk assessment procedures on the group audit are outlined in exhibit 3. Exhibit 3 Outcome of risk assessment procedures on the group audit Group component Accounting treatment Risk of material misstatement Audit procedures required Auditor North Ayrshire Council Consolidated on a line-by-line basis Yes – Exhibit 2 Yes – full scope audit Audit Scotland Common Good Funds Consolidated on a line-by-line basis No – not material to group financial statements Yes – analytical procedures at group level Audit Scotland Trust Funds Consolidated on a line-by-line basis No – not material to group financial statements Yes – analytical procedures at group level Audit Scotland North Ayrshire Ventures Trust Consolidated on a line-by-line basis No – not material to group financial statements Yes – analytical procedures at group level Galbraith Pritchards North Ayrshire Leisure Limited Consolidated on a line-by-line basis No – not material to group financial statements Yes – analytical procedures at group level Azets Audit Services Limited
Page 14
Audit of the annual accounts | 11 Group component Accounting treatment Risk of material misstatement Audit procedures required Auditor Strathclyde Partnership for Transport (SPT) Accounted for on equity basis Yes – risk of material misstatement due to management override, estimation in the valuation of the land and buildings balance and pension asset or liability balance included in the group’s share of SPT’s net assets. Yes – obtaining assurances on the audit procedures carried out on management override, valuation of land and buildings and valuation of pension asset or liability balance in SPT Audit Scotland Strathclyde Concessionary Travel Scheme Joint Board Accounted for on equity basis No – not material to group financial statements Yes – analytical procedures at group level Audit Scotland Ayrshire Valuation Joint Board Accounted for on equity basis No – not material to group financial statements Yes – analytical procedures at group level Audit Scotland North Ayrshire Integration Joint Board Accounted for on equity basis No – not material to group financial statements Yes – analytical procedures at group level Audit Scotland Source: Audit Scotland As the auditor of SPT, Fiona Mitchell-Knight is also the council’s auditor, assurances will be taken from the SPT audit in reaching the audit opinion on the council’s group accounts. Audit of the Annual Accounts of the eight section 106 charities administered by the Council 21. Elected members of the Council are trustees for eight registered Scottish charities (the charities): • Anderson Park Trust: charity number - SC042136 • Douglas Sellers Trust: charity number - SC042101 • Margaret Archibald Bequest: charity number - SC042117
Page 15
Audit of the annual accounts | 12 • North Ayrshire Charitable Trust: charity number - SC025083 • North Ayrshire Council (Dalry) Charitable Trust: charity number - SC043644 • North Ayrshire Council (Kilbirnie and Glengarnock) Charitable Trusts: charity number - SC043600 • North Ayrshire Council (Kilwinning) Charitable Trust: charity number - SC043374 • North Ayrshire Council (Largs) Charitable Trust: charity number - SC043494 22. David Jamieson, of Audit Scotland, has been appointed by the Accounts Commission as external auditor of the charities, for the period from 2022/23 until 2026/27. The 2024/25 financial year is therefore the third of the five-year audit appointment. 23. The Ethical Standard requires auditors to communicate any relationships that may affect the independence and objectivity of the audit team. There are no such relationships pertaining to the audit of the Charities to communicate. 24. The trust balances are disclosed in a note in the council’s Annual Accounts but do not represent assets of the council so are not included within the council’s balance sheet. As a result of the interaction of the Local Government (Scotland) Act 1973 with charities legislation, a full and separate audit and independent auditor’s report is required for each registered charity irrespective of the value of its assets. 25. Our duties as auditors of the charities administered by North Ayrshire Council are to: • express an opinion on whether the charity’s financial statements properly present the charity’s financial position and are prepared in accordance with charities legislation. • read the Trustees’ Annual Report and express an opinion as to whether it is consistent with the financial statements. • report on other matters, by exception, to the Trustees and to the Office of the Scottish Charity Regulator (OSCR). 26. Based on our risk assessment, we have identified one significant audit risk for the Trustees Annual Report and Financial Statements, being “fraud caused by management override of controls”. Our response to this risk includes the same audit procedures as set out in exhibit 2. 27. Our calculated materiality levels are set out in exhibit 4.
