Policy for Engagement of External Auditors

Transcription

1 Policy for Engagement of External Auditors Document Summary This policy sets out the actions to be completed to ensure that external audit services provided to Cumbria Partnership NHS Foundation Trust are delivered in line with national guidance and regulations. DOCUMENT NUMBER DATE RATIFIED DATE IMPLEMENTED NEXT REVIEW DATE ACCOUNTABLE DIRECTOR POLICY AUTHOR POL/002/ May 2018 May 2018 May 2019 Director of Finance Company Secretary Policy for Engagement of External Auditors Page 1 of 8

2 TABLE OF CONTENTS 1 Scope Introduction Statement of Intent Definitions Duties Arrangement/Details Training Monitoring compliance with this Document References/ Bibliography Related Trust Policy/Procedures Appendix A... 8 Policy for Engagement of External Auditors Page 2 of 8

3 1. SCOPE This policy sets out the actions to be completed to ensure that external audit services provided to Cumbria Partnership NHS Foundation Trust are delivered in line with national guidance and regulations. 2. INTRODUCTION It is important that the independence of our External Auditors in reporting to Governors, Non-Executive Directors and Cumbria Partnership NHS Foundation Trust (the Trust) is not, or does not appear to be, compromised in terms of the objectivity of their opinion on the financial statements of the Trust. Equally the Trust should not be deprived of expertise where it is needed, should the External Auditors be able to demonstrate higher quality and more cost effective service than other providers. Auditors are required to comply with relevant ethical standards and guidance issued or adopted by their professional accountancy bodies. This includes the Ethical Standards issued by the Auditing Practices Board (APB) and in particular, Ethical Standard 5, which deals with non-audit services provided to audit clients. The ethical standards and guidance require that a member of a professional accountancy body should behave with integrity in all professional, business and financial relationships. Integrity implies not merely honesty but fair dealing and truthfulness. Auditors must carry out their work with independence and objectivity. The Auditors opinions, conclusions and recommendations should both be, and be seen to be, impartial. Auditors and their staff should exercise their professional judgement and act independently of the NHS Foundation Trust. They should ensure they maintain an objective attitude at all times and that they do not act in any way that might give rise to, or be perceived to give rise to, a conflict of interest. This policy therefore seeks to set out what threats to audit independence theoretically exist and thus provides a definition of non-audit work which can be shared by the Trust and its External Auditor. It then seeks to establish transparent approval processes and corporate reporting mechanisms that will be put in place for any non-audit work that the Trust s External Auditor is asked to perform. Guidance issued by NHS Improvement (NHSI) (in both the Foundation Trust Code of Governance and the Audit Code for Foundation Trusts) states that Foundation Trusts implement a policy for approving any non-audit services that are to be provided by their External Auditor. 2.6 The Institute of Chartered Accountants in England and Wales sets out threats to independence as the following: Self-interest where an interest in the outcome of their work or in a depth of relationship with the Trust may conflict with the auditor s o b jectivity; Self-review where the auditors may be checking their own colleagues work and might feel constrained from identifying risks and shortcomings; Policy for Engagement of External Auditors Page 3 of 9

4 Management exists when the auditor undertakes work that involves making judgements and taking decisions that are properly the responsibility of management; Advocacy which may be present in engagement but could become a threat if an auditor becomes an advocate for an extreme position in an adversarial matter; Familiarity or trust where the level of constructive challenge provided by the auditor is diminished as a result of assumed knowledge or relationships that exist; and Intimidation where a member of the audit team may be deterred from acting objectively and exercising professional scepticism by threats, actual or perceived, from directors, managers or other employees of an audit client 3. STATEMENT OF INTENT The Trust is committed to continuous quality improvement and therefore believes that the processes outlined within this document provide a necessary framework to assist the effective management of external auditors in line with the requirements set out by NHSI. 4. DEFINITIONS NHSI is responsible for overseeing foundation trusts and NHS trusts, as well as independent providers that provide NHS-funded care. From 1 April 2016, NHSI is the operational name for an organisation that brings together Monitor and the NHS Trust Development Authority, amongst others. External Auditors perform audits, in accordance with specific laws or rules, of the financial statements of a company, government entity, other legal entity, or organization, and is independent of the entity being audited. International Standards on Auditing (ISAs) are a common set of professional standards that all auditors must follow in delivering external audit. Non-audit services are professional services provided by the external auditor other than: The audit of financial statements; and 5. DUTIES Other roles which legislation and regulation specify Governors Council is responsible for approving this policy. The Chief Executive is ultimately responsible for the effective implementation of this policy. The Director of Finance has responsibility for ensuring this policy is adhered to and for ensuring that the policy remains up to date and appropriate. Policy for Engagement of External Auditors Page 4 of 9

