Annu­al Audit Plan

Cairngorms Nation­al Park Authority

Year end­ing 31 March 2024

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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 Appendix A – Key com­mu­nic­a­tion points Appendix B — Cur­rent year updates, forth­com­ing account­ing and oth­er issues

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.

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1. Engage­ment and respons­ib­il­it­ies summary

Over­view of engagement

We are appoin­ted to per­form the extern­al audit of CNPA for the year to 31 March 2024. 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: Code of audit prac­tice | Audit Scot­land (audit​-scot​land​.gov​.uk). Our respons­ib­il­it­ies are prin­cip­ally derived from the Pub­lic Fin­ance and Account­ab­il­ity (Scot­land) Act 2000 and the Code of Audit Prac­tice, as out­lined below and overleaf.

Engage­ment area	Respons­ib­il­it­ies
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 is it 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.
Intern­al control	Man­age­ment is respons­ible for such intern­al con­trol as man­age­ment determ­ines is neces­sary to enable the pre­par­a­tion of fin­an­cial state­ments that are free from mater­i­al mis­state­ment, wheth­er due to fraud or error. We are respons­ible for obtain­ing an under­stand­ing of intern­al con­trol rel­ev­ant to our audit and the pre­par­a­tion of the fin­an­cial state­ments to design audit pro­ced­ures that are appro­pri­ate in the cir­cum­stances, but not for the pur­pose of express­ing an opin­ion on the effect­ive­ness of CNPA’s intern­al control.
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 com­pli­ance with rel­ev­ant laws and reg­u­la­tions, and the 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. How­ever, our audit 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 and its arrange­ments to secure Best Value. We dis­cuss our approach to wider scope and Best Value work fur­ther in sec­tion 5 of this report.

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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

Gregory Oduor Engage­ment Man­ager Gregory.​Oduor@​mazars.​co.​uk 07974 124 461

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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 the nature, extent, and tim­ing of our audit pro­ced­ures are primar­ily driv­en by the areas of the fin­an­cial state­ments we con­sider to be more sus­cept­ible to mater­i­al mis­state­ment. Fol­low­ing our risk assess­ment where we assess the inher­ent risk factors (sub­jectiv­ity, com­plex­ity, uncer­tainty, change and sus­cept­ib­il­ity to mis­state­ment due to man­age­ment bias or fraud) to aid in our risk assess­ment, we devel­op our audit strategy and design audit pro­ced­ures to respond to the risks we have identified.

If we con­clude that appro­pri­ately designed con­trols are in place, we may plan to test and rely on those con­trols. If we decide con­trols are not appro­pri­ately designed, or we decide that it would be more effi­cient to do so, we may take a wholly sub­stant­ive approach to our audit test­ing where, in our pro­fes­sion­al judge­ment, sub­stant­ive pro­ced­ures alone will provide suf­fi­cient appro­pri­ate audit evid­ence. Sub­stant­ive pro­ced­ures are audit pro­ced­ures designed to detect mater­i­al mis­state­ments at the asser­tion level and com­prise tests of detail (of classes of trans­ac­tion, account bal­ances, and dis­clos­ures), and sub­stant­ive ana­lyt­ic­al pro­ced­ures. Irre­spect­ive of our assessed risks of mater­i­al mis­state­ment, which takes account of our eval­u­ation of the oper­at­ing effect­ive­ness of con­trols, we are required to design and per­form sub­stant­ive pro­ced­ures for each mater­i­al class of trans­ac­tion, 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.

The dia­gram on the next page out­lines the pro­ced­ures we per­form at the dif­fer­ent stages of the audit.

Plan­ning and Risk Assess­ment (Feb­ru­ary to March 2024)

• Plan­ning vis­it and devel­op­ing our under­stand­ing of CNPA
• Ini­tial opin­ion and wider scope risk assessments
• Risk iden­ti­fic­a­tion and assessment
• Con­sid­er­ing pro­posed account­ing treat­ments and account­ing policies
• Devel­op­ing the audit strategy and plan­ning the audit work to be performed
• Agree­ing timetable and deadlines
• Risk assess­ment ana­lyt­ic­al procedures
• Determ­in­a­tion of materiality

Inter­im (April 2024)

• Doc­u­ment­ing sys­tems and controls
• Per­form­ing walkthroughs
• Inter­im con­trols test­ing includ­ing tests of IT gen­er­al controls
• Early sub­stant­ive test­ing of transactions
• Reas­sess­ment of audit plan and revi­sion if necessary

