Statement of responsibilities of auditors and audited bodies: Principal Local Authorities and Police Bodies

Responsibilities in relation to the financial statements

10. The responsibility of the audited body in relation to the financial statements are to:

  • put in place, and review the effectiveness of, a system of internal control, including arrangements to ensure the regularity and lawfulness of transactions;
  • maintain proper accounting records;
  • prepare financial statements that give a true and fair view of the financial position of the body and its expenditure and income and that are in accordance with applicable laws, regulations and accounting policies; and
  • prepare and publish with its financial statements a governance statement.

11. Certain specified bodies also prepare a whole of government accounts return, or a narrative statement by the authority on their financial performance and value for money outcomes over the year, in accordance with proper practices in relation to accounts, alongside the financial statements.

12. A local authority that is the administering authority for a local authority pension fund must prepare pension fund financial statements and an annual report on the pension fund for each financial year. These financial statements must give a true and fair view of:

  • the financial transactions of its pension fund during the year; and
  • the amount and disposition of the fund’s assets and liabilities, other than liabilities to pay pensions and other benefits after the end of the scheme year.

13. In preparing their financial statements, local authorities are responsible for:

  • preparing realistic plans that include clear targets and achievable timetables for the production of the financial statements;
  • assigning responsibilities clearly to staff with the appropriate expertise and experience;
  • providing necessary resources to enable delivery of the plan;
  • maintaining adequate documentation in support of the financial statements and, at the start of the audit, providing a complete set of working papers that provide an adequate explanation of the entries in those financial statements;
  • ensuring that senior management monitors, supervises and reviews work to meet agreed standards and deadlines; and
  • ensuring that a senior individual at top management level personally reviews and approves the financial statements before presentation to the auditor.

14. If draft financial statements and supporting working papers of appropriate quality are not available at the agreed start date of the audit, the auditor is unable to meet the planned audit timetable and the start date of the audit will be delayed.

15. The audit scale fee is calculated on the basis that the draft financial statements, and detailed working papers, are provided to an agreed timetable and are of an acceptable standard. If information is not provided to this timetable, or is provided to an unacceptable standard, the auditor will incur additional costs in carrying out any extra work that is necessary. These additional costs are borne by the audited body.

16. In carrying out their responsibilities in relation to the financial statements auditors should comply with auditing standards as well as other relevant guidance issued by the Financial Reporting Council, and the NAO on behalf of the Comptroller and Auditor General.

17. Auditors provide an opinion on whether the audited body’s financial statements:

  • give a true and fair view of the financial position of the audited body and its expenditure and income for the period in question; and
  • have been prepared properly in accordance with the relevant accounting and reporting framework as set out in legislation, applicable accounting standards or other direction.

18. Auditors plan and perform their audit in compliance with the requirements of the Code and with relevant professional standards issued by the Financial Reporting Council and relevant quality control standards. The auditor’s work is risk-based and proportionate and is designed to meet the auditor’s statutory responsibilities, applying the auditor’s professional judgement to tailor their work to the circumstances in place at the audited body and the audit risks to which they give rise. The auditor conducts their work economically, efficiently and effectively, and in as timely a way as possible.

19. Auditors examine selected transactions and balances on a test basis and assess the significant estimates and judgements made by the audited body in preparing the annual accounts. In carrying out their work, the auditors exercise professional scepticism. They obtain and document such information and explanations as they consider necessary to provide sufficient, appropriate evidence in support of their judgements.

20. Auditors evaluate significant financial systems, and the associated internal financial controls, for the purpose of giving their opinion on the annual accounts. However, they do not provide assurance to audited bodies on the operational effectiveness of specific systems and controls or their wider system of internal control. Where auditors identify any weaknesses in such systems and controls, they draw them to the attention of the audited body, but they cannot be expected to identify all weaknesses that may exist.

21. Auditors review whether the governance statement has been presented in accordance with relevant requirements and report if it does not meet these requirements or if it is misleading or inconsistent with other information of which the auditor is aware. In doing so, auditors take into account the knowledge of the audited body gained through their work in relation to the annual accounts and through their work in relation to the body’s arrangements for securing economy, efficiency and effectiveness in the use of its resources.

22. Auditors are not required to consider whether the governance statement covers all risks and controls, nor are auditors required to express a formal opinion on the effectiveness of the audited body’s corporate governance procedures or risk and control procedures.

23. Auditors are also mindful of the activities of inspectorates and other bodies and take account of them where relevant to prevent duplication and ensure that the demands on audited bodies are managed effectively. In so doing, the auditor is not required to carry out procedures to assess the quality of, or re-perform, the work of inspectorates and other bodies, except where it would be unreasonable not to do so, for example, to provide assurance in accordance with auditing standards issued by the Financial Reporting Council in support of the audit opinion on the financial statements.

24. Auditors also review for consistency other information that is published by the audited body alongside financial statements, such as an annual report. If auditors have concerns about the consistency of any such information they will report them to those charged with governance.

25. At the conclusion of the audit of the accounts, auditors give their opinion on the following matters:

  • whether the financial statements give a true and fair view of the financial position of the audited body and its expenditure and income for the period in question;
  • whether the financial statements have been prepared properly in accordance with relevant legislation and applicable accounting standards;
  • for specified bodies, whether the whole of government accounts return has been properly prepared; and
  • for administering authorities of a local authority pension fund, a separate opinion on the pension fund accounts within their report on the financial statements and a separate opinion on the financial statements contained in the pension fund annual report.
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