A Jha took the report as read, noting the significant risk areas as management override of controls, valuation of land and buildings and the net pension fund liability.
Cllr Birnie commented on the list of assets under the valuation of land and buildings and asked if this is the same asset audit they were told would take place this year to include land.
F Jump explained that this refers to the audit of the Council's published financial accounts and arrangements for producing these. Assets include all Council assets rather than a specific internal-facing review and is part of the overall external audit of the Council's financial accounts.
A Jha advised that some misstatements are above the headline materiality, which is currently £3.5m, and this accounts for 2% of the current year's gross operating costs for the year. The initial risk assessment for value for money audit has also been conducted and no significant weaknesses have been found in the planning at risk assessment stages.
A Jha referred to two new accounting standards, ISO 315 and ISO 240, noting that an assessment of internal controls of the IT infrastructure and systems is now required and that the assessment of the general ledger system will be conducted.
Cllr Birnie asked if the auditor's fees have increased.
A Jha advised that the fee has not increased significantly.
F Jump suggested that fees have increased by a reasonable amount over recent years to reflect the increased scope of the audit work being carried out and that the Council should expect an ongoing increase in fees.
Cllr Elliot asked if the £82,000 is the set fee for each year or is an estimate of the actual work that will be carried out.
A Jha stated that, at planning stage, they estimate the fee that they will be billing the Council for the year and that the £82,000 will be the fee for the year unless there is a change in scope or additional work is required.
Cllr Elliot commented that the fee may increase to £150,000 due to the issues with other councils.
F Jump explained that there is a scale fee set by the PSAA and as the work is carried out, external audit colleagues will feed back on additional work that is required and variations to the fee. The PSAA will then give a final verdict on the final fee and this will have to be paid. On the £150,000, F Jump explained that this is in reference to seeing an increase of around 150% in terms of the levels of fees to reflect the increased scope of audit work.
Cllr Birnie suggested that the strong performance of the Council in recent audits should mean that fees increase less slowly. F Jump advised that this strong performance does not mean there is a reduced workload for external audit colleagues.
A Jha advised that the Council will receive the scale fees in November 2023 and this will be made publicly available.
The Chair asked if the resource is in place to carry out the external audit. A Jha advised that the Council is one of Grant Thornton's stage 1 audits and gets the benefit of being very good with financial statements.
A Jha referred to the additional work regarding the IT infrastructure, noting that the general ledger system and payroll system have been identified as the key systems and a design assessment will be performed to understand the processes and controls in place.
Cllr Birnie asked if the Council outsources its payroll.
F Jump confirmed that the Council has a small in-house to handle administration and they utilise MHR for the provision of payroll services.
Cllr Birnie asked if the hybrid payroll system increases the auditing work.
A Jha explained that they don't have to technically test the payroll system and that the work is around understanding the controls around it. If the outcome of the assessment requires more work then the scope will be increased.
The committee noted the external audit plan for 2022-23.