Audit Strategy Memorandum

Cairngorms Nation­al Park Authority

Year end­ing 31 March 2023

Con­tents

1. Engage­ment and respons­ib­il­it­ies summary
2. Your audit engage­ment team
3. Audit scope, approach and timeline
4. Sig­ni­fic­ant risks and oth­er key judge­ment areas
5. Wider scope and Best Value
6. Fees for audit and oth­er services
7. Our com­mit­ment to independence
8. Mater­i­al­ity and mis­state­ments A. Appendix A – Key com­mu­nic­a­tion points B. Appendix B – Revised audit­ing stand­ard on identi­fy­ing and assess­ing the risks of mater­i­al mis­state­ment: ISA (UK) 315 (Revised 2019)

This doc­u­ment is to be regarded as con­fid­en­tial to Cairngorms Nation­al Park Author­ity. It has been pre­pared for the sole use of the Audit and Risk Com­mit­tee as the appro­pri­ate com­mit­tee charged with gov­ernance. No respons­ib­il­ity is accep­ted to any oth­er per­son in respect of the whole or part of its con­tents. Our writ­ten con­sent must first be obtained before this doc­u­ment, or any part of it, is dis­closed to a third party.

1. Engage­ment and Respons­ib­il­it­ies Summary

Over­view of engagement:

We are appoin­ted to per­form the extern­al audit of Cairngorms Nation­al Park Author­ity (CNPA) for the year to 31 March 2023. The scope of our engage­ment is set out in the Code of Audit Prac­tice, issued by the Aud­it­or Gen­er­al and the Accounts Com­mis­sion avail­able from the Audit Scot­land web­site. Our respons­ib­il­it­ies are estab­lished by the Pub­lic Fin­ance and Account­ab­il­ity (Scot­land) Act 2000 and the Code of Audit Prac­tice, as out­lined below.

Audit opin­ion:

We are respons­ible for form­ing and express­ing an inde­pend­ent opin­ion on wheth­er the fin­an­cial state­ments are pre­pared, in all mater­i­al respects, in accord­ance with all applic­able stat­utory require­ments. Our audit does not relieve man­age­ment or the Audit and Risk Com­mit­tee, as Those Charged With Gov­ernance, of their responsibilities.

CNPA is respons­ible for the assess­ment of wheth­er it is appro­pri­ate for CNPA to pre­pare its accounts on a going con­cern basis. As aud­it­ors, we are required to obtain suf­fi­cient appro­pri­ate audit evid­ence regard­ing and con­clude on: a) wheth­er a mater­i­al uncer­tainty related to going con­cern exists; and b) con­sider the appro­pri­ate­ness of CNPA’s use of the going con­cern basis of account­ing in the pre­par­a­tion of the fin­an­cial statements.

Fraud:

The respons­ib­il­ity for safe­guard­ing assets and for the pre­ven­tion and detec­tion of fraud, error and non-com­pli­ance with law or reg­u­la­tions rests with both Those Charged With Gov­ernance and man­age­ment. This includes estab­lish­ing and main­tain­ing intern­al con­trols over reli­ab­il­ity of fin­an­cial reporting.

As part of our audit pro­ced­ures in rela­tion to fraud we are required to enquire of Those Charged With Gov­ernance, includ­ing key man­age­ment and intern­al audit as to their know­ledge of instances of fraud, the risk of fraud and their views on intern­al con­trols that mit­ig­ate the fraud risks. In accord­ance with Inter­na­tion­al Stand­ards on Audit­ing (UK), we plan and per­form our audit so as to obtain reas­on­able assur­ance that the fin­an­cial state­ments taken as a whole are free from mater­i­al mis­state­ment, wheth­er caused by fraud or error. Our audit, how­ever, should not be relied upon to identi­fy all such misstatements.

Wider scope and Best Value:

We are also respons­ible for review­ing and report­ing on the wider scope arrange­ments that CNPA has in place. We dis­cuss our approach to wider scope work fur­ther in sec­tion 5 of this report.