Field­work (May to June 2024)

• Receiv­ing and review­ing draft fin­an­cial statements
• Deliv­er­ing our audit strategy start­ing with sig­ni­fic­ant risks and high risk areas includ­ing detailed test­ing of trans­ac­tions, account bal­ances and disclosures
• Com­mu­nic­at­ing pro­gress and issues
• Clear­ance meeting
• Final review and dis­clos­ure check­list of fin­an­cial statements
• Final engage­ment dir­ect­or review

Com­ple­tion (July to August 2024)

• Agree­ing con­tent of let­ter of representation
• Report­ing to the Audit and Risk Committee
• Review­ing sub­sequent events
• Sign­ing the inde­pend­ent auditor’s report

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 to dis­cuss the pro­gress and find­ings of their work pri­or to the com­mence­ment of our con­trols eval­u­ation procedures.

Ser­vice organisations

Inter­na­tion­al Audit­ing Stand­ards (UK) (ISAs) define ser­vice organ­isa­tions as third party organ­isa­tions that provide ser­vices to CNPA that are part of its inform­a­tion sys­tems rel­ev­ant to fin­an­cial report­ing. We are required to obtain an under­stand­ing of the ser­vices provided by ser­vice organ­isa­tions as well as eval­u­at­ing the design and imple­ment­a­tion of con­trols over those ser­vices. The table below sum­mar­ises the ser­vice organ­isa­tions used by CNPA and our planned audit approach.

Items of account	Ser­vice organ­isa­tion	Audit approach
Cash equi­val­ent trans­fer val­ues of pen­sions as dis­closed in the Remu­ner­a­tion and Staff Report	MyC­SP	We will review the source data CNPA provides to MyC­SP and agree this to CNPA payroll records. We will review the reports provided by MyC­SP to CNPA and agree these to the pen­sion dis­clos­ures included in the Remu­ner­a­tion and Staff Report.

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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

A risk that is assessed as being at or close to the upper end of the spec­trum of inher­ent risk, based on a com­bin­a­tion of the like­li­hood of a mis­state­ment occur­ring and the mag­nitude of any poten­tial mis­state­ment. A fraud risk is always assessed as a sig­ni­fic­ant risk (as required by audit­ing stand­ards), includ­ing man­age­ment over­ride of con­trols and rev­en­ue recognition.

Enhanced risk

An area with an elev­ated risk of mater­i­al mis­state­ment at the asser­tion level, oth­er than a sig­ni­fic­ant risk, based on factors/​inform­a­tion inher­ent to that area. Enhanced risks require addi­tion­al con­sid­er­a­tion but do not rise to the level of a sig­ni­fic­ant risk. These include but are not lim­ited to:

• Key areas of man­age­ment judge­ment and estim­a­tion uncer­tainty, includ­ing account­ing estim­ates related to mater­i­al classes of trans­ac­tion, account bal­ances, and dis­clos­ures but which are not con­sidered to give rise to a sig­ni­fic­ant risk of mater­i­al mis­state­ment; and
• Risks relat­ing to oth­er asser­tions and arising from sig­ni­fic­ant events or trans­ac­tions that occurred dur­ing the period

Stand­ard risk

A risk related to asser­tions over classes of trans­ac­tion, account bal­ances, and dis­clos­ures that are rel­at­ively routine, non-com­plex, tend to be sub­ject to sys­tem­at­ic pro­cessing, and require little or no man­age­ment judgement/​estim­a­tion. Although it is con­sidered that there is a risk of mater­i­al mis­state­ment, there are no elev­ated or spe­cial factors related to the nature of the fin­an­cial state­ment area, the likely mag­nitude of poten­tial mis­state­ments, or the like­li­hood of a 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.

Key: Sig­ni­fic­ant risk Enhanced risk / sig­ni­fic­ant man­age­ment judgement

Fin­an­cial Impact	Like­li­hood	Risk
High	High	1. Man­age­ment over­ride of controls
High	High	2. Fraud over expendit­ure recognition
High	High	3. Fraud over recog­ni­tion of revenue

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.