5 All Executive Directors/Managers are responsible for ensuring the implementation of and compliance with this policy within their respective areas. All Staff who have delegated authority to make such an appointment must adhere to this policy. Trust has delegated authority to approve non-audit work in line with this policy and to monitor its effectiveness. 6 ARRANGEMENTS/DETAIL 6.1 In order to provide a transparent mechanism by which non-audit work can be reviewed and progressed, the following categories of work are agreed as professional services available from the Trust sexternal Auditors Statutory and audit related work not requiring approval. Projects where the work is audit related and the external auditors are likely to be best placed to do the work (e.g. Grants returns, covenant reporting, lease compliance reporting). Such assignments do not generally require approval. However, there shall be a fee limit of 10,000 for each individual project above which prior approval should be sought for such work Audit related and advisory services requiring prior approval. There are projects and engagements where the auditors are best placed to perform the work: Due to their network within and knowledge of the business (e.g. taxation advice, due diligence and accounting advice); Due to their previous experience approval should be sought for projects of this nature. Effective planning should ensure approval, where necessary, can be sought prior to the commencement of a project. However, in exceptional circumstances and where the priority of need and meeting schedule does not enable full approval to be sought, the Chair of the or Deputy Chair in the absence of the Chair, will consider the need to arrange an extraordinary meeting of the Projects that are not permitted. There are some projects that are not to be performed by the External Auditors. These projects represent a real threat to the independence of the audit team such as where the External Auditors would be in a position where paragraph 2.6 might apply, such as auditing their own work (for example, systems implementation). This includes projects commissioned by national regulators into services solely provided by the Trust where these projects are materially relevant to the External Auditor s opinions stated within the annual report and accounts More detail on each type of work is set out in Appendix A. The Audit Code for NHS Foundation Trusts (Monitor, 2014, section 2.12) states that T he auditor may, with the approval of the council of governors, provide the NHS Foundation Trust with services which are outside the scope of the audit Policy for Engagement of External Auditors Page 5 of 9

6 as defined in this code (additional services). Under this policy, the Governors Council delegates authority to the for commissioning additional services from the Auditor The is therefore responsible for approving all non-audit work undertaken by the External Auditors. For the avoidance of doubt, the requires the business sponsor of the proposed work to obtain a proposed scope and fee estimate before the work commences. The business sponsor should also seek written confirmation that the Auditor will be able to safeguard their independence in relation to the proposed work. If the proposed fee obtained as part of 6.5 exceeds the established limits or falls into a category of work that requires approval, details of the scope and fee proposal should be submitted to the Chairman and Director of Finance for consideration and approval. If approved the project should be logged by the secretary to be raised at the next Audit meeting and the Trust Secretary informed in order that a schedule of non-audit work fees can be maintained and the Governors Council updated as necessary at the next available meeting. In cases where it is undecided which category services fall into they will default to the category that requires approval and be expected to take that route until such time as a this policy is reviewed and updated by the. 7 TRAINING Formal training is not required. Skills, knowledge and attributes required by post holders with detailed responsibilities are sufficient for the application of this policy. 8 MONITORING COMPLIANCE WITH THIS DOCUMENT The table below outlines the Trusts monitoring arrangements for this policy/document. The Trust reserves the right to commission additional work or change the monitoring arrangements to meet organisational needs. Aspect of compliance or effectiveness being monitored Review and approval on the structure, content and operation of the policy The will include within their Annual Monitoring method Annual report Annual report Individual responsible for the monitoring Director of Finance Director of Finance Frequency of the monitoring activity Annually Annually Group / committee which will receive the findings / monitoring report Board of Directors Group / committee / individual responsible for ensuring that the actions are completed Policy for Engagement of External Auditors Page 6 of 9

7 Report to the Trust Board and the Council of Governors all additional work performed by the Trust s External Auditors External Auditors will include within their annual ISA260 an appendix that summarises any additional work that they have performed for the Trust and a review of the effectiveness of this policy Annual report External Auditors (Facilitated by Director of Finance) Annually 9 REFERENCES/ BIBLIOGRAPHY Audit Code for NHS Foundation Trusts (Monitor, December 2014) NHS Foundation Trust Code of Governance (Monitor, July 2014) NHS Foundation Trust Annual Reporting Manual 2014/15 (Monitor, December 2014) Ethical Standards issued by the Auditing Practices Board (Finance Reporting Council) 10 RELATED TRUST POLICY/PROCEDURES POL/003/001 Standing Orders, Reservation and Delegation of Powers and Standing Financial Instructions Policy. Policy for Engagement of External Auditors Page 7 of 9

8 Appendix A EXAMPLES OF WORK TYPES The table below sets out examples of the different work types that could be requested from the External Auditor and the associated approval process Characteristics Statutory and Audit Related (not requiring Audit & Risk approval unless over 10k) Advice on areas core to the financial statement audit. Audit and Assurance Related and Non- Audit Advisory Services (sensitive projects requiring referral without de minimis) Requiring independent objective assessment of information or procedures Projects that are not permitted. Participation in management Staff secondments Other advisory services Acquisitions / Disposals Accountants reports Reporting on financial assistance Audit of carve out financial statements Due diligence and related advice Completion accounts audit Agreement of adjustments as a result of completion accounts None Advice on integration activities Preparation of forecast of investment proposals Internal Audit and Risk Management Services None Provision of specialist skills/training Advice on methodology and systems Full outsourcing Systems implementation Co-sourcing Advice and design of policies, systems or procedures Policy for Engagement of External Auditors Page 8 of 9

9 Taxation Statutory and Audit Related (not requiring Audit & Risk approval unless over 10k) None Audit and Assurance Related and Non- Audit Advisory Services (sensitive projects requiring referral without de minimis) Preparation of draft returns Submission of returns and correspondence with tax authorities Projects that are not permitted. Preparation of accounting entries for tax Handling taxation payments Advice on tax matters Transfer pricing Valuation for the purposes of taxation General Accounting None Advice on accounts preparation and application of accounting standards training for accounting and risk management projects Preparation of accounting entries Preparation of financial information Book keeping services Policy for Engagement of External Auditors Page 9 of 9