2. Your Audit Engage­ment Team

Below is your audit engage­ment team and their con­tact details:

Tom Reid Engage­ment Dir­ect­or tom.​reid@​mazars.​co.​uk 07816 354 994

3. Audit Scope, Approach and Timeline

Audit scope:

Our audit approach is designed to provide an audit that com­plies with all pro­fes­sion­al require­ments. Our audit of the fin­an­cial state­ments will be con­duc­ted in accord­ance with Inter­na­tion­al Stand­ards on Audit­ing (UK), rel­ev­ant eth­ic­al and pro­fes­sion­al stand­ards, our own audit approach and in accord­ance with the terms of our engage­ment. Our work is focused on those aspects of your activ­it­ies which we con­sider to have a high­er risk of mater­i­al mis­state­ment, such as those impacted by man­age­ment judge­ment and estim­a­tion, applic­a­tion of new account­ing stand­ards, changes of account­ing policy, changes to oper­a­tions or areas which have been found to con­tain mater­i­al errors in the past.

Audit approach:

Our audit approach is risk-based and primar­ily driv­en by the issues that we con­sider lead to a high­er risk of mater­i­al mis­state­ment of the accounts. Once we have com­pleted our risk assess­ment, we devel­op our audit strategy and design audit pro­ced­ures in response to the risks iden­ti­fied. If we con­clude that appro­pri­ately-designed con­trols are in place then we may plan to test and rely upon these con­trols. If we decide con­trols are not appro­pri­ately designed, or we decide it would be more effi­cient to do so, we may take a wholly sub­stant­ive approach to our audit test­ing. Sub­stant­ive pro­ced­ures are audit pro­ced­ures designed to detect mater­i­al mis­state­ments at the asser­tion level and com­prise: tests of details (of classes of trans­ac­tions, account bal­ances, and dis­clos­ures); and sub­stant­ive ana­lyt­ic­al pro­ced­ures. Irre­spect­ive of the assessed risks of mater­i­al mis­state­ment, which take into account our eval­u­ation of the oper­at­ing effect­ive­ness of con­trols, we are required to design and per­form sub­stant­ive pro­ced­ures for each mater­i­al class of trans­ac­tions, account bal­ance, and dis­clos­ure. Our audit will be planned and per­formed so as to provide reas­on­able assur­ance that the fin­an­cial state­ments are free from mater­i­al mis­state­ment and give a true and fair view. The concept of mater­i­al­ity and how we define a mis­state­ment is explained in more detail in sec­tion 8.

Reli­ance on intern­al audit:

Where pos­sible we will seek to util­ise the work per­formed by intern­al audit to modi­fy the nature, extent and tim­ing of our audit pro­ced­ures. We will meet with intern­al audit on an ongo­ing basis to dis­cuss the pro­gress and find­ings of their work as part of our ongo­ing assess­ment of CNPA’s con­trol envir­on­ment. Where we intend to rely on the work on intern­al audit, we will eval­u­ate the work per­formed by your intern­al audit team and per­form our own audit pro­ced­ures to determ­ine its adequacy for our audit.

Management’s and our experts:

Man­age­ment makes use of experts in spe­cif­ic areas when pre­par­ing the CNPA’s fin­an­cial state­ments. We also use experts to assist us to obtain suf­fi­cient appro­pri­ate audit evid­ence on spe­cif­ic items of account.

4. Sig­ni­fic­ant Risks and Oth­er Key Judge­ment Areas

Fol­low­ing the risk assess­ment approach dis­cussed in sec­tion 3 of this doc­u­ment, we have iden­ti­fied risks rel­ev­ant to the audit of fin­an­cial state­ments. The risks that we identi­fy are cat­egor­ised as sig­ni­fic­ant, enhanced or stand­ard. The defin­i­tions of the level of risk rat­ing are giv­en below:

Sig­ni­fic­ant risk:

Sig­ni­fic­ant risks are those risks assessed as being close to the upper end of the spec­trum of inher­ent risk, based on the com­bin­a­tion of the like­li­hood of a mis­state­ment occur­ring and the mag­nitude of any poten­tial mis­state­ment. Fraud risks are always assessed as sig­ni­fic­ant risks as required by audit­ing stand­ards, includ­ing man­age­ment over­ride of con­trols and rev­en­ue recognition.

Enhanced risk:

An enhanced risk is an area of high­er assessed risk of mater­i­al mis­state­ment at audit asser­tion level oth­er than a sig­ni­fic­ant risk. Enhanced risks require addi­tion­al con­sid­er­a­tion but does not rise to the level of a sig­ni­fic­ant risk, these include but may not be lim­ited to:

• key areas of man­age­ment judge­ment, includ­ing account­ing estim­ates which are mater­i­al but are not con­sidered to give rise to a sig­ni­fic­ant risk of mater­i­al mis­state­ment; and
• oth­er audit asser­tion risks arising from sig­ni­fic­ant events or trans­ac­tions that occurred dur­ing the period.

