Minutes:
The Chairman agreed that the following item of business could be considered of sufficient urgency to warrant consideration.
Mr Waddell, Mazars, informed the Committee that the following would be added as a significant audit risk :
Revenue and expenditure recognition
Auditing standards include a rebuttable presumption that there is a significant risk in relation to the timing of income recognition, and in relation to judgements made by management as to when income has been earned. For public sector organisations the same risk also applies to the recognition of expenditure and contractual obligations.
The pressure to manage income and expenditure to deliver forecast performance in a challenging economic environment increases the risk of fraudulent financial reporting leading to material misstatement and means that we are unable to rebut the presumption.
This does not imply that we suspect actual or intended manipulation but that we approach the audit with due professional scepticism.
We will evaluate the design and implementation of any controls which mitigate the risk. In addition we will undertake a range of substantive procedures including:
· testing of income and expenditure including tests to ensure transactions are recognised in the correct year;
· testing year end receivables, payables, accruals and provisions;
· review of management oversight of material accounting estimates and any changes to accounting policies;
· review judgements about whether the criteria for recognising provisions are satisfied; and
· testing of journals.
Mr Waddell informed the Committee that the Audit Completion Report would be presented in September.