This document provides an overview and guidance for the 2020-21 financial audit process. It begins with welcoming remarks and then provides information on: - Communication strategies given ongoing COVID-19 circumstances - An overview of the audit teams and key contacts - Use of electronic work papers and expectations for agencies - Options for auditors to access agency information and data - The importance of communication between agencies and audit teams It then discusses some specific issues or areas of focus for the upcoming financial audits, including asset valuations, inter-agency transactions, performance indicators, and accounting treatments. Representatives from various agencies then provide some remarks. The document aims to facilitate coordination and information sharing to help ensure a smooth financial audit

1. 2020-21
FINANCIAL AUDIT WEBINAR

2. WELCOME
Mr Michael Harris, Auditor-General

3. Address by the Chair,
Standing Committee on Public Accounts
Mr Alistair Coe, MLA

4. Communication
strategies/protocols from the
continuing COVID-19
circumstances
Mr Chris Huang
Director, Financial Audit

5. Overview
• Audit teams and key contacts
• Electronic work papers and better
practice
• Data access and transfer of information
to the audit team
• Communication strategy - working from
home

6. Audit teams and key contacts
Chris Huang
(Director, Financial Audit)
6207 4734
Chris.Huang@act.gov.au
David O’Toole
(Director, Financial Audit)
6205 3087
David.O’Toole@act.gov.au
Sam Mahaarachchi
(Director, Financial Audit)
6207 0831
Saman.Mahaarachchi@act.gov.au
 Transport Canberra and City Services
Directorate
 Transport Canberra Operations
 Major Projects Canberra
 Canberra Health Services
 ACT Health Directorate
 ACT Local Hospital Network
Directorate
 National Health Funding Pool State
Pool Account
 ACT Gambling and Racing
Commission
 Independent Competition and
Regulatory Commission
 ACT Electoral Commissioner
 Territory Banking Account
 Superannuation Provision Account
 Building and Construction Industry
Training Fund Authority
 Long Service Leave Authority
 Community Housing Canberra Limited
 Chief Minister, Treasury and Economic
Development Directorate
 ACT Executive
 Justice and Community Safety
Directorate
 Lifetime Care and Support Fund
 Motor Accident Injuries Commission
 ACT Insurance Authority
 Default Insurance Fund
 Office of the Nominal Defendant of
the ACT
 Public Sector Workers Compensation
Fund
 Legal Aid Commission (ACT)
 Cultural Facilities Corporation
 Icon Water Limited
 ActewAGL Joint Venture
 Office of the Work Health and Safety
Commissioner
 University of Canberra
 Canberra Institute of Technology
 Community Services Directorate
 Housing ACT
 Education Directorate
 Environment, Planning and
Sustainable Development Directorate
 Suburban Land Agency
 West Belconnen Joint Venture
 City Renewal Authority
 ACT Public Cemeteries Authority and
Perpetual Care Trusts
 Office of the Legislative Assembly
 Public Trustee and Guardian
 Public Trustee and Guardian Trust
Account
 Capital Region Community
Foundation Gift and Open Funds
 ACT Integrity Commission

7. Electronic work papers and better practice
• Continuing the trend of electronic work papers – ready
when draft financial statements are provided
• Initial workpapers provided should be complete and
gone through your agency’s internal quality assurance
process and include documents such as:
o complete trial balance;
o system reports supporting balances (e.g. transaction listings, debtors
report);
o signed reconciliations;
o revaluation reports; and
o accounting advice and/or papers.
• Further information such as evidence trails for test
samples will be requested during the audit

8. What makes a good work paper for audit?
o easy to understand and follow by a person with
reasonable accounting knowledge
o reconciles to the general ledger and trial balance
provided for audit
o clearly referenced to supporting documents
o accounting policy papers and position papers should
clearly reference the applicable accounting standards
Electronic work papers and better
practice - continued

9. Electronic work papers and better
practice - continued
What to avoid in work papers:
o unreferenced or not clearly referenced work papers
most likely will require further clarification and more
time spent by the audit team (e.g. a system report
from the finance system without linkage to what
figures from the report eventuated in figures
presented in the financial statements or how these
figures were compiled)
o unnecessary work papers
o incomplete work papers will also lead to additional
time spent for clarification