Stand­ard risk:

This is related to rel­at­ively routine, non-com­plex trans­ac­tions that tend to be sub­ject to sys­tem­at­ic pro­cessing and require little man­age­ment judge­ment. Although it is con­sidered that there is a risk of mater­i­al mis­state­ment (RMM), there are no elev­ated or spe­cial factors related to the nature, the likely mag­nitude of the poten­tial mis­state­ments or the like­li­hood of the risk occurring.

Sum­mary risk assessment:

The sum­mary risk assess­ment, illus­trated in the table below, high­lights those risks which we deem to be sig­ni­fic­ant and oth­er enhanced risks in respect of CNPA. We have sum­mar­ised our audit response to these risks on the next page.

Spe­cif­ic iden­ti­fied audit risks and planned test­ing strategy:

We have presen­ted below in more detail the reas­ons for the risk assess­ment high­lighted above, and also our test­ing approach with respect to sig­ni­fic­ant risks. An audit is a dynam­ic pro­cess, should we change our view of risk or approach to address the iden­ti­fied risks dur­ing the course of our audit, we will report this to the Audit and Risk Committee.

5. Wider Scope and Best Value

The frame­work for wider scope work:

The Code of Audit Prac­tice sets out the four areas that frame the wider scope of pub­lic sec­tor audit. We are required to form a view on the adequacy of CNPA’s arrange­ments in four areas:

1. Fin­an­cial management
2. Fin­an­cial sustainability
3. Vis­ion, lead­er­ship, and governance
4. Use of resources to improve outcomes.

Our approach:

Our planned audit work against the four wider scope areas is risk based and pro­por­tion­ate. We need to gath­er suf­fi­cient evid­ence to sup­port our com­ment­ary on CNPAs arrange­ments and to identi­fy and report on any sig­ni­fic­ant weak­nesses. We will carry out more detailed work where we identi­fy sig­ni­fic­ant risks. Where sig­ni­fic­ant weak­nesses are iden­ti­fied we will report these to CNPA and make recom­mend­a­tions for improve­ment. In addi­tion to loc­al risks, we con­sider chal­lenges that are impact­ing the pub­lic sec­tor as a whole.

The Code of Audit Prac­tice per­mits an altern­at­ive audit approach where an audited body is con­sidered less com­plex due its size and lim­ited fin­an­cial activ­ity. The Code of Audit Prac­tice sup­ple­ment­ary guid­ance sets out the cri­ter­ia for aud­it­ors to use to determ­ine if a body is less com­plex and the audit approach to be adop­ted in such circumstances.

CNPA’s gross expendit­ure slightly exceeds the quant­it­at­ive cri­ter­ia for a less com­plex body, how­ever we have rebut­ted the size cri­ter­ia based on an assess­ment of the qual­it­at­ive cri­ter­ia for bod­ies above the quant­it­at­ive threshold. We have not iden­ti­fied any wider scope risks, CNPA has not been sub­ject to a stat­utory report in the pre­vi­ous year and CNPA is not sub­ject to sig­ni­fic­ant pub­lic scru­tiny. We have there­fore con­cluded, based on our under­stand­ing of CNPA though our plan­ning work, that it is a less com­plex body. This was also the judge­ment of CNPA’s pre­vi­ous auditor.

We will there­fore restrict our wider scope work to:

• a review of the Annu­al Gov­ernance Statement
• con­clud­ing on the fin­an­cial sus­tain­ab­il­ity of CNPA and the ser­vices that it deliv­ers in the medi­um to longer term.

6. Fees for Audit and Oth­er Services

Fees for work as CNPA’s appoin­ted auditor

At this stage of the audit, we are not plan­ning any diver­gence from the expec­ted fees set by Audit Scot­land. The break­down of the fee is set out in the table below.

