AGS: AUDIT OF ACCOUNTS Contents:
Scope
Key Points
Background
Audit of Accounts
Qualification of Accounts
Annual Audit
Laying and Publishing
Management Letters
Scope 1. This section gives
guidance on the audit of accounts by the
Auditor General for Scotland (AGS) or by
auditors appointed by him or her either
from the staff of Audit Scotland or from
private sector audit firms.
Key Points 2. The auditors' reports
must set out the auditors' findings on the
matters specified in section 22(1)&(2)
of the PFA Act 3. A timetable should be
agreed in advance between Finance Teams and
the auditors. 4. Auditors appointed by
the AGS will prepare a report consisting
the auditor's detailed opinions on certain
matters set out in the PFA Act. The AGS may
additionally prepare a report under section
22(3) of the PFA Act and both reports must
be attached to the accounts before they are
laid. Departments will be given the
opportunity to comment on the terms of
these reports before they are
finalised. 5. Departments will be
given the opportunity to comment on
Management Letters at the draft stage and
only material matters will be included in
the final version. Other more minor matters
will be covered in subsidiary letters to
Finance Teams.
Background 6. Under section 69 of
the Scotland Act 1998 one of the main
functions of the AGS is the auditing of
accounts - i.e. those produced by the
Scottish Administration and certain other
office holders and bodies - and certifying
and reporting on them. Section 13(6) of the
Public Finance and Accountability
(Scotland) Act 2000 (the PFA Act) allows
for any function of the AGS to be exercised
on his or her behalf by a member of the
staff of Audit Scotland or any other person
authorised by the AGS to do so. And section
21(3) of the PFA Act allows for accounts to
be audited by the AGS or a qualified person
appointed by the AGS.
Audit of Accounts 7. Accounts which are
required to be audited by the AGS must be
sent to the AGS not later than 6 months
after the end of the financial year to
which the accounts relate. The auditor's
report on an account must set out the
auditor's findings on the matters specified
in section 22(1)&(2) of the PFA Act
including: whether
expenditure and receipts shown in
the account were incurred or
applied in accordance with the
necessary statutory authority; whether
expenditure and receipts shown in
the account were incurred or
applied in accordance with the
relevant Budget Act authority; whether
expenditure and receipts shown in
the account were incurred or
applied in accordance with any
applicable guidance issued by
Scottish Ministers; and whether sums paid
out of the Scottish Consolidated
Fund were paid out and applied in
accordance with the relevant
legislation; whether the
account complies with any
applicable Accounts Direction.
8. Audits are designed to
provide sufficient relevant and reliable
evidence to support the conclusions
expressed by the auditors' certificates. It
is an ongoing exercise throughout the
financial year and relies on a review of
accounting systems and controls and a test
examination of transactions. The timing of
visits to Departments will normally be
agreed in advance, through the relevant
Finance Teams, between the auditors and the
areas concerned, but the nature of the work
requires that the auditors may request
information or documents at any time and at
short notice. To enable accounts to be
certified by the due dates, documents
requested by auditors should be provided
promptly and accounts should be prepared in
accordance with a timetable agreed in
advance between Finance Teams and the
auditors.
Qualification of
Accounts 9. If the auditor is not
satisfied in relation to any of the matters
specified in section 22(1)&(2) of the
PFA Act an explanation will be sought from
the body concerned. If the explanation is
not satisfactory the auditor's opinion will
be qualified.
Annual Audit 10. At the conclusion of
the audit the auditor will prepare a report
for publication together with the accounts
consisting the auditor's detailed opinions
on the accounts including the reason(s) for
any qualifications. At the same time the
auditor will provide an "Annual Audit
Report" to the audited body and the AGS
summarising the auditor's opinions and
conclusions and, where appropriate, matters
of substance or significant issues arising
from the audit. The Annual Audit Report
will not be published with the accounts but
may give rise to a separate report by the
AGS which will be published with the
accounts. While the terms and contents of
reports for publication with the accounts
are for the auditors and the AGS
respectively to determine Departments - via
the Scottish Executive Finance Director
(SEFD) - will be given the opportunity to
comment before any such reports are
finalised.
Laying and Publishing 11. The AGS must send the
accounts and reports for publication to
Scottish Ministers in sufficient time for
Ministers to have them laid before the
Parliament and published no later than 9
months after the end of the financial year
to which they relate. In practice those
accounts and reports which do not relate to
the Scottish Administration should be
published by the bodies concerned. The
accounts and published reports can be
considered by the Audit Committee.
Management Letters 12. Following completion
of the annual audits the auditor will send
management reports or letters to relevant
Accountable Officers. Departments will be
given the opportunity to comment on the
letters in draft form via the relevant
Assistant Director of Finance. The purpose
of the letters is to draw attention to
material areas of weakness in systems and
controls and to provide advice on making
improvements. Other more minor matters will
be covered in subsidiary letters to Finance
Teams. Finance Teams should inform
administrative divisions of points in the
management letter pertaining to them and,
where appropriate, seek their comments on
the points raised by the auditor and their
proposals, if any, for dealing with them.
Such proposals might include the amendment
of procedures or undertaking specific
action. Departmental Accountable Officers
will respond formally to management letters
and Finance Team Leaders will respond to
any subsidiary letters. 13. If an audit of a
sponsored body reveals weaknesses in a
Department's controls or oversight of the
body the auditor will report direct to the
sponsor Department. Departments should
ensure that they obtain copies of any
management letters in respect of their
sponsored bodies.
Back to top Page Published/
Updated on: 17th June 2004 |