Sig­ni­fic­ant risks	Descrip­tion	Fraud	Error	Judge­ment	Planned response
1 Man­age­ment over­ride of controls	This is a man­dat­ory sig­ni­fic­ant risk on all audits due to the unpre­dict­able way in which such over­ride could occur. Man­age­ment at vari­ous levels with­in an organ­isa­tion are in a unique pos­i­tion to per­pet­rate fraud because of their abil­ity to manip­u­late account­ing records and pre­pare fraud­u­lent fin­an­cial state­ments by over­rid­ing con­trols that oth­er­wise appear to be oper­at­ing effect­ively. Due to the unpre­dict­able way in which such over­ride could occur there is a risk of mater­i­al mis­state­ment due to fraud on all audits.	●	○	○	We plan to address the man­age­ment over­ride of con­trols risk by: • review­ing the key areas with­in the fin­an­cial state­ments where man­age­ment has used judge­ment and estim­a­tion tech­niques and con­sider wheth­er there is evid­ence of unfair bias; • examin­ing any account­ing policies that vary from the Gov­ern­ment Fin­an­cial Report­ing Manu­al; • test­ing the appro­pri­ate­ness of journ­al entries recor­ded in the gen­er­al ledger and oth­er adjust­ments made in pre­par­ing the fin­an­cial state­ments; and • con­sid­er­ing and test­ing any sig­ni­fic­ant trans­ac­tions out­side the nor­mal course of busi­ness or oth­er­wise unusual.
2 Fraud over expendit­ure recognition	Prac­tice Note 10: Audit of fin­an­cial state­ments and reg­u­lar­ity of pub­lic sec­tor bod­ies in the United King­dom high­lights that, as most pub­lic-sec­tor bod­ies are net spend­ing bod­ies, the risk of fraud related to expendit­ure may be great­er than the risk relat­ing to rev­en­ue recog­ni­tion. A sig­ni­fic­ant amount of CNPA’s expendit­ure is salar­ied staff costs, which are well con­trolled and made up of low value indi­vidu­al trans­ac­tions. How­ever, it has mater­i­al oper­a­tion­al plan expendit­ure. The nature of this expendit­ure means there is an increased risk of fraud in its recog­ni­tion which could res­ult in a mater­i­al mis­state­ment in the fin­an­cial statements.	○	○	●	We plan to address the risk of fraud over expendit­ure recog­ni­tion by under­tak­ing sub­stant­ive pro­ced­ures to ensure oper­a­tion­al plan expendit­ure is recor­ded appro­pri­ately in the fin­an­cial statements.
3 Fraud over recog­ni­tion of revenue	As set out in Inter­na­tion­al Stand­ard on Audit­ing (UK) 240: The auditor’s respons­ib­il­it­ies relat­ing to fraud in an audit of fin­an­cial state­ments, there is a pre­sumed risk of fraud over the recog­ni­tion of rev­en­ue. There is a risk that rev­en­ue may be mis­stated res­ult­ing in a mater­i­al mis­state­ment in the fin­an­cial state­ments. CNPA has mater­i­al oper­a­tion­al plan income. The nature of this income means there is an increased risk of fraud in its recognition.	●	○	○	We plan to address the risk of fraud over recog­ni­tion of rev­en­ue by under­tak­ing sub­stant­ive pro­ced­ures to ensure oper­a­tion­al plan income is recor­ded appro­pri­ately in the fin­an­cial statements.

Oth­er key areas of man­age­ment judge­ment and enhanced risks

Key areas of man­age­ment judge­ment include account­ing estim­ates which are mater­i­al but are not con­sidered to give rise to a sig­ni­fic­ant risk of mater­i­al mis­state­ment. These areas of man­age­ment judge­ment rep­res­ent oth­er areas of audit emphasis.

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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.