We have taken account of the risk expos­ure of CNPA and the man­age­ment assur­ances in place. We have assumed that CNPA has effect­ive gov­ernance arrange­ments and will pre­pare com­pre­hens­ive and accur­ate accounts and work­ing papers for audit in line with the agreed timetable for the audit. We reserve the right to charge a sup­ple­ment­ary fee where our audit can­not pro­ceed as planned. An addi­tion­al fee will be required for any oth­er sig­ni­fic­ant exer­cises not with­in our planned audit activity.

7. Our Com­mit­ment to Independence

We are com­mit­ted to inde­pend­ence and are required by the Fin­an­cial Report­ing Coun­cil to con­firm to you at least annu­ally in writ­ing that we com­ply with the FRC’s Eth­ic­al Stand­ard. In addi­tion, we com­mu­nic­ate any mat­ters or rela­tion­ship which we believe may have a bear­ing on our inde­pend­ence or the objectiv­ity of the audit team.

Based on the inform­a­tion provided by you and our own intern­al pro­ced­ures to safe­guard our inde­pend­ence as aud­it­ors, we con­firm that in our pro­fes­sion­al judge­ment there are no rela­tion­ships between us and any of our related or sub­si­di­ary entit­ies, and you and your related entit­ies cre­at­ing any unac­cept­able threats to our inde­pend­ence with­in the reg­u­lat­ory or pro­fes­sion­al require­ments gov­ern­ing us as your auditors.

We have policies and pro­ced­ures in place which are designed to ensure that we carry out our work with integ­rity, objectiv­ity and inde­pend­ence. These policies include:

• all part­ners and staff are required to com­plete an annu­al inde­pend­ence declaration;
• all new part­ners and staff are required to com­plete an inde­pend­ence con­firm­a­tion and also com­plete com­puter based eth­ic­al training;
• rota­tion policies cov­er­ing audit engage­ment part­ners and oth­er key mem­bers of the audit team; and
• use by man­agers and part­ners of our cli­ent and engage­ment accept­ance sys­tem which requires all non-audit ser­vices to be approved in advance by the audit engage­ment partner.

We con­firm, as at the date of this doc­u­ment, that the engage­ment team and oth­ers in the firm as appro­pri­ate, Maz­ars LLP are inde­pend­ent and com­ply with rel­ev­ant eth­ic­al require­ments. How­ever, if at any time you have con­cerns or ques­tions about our integ­rity, objectiv­ity or inde­pend­ence please dis­cuss these with Tom Reid in the first instance.

Pri­or to the pro­vi­sion of any non-audit ser­vices, Tom Reid will under­take appro­pri­ate pro­ced­ures to con­sider and fully assess the impact that provid­ing the ser­vice may have on our aud­it­or inde­pend­ence. Any emer­ging inde­pend­ence threats and asso­ci­ated iden­ti­fied safe­guards will be com­mu­nic­ated in our Annu­al Audit Report.

8. Mater­i­al­ity and Misstatements

Sum­mary of ini­tial mater­i­al­ity thresholds:

Mater­i­al­ity:

Mater­i­al­ity is an expres­sion of the rel­at­ive sig­ni­fic­ance or import­ance of a par­tic­u­lar mat­ter in the con­text of fin­an­cial state­ments as a whole. Inform­a­tion is con­sidered to be mater­i­al if omit­ting, mis­stat­ing or obscur­ing it could reas­on­ably be expec­ted to influ­ence the decisions that the primary users of gen­er­al pur­pose fin­an­cial state­ments make on the basis of those fin­an­cial state­ments, which provide fin­an­cial inform­a­tion about a spe­cif­ic report­ing entity.

Judge­ments on mater­i­al­ity are made in light of sur­round­ing cir­cum­stances and are affected by the size and nature of a mis­state­ment, or a com­bin­a­tion of both. Judge­ments about mater­i­al­ity are based on con­sid­er­a­tion of the com­mon fin­an­cial inform­a­tion needs of users as a group and not on spe­cif­ic indi­vidu­al users.

The assess­ment of what is mater­i­al is a mat­ter of pro­fes­sion­al judge­ment and is affected by our per­cep­tion of the fin­an­cial inform­a­tion needs of the users of the fin­an­cial state­ments. In mak­ing our assess­ment we assume that users:

• have a reas­on­able know­ledge of busi­ness, eco­nom­ic activ­it­ies and accounts;
• have a will­ing­ness to study the inform­a­tion in the fin­an­cial state­ments with reas­on­able diligence;
• under­stand that fin­an­cial state­ments are pre­pared, presen­ted and audited to levels of materiality;
• recog­nise the uncer­tain­ties inher­ent in the meas­ure­ment of amounts based on the use of estim­ates, judge­ment and the con­sid­er­a­tion of future events; and
• will make reas­on­able eco­nom­ic decisions on the basis of the inform­a­tion in the fin­an­cial statements.

