Faster closing – it’s good to talk
Following on from our recent event on ‘Early closure of local government accounts’, Matthew Coe, Financial Audit Manager at the Wales Audit Office, talks about his experience of the day and the important discussions he encountered with delegates…
On 10 October 2017 I attended the latest Good Practice Exchange shared learning seminar in Cardiff on the Early closure of local government accounts. Alongside many representatives from local authorities, there were a large number of staff from the Wales Audit Office, all keen to understand lessons from those already piloting faster closing timetables.
In the first plenary session there was a lot of audience participation with table groups considering a number of mini scenarios on how not to manage the accounts closure and audit processes. Even with some of the Wales Audit Office “actors” hamming it up for all they were worth, it was clear that everyone in the room recognised we need teamwork and regular communication to make a success of this transition.
As is usual at Good Practice Exchange events, we then broke into smaller workshop groups covering three particular aspects:
- Making Assets Early Closure Friendly – ensuring the streamlining of asset valuations and capital accounting;
- Knowing why we want what we want! – what is needed in terms of working paper requirements; and
- The importance of Internal Quality Assurance on your Financial Statements - highlighting why internal quality assurance checks are critical to a successful audit.
These workshops looked at practical actions that we could take. It was particularly useful having a trained – tamed? – valuer present in the asset valuation workshop to explain his work and give his perspective on how to give valuations sooner.
The big learning points for me from these workshops were:
- Everyone agreed but more importantly accepted that there will be more estimates in the accounts.
- In addition it is likely there will be more uncorrected misstatements noted in the auditor’s reports (ISA260 reports) – BUT this is not necessarily a bad thing: a key message to relay to those charged with governance.
- You can actually do things earlier on non-current assets – it is not solely a year-end exercise after all – and together we just need to think creatively about it.
- Finally, auditors need to be clearer on working papers they need – not want, but actually need – and in what format with finance staff. On the flip side, finance staff also need to change the way they prepare and provide the working papers.
In the final plenary session I was struck most with just how long I had spent discussing the detailed arrangements with the finance staff from Cardiff Council. While we do cover this in our work as an audit team, as a Client Manager, I personally seldom get a chance to discuss the detailed approach to working papers with the finance team preparing them. For me, to have nearly four hours to go through the practicalities and challenges of changing both Council and Wales Audit Office approaches and ways of doing things, was incredibly valuable.
There and then we were able to agree a number of key principles such as early engagement on changes, quick resolutions to queries by both sides, and further meetings to improve supporting documentation for the 2017-18 accounts (meetings we have already starting arranging).
Also not only did I find that we agreed on the need to change both our approaches (and were positive about doing something about it for 2017-18) but I could communicate the collegiate way of working that sets the tone of our audit work first hand.
Finally I would say that communication really is the key – preferably by just talking to the right people face to face - so that you can talk around the implications of potential problems early on makes a big difference to how smooth an accounts/audit process can be. Early engagement on changes in accounting policies, methodologies and potential issues, as well as carrying out earlier testing, will certainly smooth the way to a faster closing Nirvana!