Area	Descrip­tion	Aud­it­ors’ view
Fin­an­cial management	Fin­an­cial man­age­ment means hav­ing sound budget­ary pro­cesses. Audited bod­ies require the abil­ity to under­stand the fin­an­cial envir­on­ment and wheth­er intern­al con­trols are oper­at­ing effect­ively. Aud­it­ors con­sider wheth­er the body has effect­ive arrange­ments to secure sound fin­an­cial management.
Fin­an­cial sustainability	Fin­an­cial sus­tain­ab­il­ity means being able to meet the needs of the present without com­prom­ising the abil­ity of future gen­er­a­tions to meet their own needs. Aud­it­ors con­sider the extent to which audited bod­ies have shown regard to fin­an­cial sus­tain­ab­il­ity. They look ahead to the medi­um term (two to five years) and longer term (over five years) to con­sider wheth­er the body is plan­ning effect­ively so that it can con­tin­ue to deliv­er services.
Vis­ion, lead­er­ship, and governance	Audited bod­ies must have a clear vis­ion and strategy, and set pri­or­it­ies for improve­ment with­in this vis­ion and strategy. They work togeth­er with part­ners and com­munit­ies to improve out­comes and foster a cul­ture of innov­a­tion. Aud­it­ors con­sider the clar­ity of plans to imple­ment the vis­ion, strategy and pri­or­it­ies adop­ted by the lead­ers of the audited body. They also con­sider the effect­ive­ness of gov­ernance arrange­ments for delivery.
Use of resources to improve outcomes	Audited bod­ies need to make best use of their resources to meet stated out­comes and improve­ment object­ives, through effect­ive plan­ning and work­ing with stra­tegic part­ners and com­munit­ies. Aud­it­ors con­sider the clar­ity of the arrange­ments in place to ensure that resources are deployed to improve stra­tegic out­comes, meet the needs of ser­vice users tak­ing account of equal­it­ies, and deliv­er con­tinu­ous improve­ments in pri­or­ity services.

Less com­plex bodies

The Code of Audit Prac­tice allows an altern­at­ive audit approach where an audited body is con­sidered less com­plex due to its size and lim­ited fin­an­cial activ­ity. Audit Scot­land has pre­pared guid­ance on quant­it­at­ive and qual­it­at­ive factors to con­sider in assess­ing wheth­er a body is less com­plex. We have reviewed these cri­ter­ia and con­cluded that CNPA is a less com­plex body. Our wider scope work will there­fore be lim­ited to review­ing the Gov­ernance State­ment and con­clud­ing on the fin­an­cial sus­tain­ab­il­ity of CNPA and the ser­vices it deliv­ers over the medi­um to longer term.

Wider scope risks

The Code of Audit Prac­tice requires us to con­sider the sig­ni­fic­ant audit risks in areas defined in the Code as the wider scope audit.

We have not iden­ti­fied any wider scope audit risks from our plan­ning and risk assess­ment work.

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6. Fees for audit and oth­er services

Fees for audit and oth­er services

Our fees (exclus­ive of VAT and dis­burse­ments) for the audit of CNPA’s fin­an­cial state­ments for the year ended 31 March 2024 are out­lined below.

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 and is avail­able on the Audit Scot­land web­site: Audit Scot­land expec­ted fees for ²⁰²³⁄₂₄ audits.

We have not provided any non-audit ser­vices to CNPA dur­ing the year.

	2023⁄24 Pro­posed Fee	2022⁄23 Actu­al Fee
Aud­it­or remuneration	£27,980	£26,390
Pooled costs	£300	(£420)
Con­tri­bu­tion to PABV costs	£0	£0
Audit sup­port costs	£0	£750
Sec­tor­al cap adjustment	(£11,920)	(£11,290)
Total fee	£16,360	£15,430

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7. Our com­mit­ment to independence

Require­ments

We com­ply with the Inter­na­tion­al Code of Eth­ics for Pro­fes­sion­al Account­ants, includ­ing Inter­na­tion­al Inde­pend­ence Stand­ards issued by the Inter­na­tion­al Eth­ics Stand­ards Board for Account­ants togeth­er with the eth­ic­al require­ments that are rel­ev­ant to our audit of the fin­an­cial state­ments in the UK reflec­ted in the ICAEW Code of Eth­ics and the FRC Eth­ic­al Stand­ard 2019.

Com­pli­ance

We are not aware of any rela­tion­ship between Maz­ars and CNPA that, in our pro­fes­sion­al judge­ment, may reas­on­ably be thought to impair our independence.

We are inde­pend­ent of CNPA and have ful­filled our inde­pend­ence and eth­ic­al respons­ib­il­it­ies in accord­ance with the require­ments applic­able to our audit.

Non-audit and Audit fees

We have set out a sum­mary of any non-audit ser­vices provided by Maz­ars (with related fees) to CNPA in Sec­tion 6, togeth­er with our audit fees and inde­pend­ence assessment.

We are com­mit­ted to inde­pend­ence and con­firm that we com­ply with the FRC’s Eth­ic­al Stand­ard. In addi­tion, we have set out in this sec­tion any mat­ters or rela­tion­ships we believe may have a bear­ing on our inde­pend­ence or the objectiv­ity of our 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, that cre­ate any unac­cept­able threats to our inde­pend­ence with­in the reg­u­lat­ory or pro­fes­sion­al require­ments gov­ern­ing us as your auditors.

