DOC

external audit financial statement - NHS Healthcare in Birmingham

By Gene Carpenter,2014-05-16 05:49
8 views 0
external audit financial statement - NHS Healthcare in Birmingham

     Communication concerning

     financial statements to

     those charged with

    governance

     Heart of Birmingham

     Teaching PCT

INSIDE THIS REPORT

    PAGE 2

    Summary Report

    ? Introduction

    ? Background

    ? Auditor’s report

    ? Unadjusted misstatements

    ? Material weaknesses in accounting and

    internal control systems

    ? Qualitative aspects of accounting practices

    and financial reporting

    ? Matters required by other auditing standards

    to be reported to those charged with

    governance

    ? Other matters

    ? Next steps

PAGE 9

    Appendix 1

    ? Draft auditor’s report

    54927221.doc Draft Version 1 Reference:

    May 2010 Date:

    Brian Warwick Author

     SUMMARY REPORT

    Introduction

    1. The PCT is responsible for the preparation of financial statements that give a true and fair

    view of its financial position as at 31 March 2003 and its income and expenditure in the year

    then ended. We are responsible for undertaking an audit and reporting whether in our

    opinion the PCT’s financial statements do give a true and fair view of its financial position

    and income and expenditure.

    2. The PCT is responsible for the preparation of a Statement of Internal Control in which it

    reports the extent to which it has complied with standards specified by the Department of

    Health. We are required to report where we obtain evidence in the course of our audit that

    is inconsistent with the disclosures made by the PCT.

    3. The PCT submitted draft financial statements to us on 23 may 2003 and we have now

    substantially completed our audit of those statements. This report details key matters

    arising from our audit that we must communicate to those charged with governance prior to

    giving an opinion on those financial statements.

    4. It should be noted that our audit does not seek either to obtain absolute assurance that the

    financial statements present fairly your financial position or assurance that they are

    accurate in every regard.

    5. In this context, we adopt a concept of materiality. We seek, in planning and conducting our

    audit of the accounts, to identify material errors in your financial statements. Material errors

    are those which might be misleading to a reader of the financial statements.

    Background

    6. A revised Statement of Auditing Standards (SAS), SAS 610 Reporting to those charged with

    governance is applicable for the first time to the audit of the PCT’s accounts. It requires

    auditors to report to those charged with governance (as distinct from management) certain

    matters before they give an opinion on the financial statements.

    Auditors should communicate to those charged with governance:

    a. expected modifications to the auditors' report;

    b. unadjusted misstatements;

    c. material weaknesses in the accounting and internal control systems identified during

    the audit;

    d. their views about the qualitative aspects of the entity's accounting practices and

    financial reporting;

    e. matters specifically required by other Auditing Standards to be communicated to

    those charged with governance; and

    f. any other relevant matters relating to the audit. 7. We agreed with the PCT that the communications required by SAS 610 in advance of issuing

    our report on the annual financial statements of the PCT would be with the Audit Committee. 8. We have considered each of the areas listed above and our views are set out below

    together in this first year with explanations of the issues that we are responding to.

    Communication concerning financial statements to those Heart of Birmingham Teaching PCT Page 2 charged with Audit 2002/2003

     SUMMARY REPORT

    Auditor’s report 9. The standard requires that we report to those charged with governance any proposed

    modifications to our report on the financial statements. The standard explains the reasons

    for this requirement:

    Auditors discuss expected modifications to the auditors' report on the financial

    statements with those charged with governance to ensure that:

    ? those charged with governance are aware of the proposed modification and the

    reasons for it before the report is finalised;

    ? there are no disputed facts in respect of the matter(s) giving rise to the proposed

    modification (or that matters of disagreement are confirmed as such); and

    ? those charged with governance have an opportunity, where appropriate, to provide

    the auditors with further information and explanations in respect of the matter(s)

    giving rise to the proposed modification.

    10. On the basis of our audit work we do not currently intend to issue a non-standard report on

    the PCT’s financial statements. A draft auditor’s report is attached at Appendix 1.

    Unadjusted misstatements

    11. We are required to report to you all misstatements other than those of a clearly trifling

    nature. A trifling error is an entirely inconsequential error, whether taken individually or in

    aggregate and whether judged by any quantitative and/or qualitative criteria.

    12. All non-trifling errors identified in the course of our audit have been amended by

    management.

