Halton Community Housing Corporation Audit Findings Report For the year ended December 31, 2016

Transcription

1 Attachment #2 To Report HC Halton Community Housing Corporation Audit Findings Report For the year ended December 31, 2016 Prepared April 3, 2017 for presentation on May 9, 2017 kpmg.ca/audit

2 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, The contacts at KPMG in connection with this report are: Lois Ouellette, CPA, CA Lead Audit Engagement Partner Tel: (905) louellette@kpmg.ca Table of Contents Executive summary 3 Data & Analytics in the audit 5 Financial statement presentation and disclosure 6 Adjustments and differences 7 Control observations 8 Zac Sharp, CPA, CA Audit Senior Manager Tel: (905) zsharp@kpmg.ca Appendices 9 Appendix 1: Required communications 10 Appendix 2: Audit Quality and Risk Management 11 Appendix 3: Background and professional standards 12 Appendix 4: Data & Analytics in Audit 13

3 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Executive summary Purpose of this report* The purpose of this Audit Findings Report is to assist you, as a member of the audit committee, in your review of the results of our audit of the financial statements of Halton Community Housing Corporation (the Corporation ) as at and for the year ended December 31, This Audit Findings Report builds on the Audit Plan we presented to the Audit Committee on October 4, Changes from the Audit Plan Audit risks and results We discussed with you at the start of the audit a number of areas of audit focus. We have outlined our findings to report to the audit committee in respect of them. Adjustments and differences We did not identify differences that remain uncorrected. There have been no significant changes regarding our audit from the Audit Planning Report previously presented to you. * This Audit Findings Report should not be used for any other purpose or by anyone other than the audit committee. KPMG shall have no responsibility or liability for loss or damages or claims, if any, to or by any third party as this Audit Findings Report has not been prepared for, and is not intended for, and should not be used by, any third party or for any other purpose.

4 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Executive summary (continued) Finalizing the audit As of the date of this report, we have completed the audit of the financial statements, with the exception of certain remaining procedures, which include amongst others: completing our discussions with the audit committee; performing procedures to update our legal inquiries; obtaining evidence of the Board s approval of the financial statements; and receipt of signed management representation letter We will update the audit committee, and not solely the Chair (as required by professional standards), on significant matters, if any, arising from the completion of the audit, including the completion of the above procedures. Our auditors report will be dated upon the completion of any remaining procedures. Control and other observations We did not identify any control deficiencies that we determined to be significant deficiencies in ICFR. We have identified other observations with respect to tangible capital assets. Independence We are independent and have extensive quality control and conflict mitigation processes in place. Significant accounting policies and practices There have been no initial selections of, or changes to, significant accounting policies and practices to bring to your attention.

5 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Data & Analytics in the audit We have utilized Data & Analytics (D&A) in order to enhance the quality and effectiveness of the audit. We have summarized areas of the audit where D&A tools and routines were used. Area of focus D&A tools and routines Our results Amortization of tangible capital assets ( TCA ) Utilized computer-assisted audit techniques (CAATs) to perform a 100% recalculation of amortization of TCA to identify any differences from SAP. We identified several differences for which we followed up with management. As a result of input inconsistencies at the capitalization date and separation of asset additions within the same asset ID, amortization was being over calculated for certain assets. Management has now corrected the input inconsistencies. A retrospective adjustment in the amount of $1,974 thousand was made to the current year ending accumulated amortization.

6 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Financial statement presentation and disclosure The presentation and disclosure of the financial statements are, in all material respects, in accordance with the Corporation s relevant financial reporting framework. Misstatements, including omissions, if any, related to disclosure or presentation items are in the management representation letter included in the Appendices. We also highlight the following: Form, arrangement, and content of the financial statements Application of accounting pronouncements issued but not yet effective The form, arrangement and content of the financial statements are adequate. No concerns at this time regarding future implementation.

7 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Adjustments and differences Adjustments and differences identified during the audit have been categorized as Corrected adjustments or Uncorrected differences. These include disclosure adjustments and differences. Professional standards require that we request of management and the audit committee that all identified differences be corrected. We have already made this request of management. Corrected adjustments The management representation letter includes all adjustments identified as a result of the audit, communicated to management and subsequently corrected in the financial statements. Description As at and for the year ended December 31, 2016 (figures in thousands) Correction of amortization expense net adjustment Income effect for the year ended December 31, 2016 (Decrease) Increase Financial position (cumulative impact 2011 to 2016) Assets (Decrease) Increase Liabilities (Decrease) Increase Equity (Decrease) Increase - $1,609 - $1,609 Correction of 2016 amortization adjustment $365 $365 - $365 Total $365 $1,974 - $1,974 The adjustments identified relate to amortization of tangible capital assets and involve both a current year adjustment and prior year adjustment for the periods We concur with management s representation that the differences are not material to the financial statements. Accordingly, the differences have no effect on our auditors report. Uncorrected adjustments We did not identify differences that remain uncorrected.