We have policies and pro­ced­ures in place that 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 com­plete annu­al eth­ic­al training.
• Rota­tion policies cov­er­ing audit engage­ment part­ners and oth­er key mem­bers of the audit team.
• 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 report, 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 inde­pend­ence as auditor.

Prin­cip­al threats to our inde­pend­ence and the asso­ci­ated safe­guards we have iden­ti­fied and/​or put in place are set out in Frame­work Agree­ment issued by Audit Scot­land avail­able from the Audit Scot­land web­site: Audit Scot­land Frame­work Agree­ment (audit​-scot​land​.gov​.uk). Any emer­ging inde­pend­ence threats and asso­ci­ated iden­ti­fied safe­guards will be com­mu­nic­ated in our Annu­al Audit Report.

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8. Mater­i­al­ity and misstatements

Defin­i­tions

Mater­i­al­ity is an expres­sion of the rel­at­ive sig­ni­fic­ance or import­ance of a par­tic­u­lar mat­ter in the con­text of the fin­an­cial state­ments as a whole.

Mis­state­ments in the fin­an­cial state­ments are con­sidered to be mater­i­al if they could, indi­vidu­ally or in aggreg­ate, reas­on­ably be expec­ted to influ­ence the eco­nom­ic decisions of users based on the fin­an­cial statements.

Mater­i­al­ity

We determ­ine mater­i­al­ity for the fin­an­cial state­ments as a whole (over­all mater­i­al­ity) using a bench­mark that, in our pro­fes­sion­al judge­ment, is most appro­pri­ate to the entity. We also determ­ine an amount less than mater­i­al­ity (per­form­ance mater­i­al­ity), which is applied when we carry out our audit pro­ced­ures and is designed to reduce to an appro­pri­ately low level the prob­ab­il­ity that the aggreg­ate of uncor­rec­ted and undetec­ted mis­state­ments exceeds over­all mater­i­al­ity. Fur­ther, we set a threshold above which all mis­state­ments we identi­fy dur­ing our audit (adjus­ted and unad­jus­ted) will be repor­ted to the Audit and Risk Committee.

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 a con­sid­er­a­tion of the com­mon fin­an­cial inform­a­tion needs of users as a group and not on spe­cif­ic indi­vidu­al users.

An 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 con­sid­er­a­tion of future events; and
• Will make reas­on­able eco­nom­ic decisions based on the inform­a­tion in the fin­an­cial statements.

We con­sider over­all mater­i­al­ity and per­form­ance mater­i­al­ity while plan­ning and per­form­ing our audit based on quant­it­at­ive and qual­it­at­ive factors.

When plan­ning our audit, we make judge­ments about the size of mis­state­ments we con­sider to be mater­i­al. This provides a basis for our risk assess­ment pro­ced­ures, includ­ing identi­fy­ing and assess­ing the risks of mater­i­al mis­state­ment, and determ­in­ing the nature, tim­ing and extent of our responses to those risks.

The over­all mater­i­al­ity and per­form­ance mater­i­al­ity that we determ­ine does not neces­sar­ily mean that uncor­rec­ted mis­state­ments that are below mater­i­al­ity, indi­vidu­ally or in aggreg­ate, will be con­sidered immaterial.

We revise mater­i­al­ity 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.

Mater­i­al­ity (con­tin­ued)

We con­sider that total expendit­ure is 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 of 2% of total expenditure.

As set out in the table below, based on the audited ²⁰²²⁄₂₃ fin­an­cial state­ments we anti­cip­ate over­all mater­i­al­ity for the year ended 31 March 2024 to be in the region of £0.263m (£0.263m in the pri­or year), and per­form­ance mater­i­al­ity to be in the region of £0.184m (£0.184m in the pri­or year).

We will con­tin­ue to mon­it­or mater­i­al­ity through­out our audit to ensure it is set at an appro­pri­ate level.