    Material weaknesses in accounting and internal control

    systems

    13. We have limited responsibilities to report to you weaknesses in accounting systems and

    systems of internal control identified in the course of our audit. SAS 610 provides:

    A material weakness in the accounting and internal control systems is a deficiency in

    design or operation which could adversely affect the entity's ability to record, process,

    summarise and report financial and other relevant data so as to result in a material

    misstatement in the financial statements. Auditors normally do not need to communicate

    information concerning a material weakness of which those charged with governance are

    aware and in respect of which, in the view of the auditors, appropriate corrective action

    has been taken, unless the weakness is symptomatic of broader weaknesses in the

    overall control environment and there is a risk that other material weaknesses may

    occur. Material weaknesses of which the auditors are aware are communicated where

    they have been corrected by management without the knowledge of those charged with

    governance.

    14. We have a duty to report adjusted errors in financial statements where they are relevant to

    your wider governance responsibilities.

    15. Our audit identified the following weakness in systems of accounting and financial control

    which we should report to you.

    Communication concerning financial statements to those Heart of Birmingham Teaching PCT Page 3 charged with Audit 2002/2003

     SUMMARY REPORT

    Zero status invoices

    16. During the year we have commented on the procedure adopted by the Shared Services

    Agency for dealing with invoices for which there was no order number. These were assigned th‘zero’ status and not included in the ledger until queries had been resolved. At 8 April

    2003 these stood at a total of ?15.5m and eventually were reduced to ?329,000. (On 11

    June 2003 the figure had increased to ?2.2m). We have carried out extensive additional

    testing of your year end accounts and are satisfied that the figures in the accounts present

    fairly the transactions which took place.

    17. The main reason for the large number and volume of such invoices is that some NHS

    providers raise invoices for the provision of healthcare even though they are being paid by

    monthly mandate. These invoices are then sent to commissioners who need to match them

    with payment mandates. During 2002/3 the matching process was not as effective as it

    needed to be.

    18. In some cases the invoices were from external suppliers. These were accorded zero status

    mainly because there was no matching order.

    19. The existence of the zero status invoices caused your finance staff considerable additional

    effort in the accounts closedown process. We have discussed this with your Finance Director

    who is determined to ensure that there is a not a repeat in 2003/4.

20. You should be aware that we do not provide a comprehensive statement of all weaknesses

    that may exist in the accounting and internal control systems or of all improvements that

    may be made, but have addressed only those matters that have come to our attention as a

    result of the audit procedures performed.

    Qualitative aspects of accounting practices and financial

    reporting

    21. SAS 610 places specific duties on auditors to report their assessment of qualitative aspects

    of accounting practices and financial reporting to those charged with governance:

    In the course of their audit of the financial statements, auditors consider the qualitative

    aspects of the financial reporting process, including items that have a significant impact

    on the relevance, reliability, comparability, understandability and materiality of the

    information provided by the financial statements. Auditors discuss in an open and frank

    manner with those charged with governance the auditors' views on the quality and

    acceptability of the entity's accounting practices and financial reporting. Such

    discussions may include:

    ? the appropriateness of the accounting policies to the particular circumstances of the

    entity, judged against the objectives of relevance, reliability, comparability and

    understandability but having regard also to the need to balance the different

    objectives and the need to balance the cost of providing information with the likely

    benefit to users of the entity's financial statements;

    ? auditors explain to those charged with governance why they consider any

    accounting policy not to be the most appropriate, and request those charged with

    governance to make appropriate changes. If those charged with governance decline

    to make the changes on the grounds that the effect is not material, the auditors

    inform them that they will consider qualifying the auditors' report as soon as the

    effect of not using the most appropriate policy can reasonably be expected to

    influence the economic decisions of users of the financial statements.

    Communication concerning financial statements to those Heart of Birmingham Teaching PCT Page 4 charged with Audit 2002/2003

     SUMMARY REPORT

    ? the timing of transactions and the period in which they are recorded;

    ? the appropriateness of accounting estimates and judgments, for example in relation

    to provisions, including the consistency of assumptions and degree of prudence

    reflected in the recorded amounts;

    ? the potential effect on the financial statements of any uncertainties including

    significant risks and exposures, such as pending litigation, that are required to be

    disclosed in the financial statements;

    ? material uncertainties related to events and conditions that may cast significant

    doubt on the entity's ability to continue as a going concern;

    ? the extent to which the financial statements are affected by any unusual

    transactions including non-recurring profits and losses recognised during the period

    and the extent to which such transactions are separately disclosed in the financial

    statements;

    ? apparent misstatements in the other information in the document containing the

    audited financial statements or material inconsistencies between it and the audited

    financial statements;

    ? the overall balance and clarity of the information contained in the annual report;

    ? disagreements about matters that, individually or in aggregate, could be significant

    to the entity's financial statements or the auditors' report. These communications

    include consideration of whether the matters have, or have not, been resolved and

    the significance of the matters.