Page 16
Audit of the annual accounts | 13 Exhibit 4 2024/25 materiality levels for the charitable trusts Charitable trust Planning Materiality Performance Materiality Reporting Threshold Anderson Park Trust (SC042136) £1 (Based on 2% of audited 2023/24 net asset value; £1 minimum) £1 (Based on 75% of planning materiality; £1 minimum) £1 (Based on 5% of overall materiality; £1 minimum) Douglas Sellers Trust (SC042101) £3 (Based on 2% of audited 2023/24 net asset value) £2 (Based on 75% of planning materiality) £1 (Based on 5% of overall materiality; £1 minimum) Margaret Archibald Bequest (SC042117) £5,703 (Based on 2% of audited 2023/24 net asset value) £4,277 (Based on 75% of planning materiality) £285 (Based on 5% of overall materiality) North Ayrshire Council Charitable Trust (SC025083) £6,196 (Based on 2% of audited 2023/24 net asset value) £4,647 (Based on 75% of planning materiality) £310 (Based on 5% of overall materiality) North Ayrshire Council (Dalry) Charitable Trust (SC043644) £36 (Based on 2% of audited 2023/24 net asset value) £27 (Based on 75% of planning materiality) £2 (Based on 5% of overall materiality) North Ayrshire Council (Kilbirnie & Glengarnock) Charitable Trust (SC043600) £60 (Based on 2% of audited 2023/24 net asset value) £45 (Based on 75% of planning materiality) £3 (Based on 5% of overall materiality) North Ayrshire Council (Kilwinning) Charitable Trust (SC043374) £755 (Based on 2% of audited 2023/24 net asset value) £566 (Based on 75% of planning materiality) £38 (Based on 5% of overall materiality) North Ayrshire Council (Largs) Charitable Trust (SC043494) £46 (Based on 2% of audited 2023/24 net asset value) £35 (Based on 75% of planning materiality) £2 (Based on 5% of overall materiality)
Page 17
Audit of the annual accounts | 14 28. The Code of Audit Practice includes provisions relating to the audit of smaller audits. In light of the volume and lack of complexity of the financial transactions, we plan to apply the less complex body provision of the Code to the 2024/25 audit of the charities. 29. No significant risks in the wider scope areas or Best Value were identified from the risk assessment process. 30. Our work on the Trustees Annual Report and Financial Statements will be undertaken in line with the audit timetable set out in Exhibit 5.
Page 18
Wider scope and Best Value | 15 Wider scope and Best Value Introduction 31. Reflecting the fact that public money is involved, the Code of Audit Practice requires that public audit is planned and undertaken from a wider perspective than in the private sector. The wider scope audit set out by the Code of Audit Practice broadens the audit of the annual accounts to include consideration of additional aspects or risks in four wider scope areas, which are summarised below: • Financial Management – this means having sound budgetary processes. Factors that can impact on North Ayrshire Council’s being able to secure sound financial management include the strength of the financial management culture, accountability, and arrangements to prevent and detect fraud, error and other irregularities, bribery and corruption. • Financial Sustainability – this means looking forward over the medium and longer term in planning the services to be delivered and how they will be delivered effectively. This is assessed by considering North Ayrshire Council’s medium- to longer-term planning for service delivery. • Vision, Leadership and Governance – this means having a clear vision and strategy, with set priorities within the vision and strategy. This is assessed by considering the clarity of plans in place to deliver the vision and strategy and the effectiveness of the governance arrangements to support delivery. • Use of Resources to Improve Outcomes – this means using resources to meet stated outcomes and improvement objectives through effective planning and working with partners and communities. This is assessed by considering North Ayrshire Council’s arrangements for ensuing resources are deployed to improve strategic outcomes, meet the needs of service users, and deliver continuous improvement. 32. A conclusion on the effectiveness and appropriateness of arrangements North Ayrshire Council has in place for each of the wider scope areas will be reported in the Annual Audit Report. Best Value 33. Under the Code of Audit Practice, the audit of Best Value in councils is fully integrated within the annual audit. As part of the annual audit, auditors
Page 19