CNPA fin­an­cial state­ments	2023⁄24 £’000s	2022⁄23 £’000s
Over­all materiality	£263	£263
Per­form­ance materiality	£184	£184
Clearly trivi­al	£8	£8
Spe­cif­ic materiality	We assess the Remu­ner­a­tion and Staff Report as sens­it­ive giv­en users’ interest in this spe­cif­ic area of the Annu­al Report. We are pro­pos­ing to set mater­i­al­ity in this area at one band with­in the tables in the Remu­ner­a­tion and Staff Report. An error that moved a dis­clos­ure by one band would be assessed as material.	We assess the Remu­ner­a­tion and Staff Report as sens­it­ive giv­en users’ interest in this spe­cif­ic area of the Annu­al Report. We are pro­pos­ing to set mater­i­al­ity in this area at one band with­in the tables in the Remu­ner­a­tion and Staff Report. An error that moved a dis­clos­ure by one band would be assessed as material.

Mis­state­ments

We will accu­mu­late mis­state­ments iden­ti­fied dur­ing our audit that are above our determ­ined clearly trivi­al threshold.

We have set a clearly trivi­al threshold for indi­vidu­al mis­state­ments we identi­fy (a report­ing threshold) for report­ing to the Audit and Risk Com­mit­tee and man­age­ment that is con­sist­ent with a threshold where mis­state­ments below that amount 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 clearly trivi­al threshold is £8,000, based on 3% of over­all mater­i­al­ity. If you have any quer­ies about this, please raise these with Tom Reid.

Each mis­state­ment above the report­ing threshold that we identi­fy will be clas­si­fied as:

• Adjus­ted: Those mis­state­ments that we identi­fy and are cor­rec­ted by management.
• Unad­jus­ted: Those mis­state­ments that we identi­fy that are not cor­rec­ted by management.

We will report all mis­state­ments above the report­ing threshold to man­age­ment and request that they are cor­rec­ted. If they are not cor­rec­ted, we will report each mis­state­ment to the Audit and Risk Com­mit­tee as unad­jus­ted mis­state­ments and, if they remain uncor­rec­ted, we will com­mu­nic­ate the effect that they may have indi­vidu­ally, or in aggreg­ate, on our audit opinion.

Mis­state­ments also cov­er quant­it­at­ive mis­state­ments, includ­ing those relat­ing to the notes of the fin­an­cial statements.

Report­ing

In sum­mary, we will cat­egor­ise and report mis­state­ments above the report­ing threshold to the Audit and Risk Com­mit­tee as follows:

• Adjus­ted misstatements;
• Unad­jus­ted mis­state­ments; and
• Dis­clos­ure mis­state­ments (adjus­ted and unadjusted).

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Appen­dices

A: Key com­mu­nic­a­tion points

B: Cur­rent year updates, forth­com­ing account­ing & oth­er issues

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Appendix A: Key com­mu­nic­a­tion points

We value com­mu­nic­a­tion with Those Charged With Gov­ernance as a two way feed­back pro­cess at the heart of our cli­ent ser­vice com­mit­ment. ISA 260 (UK) ​‘Com­mu­nic­a­tion with Those Charged with Gov­ernance’ and ISA 265 (UK) ​‘Com­mu­nic­at­ing Defi­cien­cies In Intern­al Con­trol To Those Charged With Gov­ernance And Man­age­ment’ spe­cific­ally require us to com­mu­nic­ate a num­ber of points with you.

Rel­ev­ant points that need to be com­mu­nic­ated with you at each stage of the audit are out­lined below.

Form, tim­ing and con­tent of our communications

We will present the fol­low­ing reports:

• Our Annu­al Audit Plan; and
• Our Annu­al Audit Report.

These doc­u­ments will be dis­cussed with man­age­ment pri­or to being presen­ted to yourselves and their com­ments will be incor­por­ated as appropriate.

Key com­mu­nic­a­tion points at the plan­ning stage as included in this Annu­al Audit Plan

• Our respons­ib­il­it­ies in rela­tion to the audit of the fin­an­cial statements;
• The planned scope and tim­ing of the audit;
• Sig­ni­fic­ant audit risks and areas of man­age­ment judgement;
• Our com­mit­ment to independence;
• Respons­ib­il­it­ies for pre­vent­ing and detect­ing errors;
• Mater­i­al­ity and mis­state­ments; and
• Fees for audit and oth­er services.