10. Data access and information transfer to
the audit teams
• Feedback received on process used in 2019-20
• Multiple options available
o access to shared drive
o access to document management systems such as
Objective
o ACT Audit Office cloud portal (pending on
confirmation)
o Objective Connect

11. Communication strategy – working from
home
• Regular updates and progress meetings between
audit teams and agencies are encouraged
• Keep your audit team up to date with working from
home arrangements and communication channels
during the audit process
• Encourage agencies to use the audit planning
meeting with the audit team to agree on a
communication strategy

12. Questions?

13. Matters that need early
attention for smooth 2020-21
auditing process
Mr Sam Mahaarachchi
Director, Financial Audit

14. Overview
• Valuations (PP&E, Actuary)
• Inter-agency transactions
• Accountability indicators impacted by
COVID-19, new indicators etc
• Accounting treatment (external advice –
experience of SLA’s CFO)

15. Valuations (PP&E, Actuary)
• Valuations, formal or intervening, to
commence earlier, e.g. using March or
April data, to estimate fair values for
30 June
• Request valuers to include information
that facilitates disclosures in the
financial statements
• Explore whether any other balance can
be estimated in advance.

16. Inter-agency transactions
• Confirm inter-agency transactions
• Settle balances affected by AoA, or
other transactions early
• Closely monitor throughout the year
• Inform auditors of unresolved variances

17. Accountability indicators
• Monitor for ‘not applicable’, -100 % and
‘not measured’ results
• Identify early whether any result cannot
be measured
• Explore whether a result can be
measured using a different method
• Not measured result usually attracts an
audit report with an emphasis of matter
paragraph

18. Accounting treatments
• Assess whether sufficient internal
expertise is available
• Audit Office must be independent of
the processes and may obtain own
advice
• Share scope of the engagement and
draft reports prior to finalisation

19. SUBURBAN LANDAGENCY
2020-21 FinancialAudit Webinar

20. 2019-20 Audit Issues
• COVID-19 – going concern
• Self funded agency
• 100% dividend policy
• Other accounting issues

21. Factors critical to the success of
the process
• Trust
• Respect
• Communication

22. Questions?

23. Audit close reports and
signing financial statements
Mr David O’Toole
Director, Financial Audit

24. Audit Close Reports

25. Timing and requirements
• Issued when all material components of
financial statements have been audited
• Australian Auditing Standard ASA 260:
‘Communication with Those Charged
with Governance’
o Significant audit matters including
financial statement misstatements

26. Summary of significant audit matters
• Type of auditor’s opinion to be issued
• The outcome of audit work on areas of
highest risk to the audit
• Significant audit findings including
control weaknesses
• Significant qualitative aspects of
accounting practices
• Significant difficulties encountered

27. Financial statement misstatements
• Summary of all significant
misstatements of numbers or
disclosures identified after the financial
statements are provided for audit
• Significant misstatements may be
material or immaterial
• Agencies are not required to make
immaterial corrections

28. Signing financial statements
• Can be signed any time before issuing
of the auditor’s report
• Signed management representation
letter must be provided before auditor’s
report can be issued
• Make arrangements with your signing
officer for timely signing
• Later reporting agencies will likely
require quick turn around time

29. Questions?

30. The Audit of IT Systems as
part of a Financial Audit
Mr Tim Larnach
Senior Director, Financial Audit

31. Why do we audit IT systems?
- Auditing Standards
Components of an IT system
- General IT environment
- Applications (e.g. ORACLE, CHRIS21,
Rego.act)

32. How do we perform the IT audits?
- Engage IT audit specialist contractor
How often are the IT audits required?
- General IT environment – Annually
- Applications – Every three years (if no
major changes)

33. Who do we report IT audit findings to?
- Agency/business unit responsible for
the IT system

34. Who is responsible for the
completeness, accuracy and validity of
associated data from IT systems used
for financial reporting?
- Any agency that relies on them

35. Questions?

36. Financial Statements Assurance Processes
Ms Ahalya Shakespeare
ACT Shared Services

37.  Shared Services provides the following services:
 Accounts Payable
 Accounts Receivable
 Banking Services including managing the Banking Contract
 Taxation Services and Salary Packaging
 System Administration
 Financial Ledger Management
 Monthly/Annual Financial Statements
SS FINANCE SERVICES BRANCH
3
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Financial Statements

