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Arrangements for achieving audit quality.
The Executive Director for Audit Services is responsible to the Auditor General for the quality of all our audit work, including that performed by Audit Wales staff and external contractors. The Executive Director ensures that audit quality is at the forefront of what we do through:
The Executive Director Audit Services is supported by audit directors and the wider leadership team in discharging these responsibilities and achieving audit quality.
Central to the success of our strategy is a persistent focus on ensuring the quality of our audit work. Our culture is one committed to continuous improvement and to supporting our staff to achieve that improvement, through learning and development and our performance management arrangements.
A key area of focus within our strategy is to strengthen our leadership capabilities across the organisation. We have developed a bespoke People Manager Development programme and participated in an Aspiring Leaders programme in conjunction with other UK audit agencies. This supports the talent management and succession planning in our Strategic Workforce Plan.
Connecting the whole organisation to the importance of audit quality has been a priority for the Executive Leadership Team (ELT). 2023-24 saw us being more purposeful in relation to this. Our bi-annual ELT Roadshows drew attention to and celebrated how each element of the business contributes to the delivery of our high-quality audit. This was also the emphasis of an all-staff event in April 2024. It is vital that we continue to build bridges across the organisation to achieve maximum impact. It really is a case of the whole being greater than the sum of the parts.
Through the Auditor General’s Code of Audit Practice, we adopt and apply the Ethical Standard issued by the Financial Reporting Council to all our work.
A key characteristic of auditors is the requirement that we be independent from those whom we audit. This includes not just the delivery of audit work but the independence of appointments as well.
Our Code of Audit Practice and our staff Code of Conduct reinforce the importance of independence and objectivity to our work. All our staff are required to make an annual declaration of independence in which they identify any connections with the bodies we audit that might impair their independence.
A separate Code of Conduct is in place for Board members who are required to declare any interests they may have in any issue and may be required to withdraw from meetings where that issue is being considered.
In addition to work where the Auditor General is appointed by statute such as the audit of accounts and examinations under the Well-being of Future Generations (Wales) Act 2015, he may from time to time undertake some work by agreement.
Where we have historically engaged with private firms to undertake work on behalf of the Auditor General, they have been required to have similar arrangements in place to monitor and manage any potential threats to independence to the audits that they undertake.
We have a Rotation Policy which is under review that governs how long senior members of staff can be involved with the direction of any particular audit. The policy seeks to achieve a balance between the mostly non-discretionary nature of the Auditor General’s work, the relatively small size of Audit Wales and the requirements of the Ethical Standard.
Staff receive training to reinforce awareness of our independence policies and procedures.
Following a hiatus caused by Covid, in 2023-24 we rolled out face-to-face ethics training to all Audit Wales staff and board members. We placed particular emphasis on the importance of senior management providing an appropriate culture for sound ethical practice, including coverage of ethical concerns in our internal whistleblowing arrangements. And given the particular additional aspects of integrity, objectivity and independence in public service, we included coverage of the Nolan principles and such things as the pitfalls of personal political activity in social media.
An important component of achieving audit quality is establishing standardised approaches to carrying out our work.
We carry out our performance audit work using our Performance Audit Delivery Manual (PADM). In 2023, we updated PADM to reflect the International Organisation of Supreme Audit Institutions (INTOSAI) performance audit standards. These represent the reasonable and attainable standards of performance against which we assess the economy, efficiency, and effectiveness of an audited body’s activities.
The impact of our audit work remains a key part of audit quality
During the year we have:
The new PADM makes us stop and think about what we’re doing and why. This includes being clear about the legislative basis for our work and whether and how an audit will discharge the Auditor General’s responsibilities under the Well-being of Future Generations Act. Also, the relevance of the sustainable development principle. We’re strengthening our thinking and making the connections between the sustainable development principle and value for money.
This was the second year of implementing a new audit of accounts approach in response to the revised International Standard on Auditing 315 (UK). This represented a fundamental change to our approach with the revised standard aiming to drive a more consistent risk assessment, improved audit quality and efficiency, and a greater emphasis on professional scepticism. Our approach now places greater emphasis on audit risk ensuring teams complete targeted testing.
We continue to develop and embed a range of data analytic and other digital tools in our financial audit work to allow us to effectively interrogate and risk assess large volumes of transactional data to improve audit quality.
In performance audit, several tools have been launched or updated for auditors’ use including the Health Risks Tool (HEART) that provides analyses of key datasets to inform risk assessments of local health boards and trusts; and a redeveloped LG Context and Performance (LG CaP) data tool. The LG CaP includes the latest data on key service performances, alongside contextual information and financial data. This has a range of uses, including supporting our financial sustainability work. We will be delivering specific training on the use and presentation of data during autumn 2024.
We are exploring the use of AI in our audit work to see if it can demonstrate improvements in audit quality and/or efficiency, subject to maintaining the relevant safeguards.
All our auditors are supported by our Audit Development and Guidance team (AD&G), who provide expert guidance and advice on a range of technical and professional issues and, with our HR team, support the learning and development of our audit teams.
We strengthened our technical support by establishing a distinct research and development function in 2022. The team continues to develop our approach to horizon scanning which includes conducting early research to support the development of our audit work programme.
We maintain and foster close working relationships and networks with several internal and external stakeholders including professional institutes and other public sector audit agencies. We aim to maximise opportunities to share learning and knowledge to continually improve and ensure that we influence wider decision making that could impact public sector audit in Wales.
The implementation of the new audit approach led to an overhaul of the methodology we applied to our audit of grant expenditure in my main audit. This approach paid dividends – we identified accounting errors, and highlighted where the grant processes could be strengthened to the client. In 2023-24, we built on the foundations we laid in 2022-23, reflecting on our methodology to testing these grants.The new approach has empowered us to risk assess different areas of grant expenditure, resulting in a more focused audit, and achieving efficiency gains in terms of testing time.
We use bespoke Microsoft 365-based systems for all our accounts, grants, and performance audit work. Our platforms support consistency of audit approaches and provide inbuilt quality checks. It gives us the ability to adopt best practices and new professional developments in our audit methodologies both now and in the future.
We have developed a performance audit workflow, which will mirror our new PADM to maintain and improve audit quality, improve productivity and efficiency and support progress monitoring. In 2024 we successfully piloted the prototype and roll out will occur in 2025.
We also have in place an electronic platform to manage the work we undertake on over 700 town & community council audits.
We continue to invest heavily in learning and development to enhance the professional skills and knowledge of our staff.
We have entered into a new contract with an external supplier to support and enhance our in-house training offering for accounts audit work. Under this contract we have already commissioned in depth training on group audit and accounting; sustainability reporting; audit of insurance contracts; ISA 315 top-up training; and general changes to financial reporting standards.
Staff have an allowance of ten days per annum to support their professional learning and development. This includes a tailored training programme for our trainees and apprentices designed to augment their development whilst working towards achieving their professional qualifications.
Our annual learning and development programmes contain two main elements:
A major part of our learning programmes in the past year has focused on embedding our new INTOSAI auditing standards. For performance audit, this has included:
Our personal development processes have been accredited as an appropriate continuing professional development (CPD) system for our staff by the Association of Certified Chartered Accountants (ACCA), the Chartered Institute of Public Finance Accountants (CIPFA) and the Association of Accounting Technicians (AAT).
We also have a post-project learning process for major projects (including audits) which seeks to reinforce our aim of being a learning and sharing organisation that strives continually to improve.