CAIRNGORMS NATION­AL PARK AUTHORITY

Audit & Risk Com­mit­tee Paper 3 Annex I 08/03/2019

Grant Thornton

Cairngorms Nation­al Park Authority

Extern­al Audit Plan for the fin­an­cial year end­ing 31 March 2019

Audit and Risk Com­mit­tee 8 March 2019

DRAFT

Joanne Brown Engage­ment Leader

John Boyd Seni­or Manager

©2019 Grant Thornton UK LLP | Cairngorms Nation­al Park Author­ity | March 2019

Our audit at a glance

An audit under­pinned by qual­ity and adding value to you

• Per­form­ance mater­i­al­ity: is set at 75% and trivi­al is 5% of mater­i­al­ity. This is con­sist­ent with pri­or year and reflects min­im­al audit adjust­ments in pri­or year and our under­stand­ing Cairngorms Nation­al Park Author­ity (‘the Author­ity’) in a year three of our audit cycle.
• Plan­ning mater­i­al­ity: is set at 2% of oper­at­ing expendit­ure (£120,000) based on ²⁰¹⁷⁄₁₈ audited inform­a­tion. This is based on our assess­ment of what mis­state­ment either indi­vidu­ally or in aggreg­ate could be sig­ni­fic­ant as to be mis­lead­ing to the users of fin­an­cial statements.
• Sig­ni­fic­ant audit risks: are: man­age­ment over­ride of con­trols; the risk of fraud in rev­en­ue as set out in Inter­na­tion­al Stand­ards on Audit­ing (ISAs UK); and risk of fraud in expendit­ure as set out in prac­tice Note 10.
• Our audit: is under­taken in accord­ance with the Audit Scot­land Code of Audit Prac­tice and reflects the wider scope nature of pub­lic audit. In accord­ance with Audit Scot­land guid­ance, we con­sider the Author­ity to be a smal­ler body for the pro­poses of wider scope respons­ib­il­it­ies. There­fore the focus of our work will be on fin­an­cial sus­tain­ab­il­ity and gov­ernance state­ment disclosures.
• The Author­ity: is the lead body for the Tomin­toul & Glen­liv­et Land­scape Part­ner­ship and Account­able Body for Cairngorms ​‘LEAD­ER’, Caper­cail­lie Frame­work and the Great Place Badenoch Pro­ject. As pro­ject lead, the Author­ity makes advances to pro­ject applic­ants which are in turn reclaimed from fun­ders there is a risk that such funds may not be allow­able under the terms of the pro­ject and. in such instances the author­ity would fall liable for the costs incurred. As part of our audit we will focus on the recov­er­ab­il­ity of advance bal­ances at the year end.

Con­tents

Sec­tion	Page
1. Over­arch­ing prin­ciples of our audit	4
2. Audit approach and materiality	5
3. A risk based audit methodology	6
4. Wider scope audit — smal­ler body approach	7

Appen­dices:

Appendix	Page
1. Key audit deliv­er­ables and our team	9
2. Audit process	10
3. Fees and independence	11
4. Fraud	12
5. Respect­ive responsibilities	13
6. Tech­nic­al updates	14
7. Com­mu­nic­a­tion of audit mat­ters to those charged with governance	16

Over­arch­ing prin­ciples of our audit

Our audit is risk based and under­taken in accord­ance with the Inter­na­tion­al Stand­ards on Audit­ing (ISAs) (UK) and the Audit Scot­land Code of Audit Prac­tice 2016 (‘the Code’).

Our over­all object­ive is a effect­ive, qual­ity-focused extern­al audit which adds value through wider insights and chal­lenge. Our audit found­a­tions are:

✓ pro­fes­sion­al scepticism

✓ a focus on audit risks and key areas of man­age­ment judgement

✓ Deliv­er­ing a qual­ity audit through our exper­i­enced pub­lic sec­tor audit team, use of data ana­lyt­ics to focus our audit and under­stand­ing of the organisation

✓ clear and upfront com­mu­nic­a­tions, with reg­u­lar com­mu­nic­a­tion dur­ing the year

✓ report­ing with focused actions which will sup­port you in improv­ing your controls/​operations

Adding value

Our aim is to add value to the Author­ity through our extern­al audit work. This will be delivered through deliv­er­ing a high qual­ity audit. Spe­cific­ally for the Author­ity we will also under­take the fol­low­ing arrangements:

• Robust and effect­ive audit meth­od­o­logy: Our ISA com­pli­ant audit meth­od­o­logy is tailored to focus audit resource on sig­ni­fic­ant risk areas and key estim­ates and judgements.
• Invest­ing in our people: Our resourcing mod­el is designed to ensure you have a skilled, exper­i­enced and know­ledge­able audit team.
• Invest­ing in tech­no­logy: We con­tin­ue to invest in data ana­lys­is and audit soft­ware to deliv­er more effi­cient ISA com­pli­ant audit processes.