38.  Representation Letter
An annual Representation Letter is provided by Shared Services to all
directorates/agencies when submitting the draft financial statements. The
Representation letter:
 Provides assurance that Shared Services has prepared the draft financial
statements in accordance with the Financial Management Act 1996
 Acknowledges responsibility for implementing and operating adequate
accounting and internal controls
 Acknowledges adequate systems of internal controls
 Discloses any significant facts relating to possible frauds if any
SS FINANCE SERVICES BRANCH
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Financial Statements

39.  Financial Management Act 1996
 How do we ensure compliance in Shared Services?
 Adhering to the Accounting Standards (eg: AASB 15
Revenue from Contracts, AASB 119 Employee
Benefits and AASB 16 Leases)
 All ACT Treasury policies and guidelines are followed
 Shell Statements are prepared in accordance with ACT
Treasury Guidelines
SS FINANCE SERVICES BRANCH
3
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Financial Statements

40. Financial Statements
 Accounting and Internal Controls
 Data integrity checks (system reconciliations)
 Restricted access to information (Privacy Act 2014)
 Segregation of Duties (i.e. payment runs, bank transfers, journal uploads)
 Monthly reconciliations of subledgers to general ledger and balance sheet accounts
 Taxation legislation and policies are effectively enforced for GST/FBT
 Invoice/Journal logs and registers are maintained
 Use of data analytics for Accounts Processing and GST
SS FINANCE SERVICES BRANCH
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41. Financial Statements
 Compliance
 ACT Audit Office conducts annual audits of controls over Oracle financial
system as part of the audit of the financial statements.
 The Taxation Framework (managed by Shared Services) requires
directorates to conduct a taxation compliance review every three years.
SS FINANCE SERVICES BRANCH
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1
 Training
 Shared Services facilitates ongoing professional training, such as the CPA
Programs and tax training. Tax training is also extended to directorate staff.

42. Reporting timetable and key
messages for the preparation of the
2020-21 financial statements
42
Presenters – Ms Natasha Bourke
Executive Branch Manager
Ms Margaret Barnes CPA
Senior Director
Financial Reporting and Framework Branch
Chief Minister, Treasury and Economic Development Directorate

43. Audit Timetable
• Memo 2021/03 was released on Friday 26
Feb (revert to more standard timetable)
o24 June – COFOG data submission due
o8 July – Statement of Appropriation provided
o9 - 12 July – June Workbook open
o14 July – SS provide financial statements
o15 July – CFO sign-off statement of approp
o15 July (Group 1) 29 July – (Group 2) endorsed FS
and MD&A
o29 - 30 July – June Workbook (JFA) period
43

44. 44
Audit Timetable
o18 Aug – Statement of Performance to AO
o31 Aug – Consolidation packs to Treasury
o9 Sept – CFO sign-off for Web Workbook and Consol
pack to Treasury
o23 Sept – Audit Office to provide Audit Reports
o29 Sept – Territory FS to Audit Office
o6 Oct – Financial Statements to Ministers
o19 Oct – Territory FS to Legislative Assembly
Note: Agency groupings will be reviewed in 2021-22

45. Key Issues - WHoG
• Internal Trade errors – in 2019-20 increased over
2018-19:
o 2019-20 = $418m
o 2018-19 = $165m
o 2017-18 = $307m
• Engagement with FRF and Audit Office
o Reminder to engage with FRF and Audit Office on key issues, including
any external accounting advice
o Further training in June
• 2021-22 Budget – 31 August 2021
o GBMS stage will run from 4 May to 6 August
o Agency interim outcomes (JFA workbook will be flown in)
45

46. • Web Workbook Redevelopment
o Redevelopment project is underway to be known as Treasury Actual
Reporting System (TARS)
o Consolidation packs (notes) interface expected to change to the new
platform this year
o Monthly workbooks will not change for the 2020-21 reporting year,
expected go live in September 2021 Web Workbook Redevelopment
46
Key Issues - WHoG

47. 47

48. Accounting and Preparation 2020-21
Model Financial Statements
No full Model Financial Statements for 2020-21 will be
issued - 2019-20 Model is still valid.
What will be Issued:
• Changes for Service Concession Arrangements AASB1059,
this only impacts TCCS for 2020-21.
• Further Information on Revenue Disclosures.
• Treatment of AASB Standards Issued but are Not Yet
Effective as at 30 June 2021.
48