Wider scope and Best Value | 16 are required to take a risk-based approach to assessing and reporting on whether the council has made proper arrangements for securing Best Value, including follow up of findings previously reported in relation to Best Value. 34. The Accounts Commission also reports nationally on thematic aspects of councils’ approaches to, and performance in, meeting their Best Value duties. As part of the annual audit, thematic reviews, as directed by the Accounts Commission, are conducted on North Ayrshire Council. The thematic review for 2024/25 is on the subject of service transformation and involves considering how the council is redesigning services to maintain outcomes and deliver services more efficiently. Conclusions and judgements on the thematic review will be reported in a separate Management Report and summarised in the Annual Audit Report, where required. 35. At least once over the five-year appointment, the Controller of Audit will report to the Accounts Commission on the Council’s performance in meeting its Best Value duties. North Ayrshire Council is included in the third year of the programme. The Controller of Audit Report will be discussed with the Accounts Commission in October 2025. Significant wider scope and Best Value risks 36. No significant risks in the wider scope areas or Best Value were identified from the risk assessment process. 37. Whilst not a significant audit risk, the challenging financial environment in which North Ayrshire Council, along with other public sector bodies, is operating in, has been identified as an area of audit focus. There are challenges to the medium and longer-term financial sustainability due to the uncertainty over future Scottish Government funding allocations, the rising cost of inflation and the cost of implementing future pay settlements. Our annual audit report will include comment on the council’s 2024/25 financial outturn, 2025/26 budget, and its medium-term financial plan.
Page 20
Reporting arrangements, timetable and audit fee | 17 Reporting arrangements, timetable and audit fee Audit outputs 38. The outputs from the 2024/25 audit include: • This Annual Audit Plan. • A Best Value Management Report on service transformation • An Independent Auditor’s Report to North Ayrshire Council and the Accounts Commission setting out opinions on the annual accounts. • An Annual Audit Report to North Ayrshire Council and the Accounts Commission setting out significant matters identified from the audit of the annual accounts, conclusions from the wider scope and Best Value audit, and recommendations, where required. • A Controller of Audit Report to North Ayrshire Council and the Accounts Commission setting out conclusions on the council’s Best Value arrangements. 39. The matters to be reported in the outputs will be discussed with North Ayrshire Council for factual accuracy before they are issued. All outputs from the audit will be published on Audit Scotland’s website, apart from the Independent Auditor’s Report, which is included in the audited annual accounts. 40. Target dates for the audit outputs are set by the Accounts Commission. In setting the target dates for the audit outputs, consideration is given to the statutory date for approving the annual accounts, which is 30 September 2025 for local government bodies. 41. The Independent Auditor’s Report and Annual Audit Report are planned to be issued by the target date of 30 September 2025. Audit timetable 42. Achieving the timetable for production of the annual accounts, supported by complete and accurate working papers, is critical to delivery of the audit to agreed target dates. Exhibit 5 includes a timetable for the audit, which has been agreed with management. Agreed target dates will be kept under review as the audit progresses, and any changes required,
Page 21
Reporting arrangements, timetable and audit fee | 18 and their potential impact, will be discussed with North Ayrshire Council and reported to those charged with governance, where required. Exhibit 5 2024/25 audit timetable Audit activity Audit team target date Relevant committee date Issue of Annual Audit Plan 28 February 2025 13 March 2025 Annual accounts: • Consideration of unaudited annual accounts by those charged with governance 25 June 2025 • Submission of unaudited annual accounts and all working papers to audit team By 30 June 2025 • Latest date for audit clearance meeting, issue of draft Letter of Representation, proposed Independent Auditor’s Report, and proposed Annual Audit Report 12 September 2025 • Approval by those charged with governance and signing of audited annual accounts TBC - September 2025 • Signing of Independent Auditor’s Report and issue of Annual Audit Report TBC - September 2025 Issue of Best Value Management Report 28 August 2025 Issue of Controller of Audit Best Value Report TBC – October 2025 Source: Audit Scotland