We will share rel­ev­ant Audit Scot­land and Grant Thornton pub­lic­a­tions with Seni­or Man­age­ment and the Audit and Risk Com­mit­tee, identi­fy­ing par­tic­u­lar areas for con­sid­er­a­tion. We will pro-act­ively work with man­age­ment dur­ing the year to dis­cuss any new or emer­ging mat­ters, such as the new rev­en­ue stand­ards which come into effect from 1 April 2019.

Audit approach and materiality

We under­take your audit in accord­ance with Inter­na­tion­al Stand­ards on Audit­ing (UK) (ISAs) and the Audit Scot­land Code of Audit Prac­tice (May 2016). On an annu­al basis we are required to give an opin­ion as to wheth­er the Fin­an­cial Statements:

• give a true and fair view
• have been prop­erly pre­pared in accord­ance with rel­ev­ant legis­la­tion and standards
• audited parts of the remu­ner­a­tion and staff report have been pre­pared in accord­ance with the guidance
• reg­u­lar­ity of expenditure
• the wider inform­a­tion con­tained in the fin­an­cial state­ments e.g. Account­ab­il­ity Report; Dir­ect­ors Report and Gov­ernance Statement

Basis for materiality

We determ­ine fin­an­cial state­ment mater­i­al­ity based on a pro­por­tion of the total oper­at­ing expendit­ure. This approach is con­sist­ent with our pri­or year mater­i­al­ity determ­in­a­tion. We have determ­ined mater­i­al­ity to be £0.120 mil­lion, which equates to approx­im­ately 2% of your pri­or year total oper­at­ing expendit­ure for the year. This is based on our judge­ment of our con­sid­er­a­tion of mater­i­al to the user of the account based on under­stand­ing of the Authority.

We recon­sider plan­ning mater­i­al­ity if, dur­ing the course of our audit engage­ment, we become aware of facts and cir­cum­stances that would have caused us to make a dif­fer­ent determ­in­a­tion of plan­ning materiality.

Per­form­ance materiality

Per­form­ance mater­i­al­ity rep­res­ents the amount set for the fin­an­cial state­ments as a whole to reduce the prob­ab­il­ity that the aggreg­ate of uncor­rec­ted and undetec­ted mis­state­ments exceed mater­i­al­ity. Based on our audit exper­i­ence in ²⁰¹⁷⁄₁₈ we have retained this for ²⁰¹⁸⁄₁₉ at 75% (£90,000). Per­form­ance mater­i­al­ity determ­ines those accounts which test­ing will be under­taken on and the level of sample test­ing per­formed where applicable.

Report­ing to those charged with governance

Whilst our audit pro­ced­ures are designed to identi­fy mis­state­ments which are mater­i­al to our opin­ion on the fin­an­cial state­ments as a whole, we nev­er­the­less report to the Audit and Risk Com­mit­tee any unad­jus­ted mis­state­ments of less­er amounts to the extent that these are iden­ti­fied by our audit work. Under ISA 260 (UK) ​‘Com­mu­nic­a­tion with those charged with gov­ernance’, we are obliged to report uncor­rec­ted omis­sions or mis­state­ments oth­er than those which are ​‘clearly trivi­al’ to those charged with gov­ernance. We have determ­ined this threshold to be £6,000 thousand.

Going con­cern considerations

As aud­it­ors, we are required to ​“obtain suf­fi­cient appro­pri­ate audit evid­ence about the appro­pri­ate­ness of management’s use of the going con­cern assump­tion in the pre­par­a­tion and present­a­tion of the fin­an­cial state­ments and to con­clude wheth­er there is a mater­i­al uncer­tainty about the entity’s abil­ity to con­tin­ue as a going con­cern” (ISA (UK) 570). We will review management’s assess­ment of the going con­cern assump­tion and eval­u­ate the dis­clos­ures in the fin­an­cial statements.