    22. We have carefully considered the qualitative aspects of the PCT’s accounting practices and

    financial reporting. No matters have come to our attention that we would wish to draw to

    the attention of those charged with governance.

    Matters required by other auditing standards to be reported to

    those charged with governance

    23. Other auditing standards require us to communicate with you in other specific

    circumstances including:

    ? where we suspect or detect fraud, even if the potential effect is not material to our

    audit of the financial statements

    ? in respect of the Directors’ conclusion that the PCT is a going concern

    ? where there is an inconsistency between the PCT’s financial statements and other

    information in documents containing the financial statements. 24. We have identified no such matters in the course of our audit.

    Other matters

    25. There are no other matters that we wish to draw to your attention.

    Next steps

    26. You need to determine whether or not effective steps have been taken to address the zero

    status invoice issue.

    Communication concerning financial statements to those Heart of Birmingham Teaching PCT Page 5 charged with Audit 2002/2003

     SUMMARY REPORT Status of this report to the PCT

    This report is prepared in the context of the Statement of Responsibilities of Auditors and

    Audited Bodies issued by the Audit Commission. It is prepared by appointed auditors and

    addressed to Directors. They are prepared for the sole use of the audited body, and no

    responsibility is taken by auditors to any Director or officer in their individual capacity, or to

    any third party.

Communication concerning financial statements to those Heart of Birmingham Teaching PCT Page 6 charged with Audit 2002/2003

     APPENDICES

    Draft auditor’s report

    Draft Independent Auditor’s Report to Directors of the Board of HEART

    OF BIRMINGHAM TEACHING PCT

    I have audited the financial statements on pages a to f which have been prepared in accordance with the accounting policies relevant to the National Health Service as set out on pages yy to yy.

    This report is made solely to the Board of HEART OF BIRMINGHAM TEACHING PCT in accordance with Part II of the Audit Commission Act 1998 and for no other purpose as set out in paragraph 54 of the Statement of Responsibilities of Auditors and Audited Bodies prepared by the Audit Commission.

    Respective Responsibilities of Directors and Auditor

    As described on page x the Directors are responsible for the preparation of the financial statements in accordance with directions issued by the Secretary of State. My responsibilities, as independent auditor, are established by statute, the Code of Audit Practice issued by the Audit Commission and my profession’s ethical guidance.

    I report to you my opinion as to whether the financial statements give a true and fair view of the state of affairs of the PCT and its income and expenditure for the year, in accordance with the accounting policies directed by the Secretary of State as being relevant to the National Health Service in England.

    I review whether the directors’ statement on internal control reflects compliance with the Department of Health’s guidance ‘Governance in the NHS: Statement on Internal Control

    2001/2002 and Beyond’ and supplementary guidance issued for 2002/03. I report if it does not meet the requirements specified by the Department of Health or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements. I am not required to consider whether the directors’ statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of the PCT’s system of internal control. My review was not performed for any purpose

    connected with any specific transaction and should not be relied upon for any such purpose. I read the information contained in the Annual Report and consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the statement of accounts.

    Basis of audit opinion

    I conducted my audit in accordance with the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission, which requires compliance with relevant auditing standards issued by the Auditing Practices Board.

    An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the PCT's circumstances, consistently applied and adequately disclosed.

    Communication concerning financial statements to those Heart of Birmingham Teaching PCT (Draft Version 1) Page charged with Audit 2002/2003 7

     APPENDICES

    I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming my opinion I also evaluated the overall adequacy of the presentation of information in the financial statements.

    Opinion

    In my opinion the financial statements give a true and fair view of the state of affairs of HEART OF BIRMINGHAM TEACHING PCT as at 31 March 2003 and of its income and expenditure for the year then ended in accordance with the accounting policies directed by the Secretary of State as being relevant to the National Health Service in England.

    Certificate

    I certify that I have completed the audit of the accounts in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission.

Andy Laird

    District Auditor

…………………….. July 2003

    Audit Commission

    Friars Gate

    1011 Stratford Road

    Solihull

    B90 4EB

    Communication concerning financial statements to those Heart of Birmingham Teaching PCT (Draft Version 1) Page charged with Audit 2002/2003 8

Report this document

For any questions or suggestions please email
cust-service@docsford.com