Page 22
Reporting arrangements, timetable and audit fee | 19 Audit fee 43. North Ayrshire Council’s audit fee is determined in line with Audit Scotland’s fee setting arrangements. The agreed audit fee for the 2024/25 audit of £384,980 (£377,760 in 2023/24) is set out in exhibit 6. 44. We have also agreed an audit fee of £1,100 (£1,100 in 2023/24) for the audit of the registered charities administered by the council. 45. In setting the audit fee, it is assumed that North Ayrshire Council has effective governance arrangements in place and the complete annual accounts will be provided for audit in line with the agreed timetable. The audit fee assumes there will be no significant changes to the planned scope of the audit. Where the audit cannot proceed as planned, for example, due to incomplete or inadequate working papers, the audit fee may need to be increased. Exhibit 6 Audit fee (including VAT) Fee component1 Fee (£) External auditor remuneration 275,920 Pooled costs, such as travel and subsistence costs 6,930 Contribution to audit support costs, including technical guidance and support to auditors 0 Contribution to the performance audit programme 69,620 Adjustment for average audit price increase 32,510 Total 2024/25 fee 384,980 Source: Audit Scotland 1 Information on the components that make up the total fee can be found in Audit Scotland’s Audit management and quality guidance.
Page 23
Other matters | 20 Other matters Internal audit 46. North Ayrshire Council is responsible for establishing an internal audit function as part of an effective system of internal control. As part of the audit, the audit team will obtain an understanding of internal audit, including its nature, responsibilities, and activities. 47. While internal audit and external audit have differing roles and responsibilities, external auditors may seek to rely on the work of internal audit where it is considered appropriate. A review of internal audit’s 2024/25 audit plan was carried out to identify if there were any areas where the audit team could rely on its work. The audit team concluded it will not rely on internal audit’s work. However, the audit team will review internal audit's reports and assess if there is any impact on the audit. Audit quality 48. Audit Scotland is committed to the consistent delivery of high-quality audit. Audit quality requires ongoing attention and improvement to keep pace with external and internal changes. Details of the arrangements in place for the delivery of high-quality audits is available from the Audit Scotland website. 49. The International Standards on Quality Management (ISQM) applicable to Audit Scotland for 2024/25 audits are: • ISQM (UK) 1, which deals with an audit organisation’s responsibilities to design, implement, and operate a system of quality management (SoQM) for audits. Audit Scotland’s SoQM consists of a variety of components, such as: governance arrangements and culture to support audit quality, compliance with ethical requirements, ensuring Audit Scotland is dedicated to high- quality audit through engagement performance and resourcing arrangements, and ensuring there are robust quality monitoring arrangements in place. Audit Scotland carries out an annual evaluation of its SoQM and has concluded it complies with this standard. • ISQM (UK) 2, which sets out arrangements for conducting engagement quality reviews, which are performed by senior management not involved in an audit, to review significant judgements and conclusions reached by the audit team, and the appropriateness of proposed audit opinions on high-risk audits.
Page 24
Other matters | 21 50. To monitor quality at an individual audit level, Audit Scotland carries out internal quality reviews on a sample of audits. Additionally, the Institute of Chartered Accountants of England and Wales (ICAEW) carries out independent quality reviews on a sample of audits. 51. Actions to address deficiencies identified by internal and external quality reviews are included in a rolling Quality Improvement Action Plan, which is used to support continuous improvement. Progress with implementing planned actions is monitored on a regular basis by Audit Scotland’s Quality and Ethics Committee. 52. Audit Scotland may periodically seek the views of North Ayrshire Council on the quality of audit services provided. The audit team would also welcome feedback at any time.
Page 25
North Ayrshire Council Annual Audit Plan 2024/25 Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot AS.5.0