Work­ing with Intern­al Audit

We will aim to not duplic­ate the work of your intern­al aud­it­ors. We will con­sider the intern­al audit plan for ²⁰¹⁸⁄₁₉ and identi­fy any par­tic­u­lar areas of risks that we either need to reflect in our approach or are rel­ev­ant to our wider scope audit work. We will con­tin­ue to review intern­al audit work through­out the year and main­tain and ongo­ing, open, dia­logue with intern­al audit.

A risk based audit methodology

Under­stand­ing the Author­ity and its environment

This is our third year as the extern­al aud­it­ors of the Author­ity appoin­ted under the Audit Scot­land frame­work. In ²⁰¹⁷⁄₁₈, the Author­ity received fund­ing of £4.75 mil­lion of expendit­ure lim­it alloc­a­tion from the Scot­tish Gov­ern­ment to sup­port oper­at­ing activ­ity and gen­er­ated income from plan­ning fees, pro­jects and oth­er oper­at­ing income of £1.64 million.

The Cairngorms Nation­al Park Part­ner­ship Plan (2017−22) is pre­pared col­lab­or­at­ively with part­ners includ­ing loc­al author­it­ies, Scot­tish Gov­ern­ment, and the wider pub­lic through con­sulta­tion out­lines the pri­or­it­ies for Cairngorms Nation­al Park. The Author­ity devel­ops its own three year Cor­por­ate Plan (The Cairngorms Nation­al Park Plan (2018−2022)) which out­lines how the Part­ner­ship Plan object­ives will be delivered.

The Cor­por­ate Plan recog­nises the fin­an­cial con­straints in which the Author­ity works in, with fore­cast grant –in-aid rev­en­ue assumed to have no uplift over the three year peri­od. Through rising cost pres­sures through infla­tion­ary pres­sures on non-pay increases as well as assumed uplifts in payroll costs, the Author­ity recog­nises that it will need to deliv­er strategy using effi­cient and effect­ive ways of work­ing while look­ing at oppor­tun­it­ies to gen­er­ate oper­at­ing rev­en­ue to sup­port increas­ing costs.

Sig­ni­fic­ant risks

Sig­ni­fic­ant risks are defined by ISAs (UK) as risks that, in the judge­ment of the aud­it­or, require spe­cial audit con­sid­er­a­tion. In identi­fy­ing risks, audit teams con­sider the nature of the risk, the poten­tial mag­nitude of mis­state­ment, and its like­li­hood. Sig­ni­fic­ant risks are those risks that have a high­er risk of mater­i­al misstatement.

Wider scope audit – Smal­ler body approach

Our respons­ib­il­it­ies under Audit Scotland’s Code of Audit Prac­tice extend bey­ond the audit of the fin­an­cial statements.

The Code sets out four dimen­sions that frame wider scope audit work into iden­ti­fi­able areas. Along­side Best Value, the audit dimen­sions set a com­mon frame­work for our audit work and we review and con­clude on the four dimen­sions and that there are organ­isa­tion­al arrange­ments in place to secure Best Value. Audit Scot­land Audit Plan­ning guid­ance out­lines key areas for con­sid­er­a­tion. Rel­ev­ant to the organ­isa­tion we will con­sider the following:

• EU With­draw­al,
• chan­ging land­scape for pub­lic fin­an­cial management,
• depend­ency on key sup­pli­ers and
• open­ness and transparency.

We con­sider these areas through our audit plan­ning pro­cesses and through­out the audit cycle. At our plan­ning there are no sig­ni­fic­ant audit risks iden­ti­fied in rela­tion to these areas.

For smal­ler bod­ies the Audit Scot­land Code of Prac­tice per­mits aud­it­ors to not apply the full wider scope audit. In our judge­ment, tak­ing into account the nature of the Author­ity oper­at­ing activ­ity and income and expendit­ure streams, we feel it is appro­pri­ate to treat you as a smal­ler body under the Code. How­ever, in accord­ance with Audit Scot­land plan­ning guid­ance, we will update our under­stand­ing of your arrange­ments for ensur­ing fin­an­cial sus­tain­ab­il­ity as well as your gov­ernance arrange­ments in place to sup­port dis­clos­ures con­tained with­in the annu­al gov­ernance state­ment included with­in your fin­an­cial statements.

Appen­dices

Key audit deliv­er­ables and our team

Audit pro­cess

Fees and independence

Fraud arrange­ments

Respect­ive responsibilities

Tech­nic­al updates

Com­mu­nic­a­tion of audit mat­ters with those charged with governance