49. Accounting Policies to be Issued
• Liability for and Payment of GST between
ACT Government Related Entities
– Starts 1 April 2021
– Key issue:
• Directorates and Territory Authorities differ in the
treatment of own source revenue exemption from
liability.
• It is critical that all agencies review the policy and
guide when it is released.
49

50. Accounting Policies to be Issued
• Accounting for Concessional Loans
– this will be coming out in the next couple of months for those agencies
that will be providing loans
• ACT Land Transaction Policy
– Currently being developed including:
• Memorandum of Understanding and Schedule of Land transfers
between government agencies
– Key accounting issue include:
• Accounting treatment for land transfers between government
entities for no or nominal consideration.
50

51. Accounting and Preparation 2020-21
Model Financial Statements
Consistent Financial Reporting across the ACTPS
• Agencies are strongly encouraged to follow the format of the
2019-20 Model for consistency of presentation of financial
statements by ACT Government agencies for key users such as
the members of the Legislative Assembly.
• Agencies’ financial statements are ultimately the responsibility
of the D-G/CEO/Board.
Agency Feedback Welcome
• Agencies are welcome to raise issues about the Model
Financial Statements or accounting issues generally.
51

52. Contacts & Accounting Policies Web
• Change of Accounting Policy Staff
Hamish Palfreyman
Hamish.Palfreyman@act.gov.au
oReplaces Geoff Britt who has retired.
• Accounting and Related Policies are found at:
http://apps.treasury.act.gov.au/accounting
oContact and accounting request for advice form
52

53. Accounting and Preparation 2020-21
Model Financial Statements
Any Questions?
Thank You
53

54. Responsibility for detection of fraud
An auditing perspective
Mr Justin Reid
Board Member
AUASB

55. • The AUASB is an independent, non-corporate
Government Entity responsible for issuing audit
and assurance standards in Australia
• Australia has signed up to adopt international
auditing standards and adapt them for Australia
• The resulting standards (ASAs) have force of law
under the Corporations Act 2001, and
• Auditors-General apply ASAs to conduct their
audit engagements
© AUASB 55
Background to auditing standards

56. • Foundation of auditor objectives
To obtain reasonable assurance about whether the
financial report as a whole is free from material
misstatement, whether due to fraud or error,
thereby enabling the auditor to express an opinion
on whether the financial report is prepared, in all
material respects, in accordance with an
applicable financial reporting framework…
© AUASB 56
“Fraud” – Standards and Guidance

57. • ASA 240 – The Auditor's Responsibilities Relating
to Fraud in an Audit of a Financial Report
• One of the most comprehensive auditing
standards with 38 requirements auditors must
consider
• Objectives:
– identify and assess risk of fraud (financial report)
– obtain sufficient appropriate audit evidence
– to respond appropriately ….
© AUASB 57
Separate auditing standard – ASA 240

58. • The primary responsibility for the prevention
and detection of fraud rests with both those
charged with governance and management
• Management must place a strong emphasis
on fraud prevention
• TCWG through oversight reinforces a
commitment to creating a culture of honesty
and ethical behaviour
© AUASB 58
Who is responsible?

59. • Remain sceptical
• Perform required procedures
– enquiries with management, those charged with
governance and internal audit
– evaluate unusual or unexpected relationships
– on a risk basis identify and assess risk of material
misstatement due to fraud
– presume a risk of fraud in revenue recognition
© AUASB 59
What are the auditor’s responsibilities?

60. • Assign suitably skilled and knowledgeable
team members to assessing risk of fraud
• Respond to the risk of management override
of controls
• Test appropriateness of journal entries
• Review accounting estimates for bias
• Understand significant transactions outside
normal course of business
© AUASB 60
Auditor responsibilities cont…

61. • Obtain management representations
• Communicate with management and those
charged with governance as appropriate
• Consider the relevant legal or regulatory
requirements to report fraud outside of the
entity
© AUASB 61
Auditor responsibilities cont…

62. ACT Public Sector Management Act 1994
http://www.legislation.act.gov.au/a/1994-37/default.asp
ACT Integrity Policy
https://www.cmtedd.act.gov.au/__data/assets/pdf_file/0006/1013748/Integrity-
Policy.pdf
© AUASB 62
Legislative requirements

63. Close
Mr Ajay Sharma
Assistant Auditor-General, Financial Audit

64. Thank you