Mater­i­al­ity (con­tin­ued):

We con­sider mater­i­al­ity whilst plan­ning and per­form­ing our audit based on quant­it­at­ive and qual­it­at­ive factors. Whilst plan­ning, we make judge­ments about the size of mis­state­ments which we con­sider to be mater­i­al and which provides a basis for determ­in­ing the nature, tim­ing and extent of risk assess­ment pro­ced­ures, identi­fy­ing and assess­ing the risk of mater­i­al mis­state­ment and determ­in­ing the nature, tim­ing and extent of fur­ther audit procedures.

The mater­i­al­ity determ­ined at the plan­ning stage does not neces­sar­ily estab­lish an amount below which uncor­rec­ted mis­state­ments, either indi­vidu­ally or in aggreg­ate, will be con­sidered as immaterial.

We revise mater­i­al­ity for the fin­an­cial state­ments as our audit pro­gresses should we become aware of inform­a­tion that would have caused us to determ­ine a dif­fer­ent amount had we been aware of that inform­a­tion at the plan­ning stage.

Our pro­vi­sion­al mater­i­al­ity is set based on a bench­mark of total expendit­ure. We will identi­fy a fig­ure for mater­i­al­ity but identi­fy sep­ar­ate levels for pro­ced­ures designed to detect indi­vidu­al errors, and also a level above which all iden­ti­fied errors will be repor­ted to the Audit and Risk Committee.

We con­sider that total expendit­ure remains the key focus of users of the fin­an­cial state­ments and, as such, we base our mater­i­al­ity levels around this benchmark.

We expect to set a mater­i­al­ity threshold at 2% of total expendit­ure. Based on the audited ²⁰²¹⁄₂₂ fin­an­cial state­ments we anti­cip­ate the over­all mater­i­al­ity for the year end­ing 31 March 2023 to be in the region of £206,300.

After set­ting ini­tial mater­i­al­ity, we con­tin­ue to mon­it­or mater­i­al­ity through­out the audit to ensure that it is set at an appro­pri­ate level.

Per­form­ance Materiality:

Per­form­ance mater­i­al­ity is the amount or amounts set by the aud­it­or at less than mater­i­al­ity for the fin­an­cial state­ments as a whole to reduce, to an appro­pri­ately low level, the prob­ab­il­ity that the aggreg­ate of uncor­rec­ted and undetec­ted mis­state­ments exceeds mater­i­al­ity for the fin­an­cial state­ments as a whole. For a first-year audit we have applied 70% of over­all mater­i­al­ity as per­form­ance materiality.

Mis­state­ments:

We accu­mu­late mis­state­ments iden­ti­fied dur­ing the audit that are oth­er than clearly trivi­al. We set a level of tri­vi­al­ity for indi­vidu­al errors iden­ti­fied (a report­ing threshold) for report­ing to the Audit and Risk Com­mit­tee that is con­sist­ent with the level of tri­vi­al­ity that we con­sider would not need to be accu­mu­lated because we expect that the accu­mu­la­tion of such amounts would not have a mater­i­al effect on the fin­an­cial state­ments. Based on our pre­lim­in­ary assess­ment of over­all mater­i­al­ity, our pro­posed tri­vi­al­ity threshold is £6,200 based on 3% of over­all mater­i­al­ity. If you have any quer­ies about this please do not hes­it­ate to raise these with Tom Reid.

Report­ing to the Audit and Risk Committee:

The fol­low­ing three types of audit dif­fer­ences above the trivi­al threshold will be presen­ted to the Audit and Risk Committee:

• sum­mary of adjus­ted audit differences;
• sum­mary of unad­jus­ted audit dif­fer­ences; and
• sum­mary of dis­clos­ure dif­fer­ences (adjus­ted and unadjusted).

Appen­dices

A. Key com­mu­nic­a­tion points

B. Revised audit­ing stand­ard on Identi­fy­ing and assess­ing the risks of mater­i­al mis­state­ment: ISA (UK) 315 (Revised 2019)