8 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Control observations Other control deficiencies may be identified during the audit that do not rise to the level of significant deficiency. Other control deficiencies Below is a summary of these other control deficiencies that we identified during the audit: Description Potential effect Review over TCA Processes KPMG notes that the adjustment identified with respect to depreciation expense within the Halton Community Housing Corporation entity was determined to be the result of manual input errors from the initial adoption of TCA accounting. As evidenced in the current period, the potential impact of similar errors may be pervasive in the sense that uncorrected errors will continue across multiple periods if left unidentified and/or uncorrected. This has the potential to result in timing differences with respect to the recognition of depreciation expense over the life of the related capital assets. Post TCA adoption, management has instituted several additional review procedures over the processes related to capital asset accounting. These controls continue to improve the overall TCA reporting environment. Management has implemented KPMG s recommendation that entries to the TCA sub-ledger to set up newly acquired or constructed TCA are subject to review and approval before release. Individual assets should be reviewed periodically. Review on an asset by asset basis will increase the likelihood that similar errors are identified as soon as possible. As was the case in this year s instance, annual deprecation and remaining useful life are recommended starting points for review.

9 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Appendices Appendix 1: Required communications Appendix 2: Audit Quality and Risk Management Appendix 3: Background and professional standards Appendix 4: Data & Analytics in the Audit

10 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Appendix 1: Required communications In accordance with professional standards, there are a number of communications that are required during the course of and upon completion of our audit. These include: Auditors report the conclusion of our audit is set out in our draft auditors report attached to the draft financial statements. Management representation letter in accordance with professional standards, copies of the management representation letter are provided to the Audit Committee. Management have provided you with a copy of the representation letter for the audit of the financial statements. CPAB Big Four Firm Public Report (November 2016) Please refer to Report_EN.pdf CPAB 2016 Big Four Public Report: Highlights for Audit Committees Please refer to Reports/CPAB_2016_Big_Four_Highlights_EN.pdf

11 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Appendix 2: Audit Quality and Risk Management KPMG maintains a system of quality control designed to reflect our drive and determination to deliver independent, unbiased advice and opinions, and also meet the requirements of Canadian professional standards. Quality control is fundamental to our business and is the responsibility of every partner and employee. The following diagram summarises the six key elements of our quality control systems. Visit our Audit Quality Resources page for more information including access to our audit quality report, Audit quality: Our hands-on process. Other controls include: Before the firm issues its audit report, the Engagement Quality Control Reviewer reviews the appropriateness of key elements of publicly listed client audits. Technical department and specialist resources provide realtime support to audit teams in the field. We conduct regular reviews of engagements and partners. Review teams are independent and the work of every audit partner is reviewed at least once every three years. We have policies and guidance to ensure that work performed by engagement personnel meets applicable professional standards, regulatory requirements and the firm s standards of quality. Other risk management quality controls Independent monitoring Independence, integrity, ethics and objectivity Engagement performance standards Personnel management Acceptance & continuance of clients / engagements We do not offer services that would impair our independence. The processes we employ to help retain and develop people include: Assignment based on skills and experience; Rotation of partners; Performance evaluation; Development and training; and Appropriate supervision and coaching. We have policies and procedures for deciding whether to accept or continue a client relationship or to perform a specific engagement for that client. Existing audit relationships are reviewed annually and evaluated to identify instances where we should discontinue our professional association with the client. All KPMG partners and staff are required to act with integrity and objectivity and comply with applicable laws, regulations and professional standards at all times.

12 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Appendix 3: Background and professional standards Internal control over financial reporting As your auditors, we are required to obtain an understanding of internal control over financial reporting (ICFR) relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on internal control. Accordingly, we do not express an opinion on the effectiveness of internal control. Our understanding of ICFR was for the limited purpose described above and was not designed to identify all control deficiencies that might be significant deficiencies and therefore, there can be no assurance that all significant deficiencies and other control deficiencies have been identified. Our awareness of control deficiencies varies with each audit and is influenced by the nature, timing, and extent of audit procedures performed, as well as other factors. Documents containing or referring to the audited financial statements We are required by our professional standards to read only documents containing or referring to audited financial statements and our related auditors report that are available through to the date of our auditors report. The objective of reading these documents through to the date of our auditors report is to identify material inconsistencies, if any, between the audited financial statements and the other information. We also have certain responsibilities, if on reading the other information for the purpose of identifying material inconsistencies, we become aware of an apparent material misstatement of fact. We are also required by our professional standards when the financial statements are translated into another language to consider whether each version, available through to the date of our auditors report, contains the same information and carries the same meaning. The control deficiencies communicated to you are limited to those control deficiencies that we identified during the audit.

13 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, Appendix 4: Data & Analytics in Audit Turning data into value KPMG continues to make significant investments in our Data & Analytics (D&A) capabilities to help enhance audit quality and provide actionable insight to our clients by unlocking the rich information that businesses hold. When D&A is applied to the audit, it enables us to test complete data populations and understand the business reasons behind outliers and anomalies. Advancements in D&A tools allow us to analyze data at more granular levels, focusing on higher risk areas of the audit and developing insights you can then leverage to improve compliance, potentially uncover fraud, manage risk and more. KPMG is enhancing the audit D&A ENABLED AUDIT METHODOLOGY The combination of our proven industry experience, technical know-how and external data allows us to focus our audit on the key business risks, while providing relevant insights of value to you. FOR THE AUDIT FOR YOUR BUSINESS AUDIT QUALITY ACTIONABLE INSIGHT Automated testing of 100% of the population Focuses manual audit effort on key exceptions and identified risk areas Helping you see your business from a different perspective How effectively is your organization using your systems?

14 Halton Community Housing Corporation Audit Findings Report for the year ended December 31, kpmg.ca/audit KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ( KPMG International ). KPMG member firms around the world have 174,000 professionals, in 155 countries. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.