Agenda item

Purpose: For the Governance Committee to consider the External Audit Plan and Strategy for 2024-25 prepared by the Council’s External Auditor (KPMG).

The Committee considered a report (Agenda Item 5) concerning KPMG’s external audit plan and strategy for 2024-25.

The representative from KPMG introduced the report and noted that the details were similar to that in the previous year’s report. However, he highlighted that the level of materiality had slightly increased due to quarter three forecasts from management and that the level of materiality for the audit was therefore considered to be £12.7m. This figure was the threshold for determining if misstatements were significant enough to affect KPMG’s opinion on the accounts. Additionally, he indicated that misstatements of £635,000 and above would be reported to the Governance Committee.

It was also highlighted that KPMG considered the significant audit risks from the previous year to still be applicable, those being around the valuation of land and investments, management overriding controls, pensions, and the fraud risk of management moving expenditure at year end in order to meet targets. The Committee was informed that the audit for 2024/25 would be using the IFRS 16 audit standard which would mean that any leases which would previously have been held off the balance sheet, would now be included. Although the representative from KPMG indicated that they did not believe that it would be highly material, as this was a new standard, it was still considered to be an audit risk. In addition, the Council’s new payroll system was also flagged as being a potential audit risk.

On the value for money risk assessment, the representative from KPMG indicated that they had not received all the needed information from management prior to the meeting, so this report would aim to be taken to the next meeting of the Committee. In addition, KPMG noted that they were awaiting guidance from central government about some of the issues that had arisen as a result of the audit backstop arrangement – such as how they would be dealing with opening balances. However, they were preparing a contingency plan if this was not cleared up by the time their audit was due.

Finaly, KPMG highlighted the independence declaration in the report which confirmed that they were acting independently and objectively when it came to the Council’s audit.  

In response to a question about the nature of the guidance that KMPG were waiting on central government for, the representative from KPMG indicated that they were expecting some form of alteration on the guidance to allow them to draw a line under past statements regarding reserves. If this was not provided, there was the potential risk that KPMG would need to test back to the last audited statements. He indicated that KPMG were awaiting the outcome of a consultation on the issue.

Members questioned the level of misstatements which would trigger them being brought to the Committee’s attention, noting that £635,000 was a very large figure. However, they were assured that this figure was derived from a percentage of overall expenditure and was a standard used across the audit space and was also in line with the risk profile of similar organisations. This level would only be changed if there was a clear justification for a lower level and Members noted that this justification was not present in the case of West Berkshire Council.

Overall, as the Committee was satisfied with the report, they agreed to note KPMG’s External Audit Plan and Strategy for 2024-25.