Financial Audit Seminar Thursday,14 April 2011 pot

Financial Audit Seminar

Thursday,14 April 2011

Introduction

Malcolm Prentice
Acting Director, Financial Audits

Key Findings from the 2009-10
Financial Audit Program

Tim Larnach
Senior Audit Manager

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Session Outline
Key Findings in 2009-10:
Quality of Reporting
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Financial Statements
Statements of Performance

Audit Findings
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Status of Previously Reported Audit Findings
Computer Information Systems
Performance Measures

Quality of Reporting
Financial Statements
78 audit reports issued
No qualified audit reports
Overall quality has improved (statements rated
satisfactory or better increased from 70% in
2008-09 to 83% in 2009-10)
Most common deficiencies:
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misstatement of current or prior year figures;
lack of clear and concise explanatory information; and
irrelevant and/or untailored model disclosures.

Quality of Reporting - continued
Statements of Performance
30 reports of factual findings issued
3 reports of factual findings were issued with
negative findings due to:
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systems not being able to accurately record results
(six performance measures); and
supporting documents for results were not being
maintained (one performance measure).

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Quality of Reporting - continued
Statements of Performance - continued
Overall quality has improved (statements of
performance rated satisfactory or better increased
from 64% in 2008-09 to 74% in 2009-10)
Most common deficiencies:
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errors in calculation of actual results and variance
from planned targets;
insufficient explanations of measures and how they
were measured; and
lack of clear and concise reasons for material
variances.

Audit Findings
Status of Previously Reported Audit Findings
Agencies resolved 201 (75%) of previously
reported audit findings.

A significant percentage of findings (25%) remain
either unresolved or partially resolved.
Progress in addressing previously reported
weaknesses in major revenue applications
remains slow.

Audit Findings - continued
Computer Information Systems
Environmental controls were generally
satisfactory except over reviews of administrative
user access and audit logs.
Application controls for some systems required
further improvement, including:
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reviews of user access;
backup and recovery procedures;
reviews of audit logs; and
change management procedures.

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Audit Findings - continued
Performance Measures
Performance measures for many agencies need

further improvement.
Measures tended to be more meaningful and
useful when:
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measures and targets were clearly defined in
budgets or statements of intent; and
measurement of actual results were clearly
explained (particularly where significant
judgements or estimates are applied).

Questions?

Impact of Clarity Auditing Standards

Ajay Sharma
Senior Manager, Technical & Quality Assurance

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Introduction
Objective
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make agencies aware of the significant changes.

Application

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reporting periods commencing on or after
1 January 2010 (i.e. to 31 December 2010 and
30 June 2011 audits).

Audit Close Report
Purpose
Communicate significant findings with Those
Charged with Governance (TCWG).
Objective
Promote a two-way communication between
the auditor and TCWG.
Develop a constructive working relationship.
Timing
Prior to the issue of the audit report.

Audit Close Report - continued
What is in this report?
Auditor’s views on:
1. Qualitative aspects of the agency’s
accounting practices.
2. Significant difficulties encountered during the
audit.
3. Written representations being requested.
4. Significant risk areas identified in the audit
strategy document.

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Modified Audit Reports
Special Purpose Financial Statements
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Statements prepared for a specific user group.
Tailored to meet their needs.
Need to disclose the basis for preparation at note 1.

Audit report
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Include an ‘Emphasis of matter’ paragraph (not a
qualification) to alert the users of the basis for
preparation.
Special Purpose Audit Report.doc

Audit Strategy
Includes Agency’s reporting responsibilities.
Office is required to seek acknowledgement of
these responsibilities.
Need to sign and provide it back to the Office.
Example - Audit Strategy Template.doc

Questions?

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Qualitative Financial Statement
Disclosures

Jordan Langford-Smith
Senior Audit Manager

Session Outline
Define qualitative financial statement
disclosures.
Explain qualitative disclosures which often
need improvement:
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financial instruments;
significant accounting policies;
accounting judgements and estimates; and
impact of changes in accounting standards.

Qualitative Disclosures
Non-numeric information.
Used to:
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explain quantitative information; or
provide additional information.

Examples include:
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summary of significant accounting policies;
contingent liabilities;
risk management for financial instruments; and
impact of changes in accounting standards.

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Financial Instruments
AASB 7: ‘Financial Instrument Disclosures’
paragraph 33 requires disclosure of:
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the exposures to each type of risk and how they
arise;
the objectives, policies and processes for

managing the risk; and
changes to the risk, or the processes to manage
the risk from the prior year.

Financial Instruments - continued
Common errors include:
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discussion of risk management policies for
financial instruments that an agency does not
have;
insufficient explanation of how key risks are
managed;
not discussing risk management policies for all
financial instruments; and
discussion of risk management policies for items
that are not financial instruments.

Significant Accounting Policies
AASB 101: ‘Presentation of Financial
Statements’ paragraph 10(e).
Common errors include:
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accounting policies for balances that are not
included in the financial statements;
accounting policies which do not reflect the actual
accounting treatment; and
the inclusion of statements which are not
accounting policies.

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Accounting Judgements and
Estimates
Paragraphs 122 and 125 of AASB 101
requires an entity to disclose information
regarding the key judgements and estimates
used in preparing the financial statements.
Common errors include:
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omission of key judgements and estimates;
insufficient information regarding the judgement or
estimate being made; and
inadequate disclosures regarding discount rates
used.

Impact of Changes to Accounting
Standards

Paragraph 30 of AASB 108: ‘Accounting
Policies, Changes in Accounting Estimates
and Errors’.
ACT Accounting Policy ‘Treatment of AASB
Standards issued which are not yet effective’
Common errors include:
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not tailoring the disclosure; and
not disclosing what the impact of the change is.

Questions?

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Other Key Issues for 2010-11

David O’Toole
Acting Audit Manager

Other Key Issues for 2010-11
Client assistance schedule
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No longer included in the audit strategy document

To be provided to agencies at or after the planning meeting
A standard template will also be available on our website
www.audit.act.gov.au

Analytical reviews
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Template document will be provided to agencies
A standard template will also be available on our website
www.audit.act.gov.au

Review of draft annual reports
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Draft annual reports to be provided to the Audit Office prior to
publication where possible

Other Key Issues for 2010-11 - continued
Audit Management Report
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Draft audit management reports to be formally sent to Chief
Executives for comment

Chief Finance Officer requested to attend key
meetings (e.g. planning and exit meetings)
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Communication of significant audit matters

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Other Key Issues for 2010-11 - continued
Appropriate accommodation for audit staff
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Work space, access to telephone and network connection in
agency premises

Agencies to confirm audit requirements of grant
acquittals
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Communicating the need for separate audits for
Commonwealth funding

Shared W drive
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Providing audit work papers and large reports electronically

IDEA software
Audit fees

Questions?

2010-11 Model Financial Statements

and New Accounting Policy
Anita Hargreaves
Acting Director, Accounting Branch
Department of Treasury

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2010-11 Model Financial Statements
How to Read the Models
New Accounting Policy
Events After Balance Date

How to Read the Models
www.treasury.act.gov.au/accounting
What’s new
Addendum to Models
Customise your financial statements

New Accounting Policy
Provision for Make Good
What is make good

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Events After Balance Date
Note 45 – Events After Balance Date

Contacts
Brenden Taylor – Acting Manager ext 76141
Jason Klose – Senior Manager ext 70246

Questions?

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Whole-of-Government Reporting
Requirements in 2010-11
Melissa Tetley
Senior Manager
Budget Coordination and Reporting Branch
Department of Treasury

Questions?

Conclusion

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