Key com­mu­nic­a­tion points at the com­ple­tion stage to be included in our Annu­al Audit Report

• Sig­ni­fic­ant defi­cien­cies in intern­al control;
• Sig­ni­fic­ant find­ings from the audit;
• Sig­ni­fic­ant mat­ters dis­cussed with management;
• Sig­ni­fic­ant dif­fi­culties, if any, encountered dur­ing the audit;
• Qual­it­at­ive aspects of the entity’s account­ing prac­tices, includ­ing account­ing policies, account­ing estim­ates and fin­an­cial state­ment disclosures;
• Our con­clu­sions on the sig­ni­fic­ant audit risks and areas of man­age­ment judgement;
• Sum­mary of misstatements;
• Man­age­ment rep­res­ent­a­tion letter;
• Our pro­posed draft audit report; and
• Inde­pend­ence.

Required com­mu­nic­a­tion	Where addressed
Our respons­ib­il­it­ies in rela­tion to the fin­an­cial state­ment audit and those of man­age­ment and those charged with governance.	Annu­al Audit Plan
The planned scope and tim­ing of the audit includ­ing any lim­it­a­tions, spe­cific­ally includ­ing with respect to sig­ni­fic­ant risks.	Annu­al Audit Plan
With respect to mis­state­ments: • uncor­rec­ted mis­state­ments and their effect on our audit opin­ion; • the effect of uncor­rec­ted mis­state­ments related to pri­or peri­ods; • a request that any uncor­rec­ted mis­state­ment is cor­rec­ted; and • in writ­ing, cor­rec­ted mis­state­ments that are significant.	Annu­al Audit Report
With respect to fraud com­mu­nic­a­tions: • enquir­ies of the Audit and Risk Com­mit­tee to determ­ine wheth­er they have a know­ledge of any actu­al, sus­pec­ted or alleged fraud affect­ing the entity; • any fraud that we have iden­ti­fied or inform­a­tion we have obtained that indic­ates that fraud may exist; and • a dis­cus­sion of any oth­er mat­ters related to fraud.	Annu­al Audit Report and dis­cus­sion at Audit and Risk Com­mit­tee meet­ings Audit Plan­ning and Clear­ance meetings
Sig­ni­fic­ant mat­ters arising dur­ing the audit in con­nec­tion with the entity’s related parties includ­ing, when applic­able: • non-dis­clos­ure by man­age­ment; • inap­pro­pri­ate author­isa­tion and approv­al of trans­ac­tions; • dis­agree­ment over dis­clos­ures; • non-com­pli­ance with laws and reg­u­la­tions; and • dif­fi­culty in identi­fy­ing the party that ulti­mately con­trols the entity.	Annu­al Audit Report
Sig­ni­fic­ant find­ings from the audit includ­ing: • our view about the sig­ni­fic­ant qual­it­at­ive aspects of account­ing prac­tices includ­ing account­ing policies, account­ing estim­ates and fin­an­cial state­ment dis­clos­ures; • sig­ni­fic­ant dif­fi­culties, if any, encountered dur­ing the audit; • sig­ni­fic­ant mat­ters, if any, arising from the audit that were dis­cussed with man­age­ment or were the sub­ject of cor­res­pond­ence with man­age­ment; • writ­ten rep­res­ent­a­tions that we are seek­ing; • expec­ted modi­fic­a­tions to the audit report; and • oth­er mat­ters, if any, sig­ni­fic­ant to the over­sight of the fin­an­cial report­ing pro­cess or oth­er­wise iden­ti­fied in the course of the audit that we believe will be rel­ev­ant to CNPA or the Audit and Risk Com­mit­tee in the con­text of ful­filling their responsibilities.	Annu­al Audit Report
Sig­ni­fic­ant defi­cien­cies in intern­al con­trols iden­ti­fied dur­ing the audit.	Annu­al Audit Report
Where rel­ev­ant, any issues iden­ti­fied with respect to author­ity to obtain extern­al con­firm­a­tions or inab­il­ity to obtain rel­ev­ant and reli­able audit evid­ence from oth­er procedures.	Annu­al Audit Report
Audit find­ings regard­ing non-com­pli­ance with laws and reg­u­la­tions where the non-com­pli­ance is mater­i­al and believed to be inten­tion­al (sub­ject to com­pli­ance with legis­la­tion on tip­ping off) and enquiry of the Audit and Risk Com­mit­tee into pos­sible instances of non-com­pli­ance with laws and reg­u­la­tions that may have a mater­i­al effect on the fin­an­cial state­ments and that the Audit and Risk Com­mit­tee may be aware of.	Annu­al Audit Report and Audit and Risk Com­mit­tee meetings
With respect to going con­cern, events or con­di­tions iden­ti­fied that may cast sig­ni­fic­ant doubt on the entity’s abil­ity to con­tin­ue as a going con­cern, includ­ing: • wheth­er the events or con­di­tions con­sti­tute a mater­i­al uncer­tainty; • wheth­er the use of the going con­cern assump­tion is appro­pri­ate in the pre­par­a­tion and present­a­tion of the fin­an­cial state­ments; and • the adequacy of related dis­clos­ures in the fin­an­cial statements.	Annu­al Audit Report
Report­ing on the valu­ation meth­ods applied to the vari­ous items in the annu­al fin­an­cial state­ments includ­ing any impact of changes of such methods	Annu­al Audit Report
Com­mu­nic­a­tion regard­ing our sys­tem of qual­ity man­age­ment, com­pli­ant with ISQM 1, developed to sup­port the con­sist­ent per­form­ance of qual­ity audit engagements.	Annu­al Audit Plan
Indic­a­tion of wheth­er all reques­ted explan­a­tions and doc­u­ments were provided by the entity	Annu­al Audit Report

