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What might the 2020 audit look like?

In many cases, council’s external auditors will continue to perform the audit under the existing timetable however the audit may be performed remotely rather than at a client’s site.

There will be several discussions and meetings via an online platform to ensure that sufficient, appropriate audit evidence is able to be collected.

Councils are likely to have more frequent engagement with their auditor, as the complexity of financial reporting matters is likely to be high at 30 June 2020 due to both COVID-19 and the adoption of the new revenue and leases standards. The increased complexity of issues may affect audit procedures and reporting timelines.

Council’s control environment since 1 July 2019

Depending on how a council has been operating over the last few months, there may have been changes to the control environment which the auditor will need to consider including:

  • Information systems – changes in access levels due to remote working and reduction in security protocols
  • Increase in manual controls – the move to a remote working environment may have resulted in more manual controls and potentially less segregation of duties
  • Documentation – evidence of controls operating may be harder to achieve when employees are working remotely
  • Changes in employee roles and responsibilities – staff may take on additional or changed responsibilities to help facilitate business as usual operations, which means the risks of controls not being performed or being performed incorrectly is increased
  • Risk of fraud and error is increased as employees are working remotely and the level of supervision decreases
  • Cyber security – employees working remotely on home network systems increases the risk of cyber attacks and infiltration of systems compared to normal operations behind council firewalls.

Audit reports

There may be comments in the audit report about COVID-19 for some councils, these may vary from emphasis of matters (to draw the reader’s attention to a particular note) to modifications due to limitation of scope over certain balances.

Generally, these comments in the audit reports reflect the uncertainties in the current environment and the associated consequences for councils, rather than a negative comment about a council’s performance or preparation of the financial statements.

Councils should consult with their auditors on a regular basis throughout the 2020 reporting period to ensure that there is a shared understanding of the evidence required and available.

Last updated: Monday, Nov 30, 2020