Appendix B: Cur­rent year updates, forth­com­ing account­ing & oth­er issues

Applic­able for IFRS Reporters

Cur­rent and forth­com­ing account­ing issue

New stand­ards and amendments

Effect­ive for account­ing peri­ods begin­ning on or after 1 Janu­ary 2023

Amend­ments to IAS 1 Present­a­tion of Fin­an­cial State­ments and IFRS Prac­tice State­ment 2 Mak­ing Mater­i­al­ity Judge­ments: Dis­clos­ure of Account­ing Policies (Issued Feb­ru­ary 2021)

• The amend­ments set out new require­ments for mater­i­al account­ing policy inform­a­tion to be dis­closed, rather than sig­ni­fic­ant account­ing policies. Imma­ter­i­al account­ing policy inform­a­tion should not be dis­closed as account­ing policy inform­a­tion taken in isol­a­tion is unlikely to be mater­i­al, but it is when the inform­a­tion is con­sidered togeth­er with oth­er inform­a­tion in the fin­an­cial state­ments that may make it material.

Amend­ments to IAS 8 Account­ing Policies, Changes in Account­ing Estim­ates and Errors: Defin­i­tion of Account­ing Estim­ates (Issued Feb­ru­ary 2021)

• The amend­ment intro­duces a new defin­i­tion for account­ing estim­ates and cla­ri­fies how entit­ies should dis­tin­guish changes in account­ing policies from changes in account­ing estim­ates. The dis­tinc­tion is import­ant because changes in account­ing estim­ates are applied pro­spect­ively only to future trans­ac­tions and oth­er future events, but changes in account­ing policies are gen­er­ally applied ret­ro­spect­ively to past trans­ac­tions and oth­er past events.

IFRS 17 Insur­ance Con­tracts (issued May 2017) and Amend­ments to IFRS 17 Insur­ance Con­tracts (Issued June 2020)

• IFRS 17 is a new stand­ard that will replace IFRS 4 Insur­ance Con­tracts (IFRS 4). The stand­ard sets out the prin­ciples for the recog­ni­tion, meas­ure­ment, present­a­tion and dis­clos­ure about insur­ance con­tracts issued, and rein­sur­ance con­tracts held, by entities.

Amend­ments to IFRS 17 Insur­ance Con­tracts: Ini­tial Applic­a­tion of IFRS 17 and IFRS 9 Fin­an­cial Instru­ments (Issued Decem­ber 2021)

• The amend­ments address poten­tial mis­matches between the meas­ure­ment of fin­an­cial assets and insur­ance liab­il­it­ies in the com­par­at­ive peri­od because of dif­fer­ent trans­ition­al require­ments in IFRS 9 and IFRS 17. The amend­ments intro­duce a clas­si­fic­a­tion over­lay under which a fin­an­cial asset is per­mit­ted to be presen­ted in the com­par­at­ive peri­od as if the clas­si­fic­a­tion and meas­ure­ment require­ments of IFRS 9 had been applied to that fin­an­cial asset in the com­par­at­ive peri­od. The clas­si­fic­a­tion over­lay can be applied on an instru­ment-by-instru­ment basis.

IFRS 17 Insur­ance Con­tracts has not yet been adop­ted by the FReM. Adop­tion in the FReM is expec­ted to be from April 2025; early adop­tion is not permitted.

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Tom Reid (Audit Director)

Maz­ars 100 Queen Street Glas­gow G1 3DN

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