Financial Audit Services: On behalf of the Comptroller and Auditor
General and the Northern Ireland Audit Office
TERMS OF REFERENCE: Lot 1 - Financial Audit of the Police Rehabilitation and
Retraining Trust (PRRT) and Futures Northern Ireland (Futures (NI))
1.
BACKGROUND INFORMATION
1.1
The main activities of the Police Rehabilitation and Retraining Trust (PRRT) and Futures (NI), a
subsidiary of PRRT are detailed in Annex A.
1.2
PRRT is a company limited by guarantee, not having a share capital and having the registered
number NI 35737. PRRT is the parent company of Futures (NI), a wholly owned subsidiary with
registered number NI 37877. As registered companies, PRRT and Futures (NI) are both subject
to the requirements of the Companies Act 2006. Furthermore on 1 March 2013, The Companies
(Public Sector Audit) Order (Northern Ireland) 2013 came into effect requiring PRRT’s and
Futures (NI)’s accounts to be audited by the C&AG. The accounts should also be laid in the
Northern Ireland Assembly.
1.3
A copy of the latest annual report and accounts can be found at
http://www.prrt.org/files/downloads/AnnualRep11_12.pdf and unaudited abbreviated
accounts for Futures (NI) can be obtained on request or are available from Companies House.
1.4
The financial year end is 31 March. There is no statutory deadline for the certification and laying
of the accounts. The deadline for laying the accounts with Companies House is 31 December.
2.
DELIVERABLES
2.1
The successful tenderer will provide financial audit services for the NIAO. The contract shall cover
the audit of the 2012-2013, 2013-14, 2014-2015 accounts, with the option of extending annually
to cover the 2015-2016 and 2016-2017 accounts.
2.2
The audit work for each set of accounts for which proposals are invited is confined to:
 that leading to an audit opinion on the financial statements and part of the Remuneration
Report; and


a review of the Governance Statement.
2.3
PRRT will prepare consolidated accounts for the first time from 2012-13 and until Futures (NI) is
wound up. Futures (NI) is the trading arm of PRRT and will cease trading on 31 March 2013. It is
expected that individual accounts, , will be required for Futures (NI) for 2012-13 and 2013-14.
Futures (NI) accounts will be prepared to Government Financial Reporting Manual (FReM)
standards rather than the abbreviated version previously prepared. In 2014-15, and until the end
of the contract, it is expected that PRRT accounts, as a single company, will be subject to audit.
2.4
PRRT and Futures (NI) are administered by the same staff and share the same financial and
operating systems.
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2.5
The NIAO will place reliance each year on the audit work carried out on the accounts of PRRT
/Futures (NI) for its audit of the Department of Justice (DOJ).
2.6
The audit work does not include value for money aspects, although any value for money matters
arising as a result of the audit work should be brought to the attention of the Northern Ireland
Audit Office (NIAO).
2.7
It was noted in the 2011-12 accounts that the auditors carried out significant non-audit services
for PRRT relating to the PSNI Full Time Reserve Severance Support Programme. Although this
programme is winding down, the 2012-13 audit of PRRT should include a review the regularity of
this expenditure including the procurement arrangements. If issues are found then they should be
discussed with NIAO in the first instance. Annex C outlines the circumstances and procedures
involved.
2.8
A timetable showing the dates that the NIAO will expect to have the audit work submitted is
attached at Annex B.
2.9 The selected firm will carry out its work in accordance with International Standards on Auditing (UK
and Ireland) issued by the Financial Reporting Council (FRC), and report on the results of its audits
to the responsible staff in the NIAO. The overall objective of the audit work will be to obtain
sufficient and appropriate audit evidence to enable the selected firm to express a shadow
opinions to the NIAO in a form similar to that set out in Annex D1 Details of Reporting
Requirements are set out in Annex C.
2.10 To meet these objectives the selected firm will, inter alia, seek assurance that:

the form and content of the financial statements including the Remuneration Report comply
with the applicable government and professional accounting requirements and principles;

the figures in the financial statements are properly stated;

the funds have been applied to the services and for the purposes intended by the Northern
Ireland Assembly;

the transactions are in accordance with Northern Ireland Assembly authority, statute and
other regulations;

the Governance Statement s for PRRT and Futures (NI) meets the requirements for disclosure
specified by the Department of Finance and Personnel and is consistent with other
information resulting from the audit of the financial statements; and

information which comprises the management commentary and certain other information
normally included in a Director’s report, included within the Annual Report is consistent with
the accounts.
2.11 In arriving at their opinion the selected firm will consider the following major points and report
specifically on any aspects with which they are not satisfied:

1
whether PRRT and Futures (NI) have kept proper accounting records;
The NIAO will notify the firm of any changes to audit certificates as necessary.
2

whether they have obtained all the information and explanations which they consider
necessary for the purposes of their audit; and

whether information specified by relevant authorities regarding senior management’s
remuneration and transactions is not disclosed.
2.12 The selected firm will also be required to read the information contained in the Annual Reports
and state whether they are consistent with the financial statements. If they become aware of any
apparent misstatements or material inconsistencies with the financial statements implications for
the audit opinions must be considered. The Engagement Partner will be required to advise that
he/she has completed a review of the Annual Reports.
2.13 We expect that the firm’s audit team for the assignment will be led by a Partner with day to day
responsibility delegated to a Director or Audit Manager. Dependent on an assessment of risk, an
engagement quality control review under ISA 220 may be required for this audit and it will be the
firm’s responsibility to carry this out.
2.14 Although, the timeframe for the first year has been extended to allow for the issue of the new
legislation and appointment of contractors, the financial statements of PRRT will normally require
certification by early June each year. Prior to commencing the examination of each year’s
accounts the firm will obtain the approval of the NIAO Assignment Director for the proposed audit
strategy. If the audits are considered to be of a higher risk, the partner is expected to meet with
the NIAO Director to brief him / her on initial planning assessments and agree the general audit
approach prior to formal submission of the audit strategy. This is shown in the liaison timetable at
Annex B. The draft audit strategy should be prepared in a format agreed in advance with the
NIAO. The audit will not commence until the audit strategy has been approved by the NIAO
Assignment Director. Following approval of the strategy, the firm will be required to inform the
Board of the audit approach and underpinning assumptions and present the strategy to the Audit
Committee.
2.15 During the audit the partner is expected to keep the NIAO Director informed of any significant
matters. The expected liaison is shown in the timetable at Annex B. Firms may propose an
alternative (higher or lower) level of liaison if they consider it beneficial or otherwise warranted.
2.16 At the conclusion of the audits and following the firm’s Partner review, the firm’s shadow opinions
as to the acceptability of the financial statements for certification by the C&AG will be forwarded
to the responsible NIAO Assignment Director, together with a draft Report to Those Charged with
Governance and any draft presentation to the Audit Committee and senior management of
PRRT/Futures (NI).
2.17 The draft Report to those Charged with Governance should be prepared in a format agreed in
advance with the NIAO. The draft must be reviewed by the NIAO before being forwarded by the
firm to PRRT/Futures (NI). The firm will be responsible for agreeing the draft Report to those
Charged with Governance with PRRT/Futures (NI)’s senior management. The final Report to those
Charged with Governance should be forwarded to the NIAO who will formally issue it to
PRRT/Futures (NI) and the Department of Justice (DOJ).
2.18 On receipt of the firm’s opinions and draft Report to Those Charged with Governance an overall
scrutiny will be carried out by the NIAO Assignment Director. If the audits are judged to be high
risk, the partner will meet with the NIAO Director to brief him / her on the findings and to agree
the presentation to the Audit Committee and senior management of PRRT/Futures (NI). This
scrutiny will involve examination of these documents and may also involve examination of the
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firm’s detailed working papers. The results of this scrutiny will form the basis of the NIAO’s
submission of the accounts for certification by the C&AG.
2.19 The selected firm will be required to attend meetings with the Audit Committee, some meetings
of which will also be attended by NIAO. It is expected, unless otherwise agreed, that in any
presentation, the firm will take the lead in discussing the work and findings to the audited body
and the Audit Committee.
2.20 Some audited bodies or Audit Committees may require more frequent briefings from their
auditors. The firm will adopt the same responsibilities as given above in such situations. The
requirement for this is outlined in the timetable at Annex B.
2.21 The selected firm may also be called upon to provide additional information in respect of the
C&AG’s Annual Report on the results of financial audit work, and other ad hoc enquiries. In total,
this demand for additional information is not expected to be onerous.
2.22 The work undertaken by the firm will be subject to the firm’s normal quality assurance
procedures. Insofar as any comments made as a result of these procedures impinge upon the
work undertaken for the NIAO, they must be drawn to the attention of the NIAO. The work
undertaken will also be subject to the NIAO’s quality control procedures, which include the review
of the conduct of a sample of completed audits.
2.23 Where required, the NIAO will be permitted to have access to working files or papers produced
during the course of the contract.
2.24 The assignment will also require the selected firm to comply with APB Bulletin 2001/1 when
financial statements accompanied by the auditor’s report are published on the entity’s website.
2.25 The acceptance criteria for this assignment will reflect the delivery of the deliverables in
accordance with APB International Standards on Auditing (UK and Ireland) and the specified
timetable, and the audit approach set out in the successful firm’s proposal.
3.
INFORMATION REQUIREMENTS
Total cost of the Audit Assignment
3.1
The tender should include fixed prices for the audit of the accounts of PRRT and Futures (NI) in the
years applicable for each of the three years of the contract, (2012-13 to 2014-15) exclusive of
Value Added Tax and also for the two optional years (2015-16 and 2016-17), exclusive of Value
Added Tax. The cost should be based on the assumption that Futures (NI) will cease to trade on
31 March 2013 and the company wound up in 2013-14. The expected profile of audits in each of
the 5 years is therefore as follows:
2012/13
PRRT [Consolidated]
Futures (NI)
2013/14
PRRT [Consolidated]
Futures (NI)
2014/15
PRRT [Single Entity]
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2015/16
PRRT [Single Entity]
2016/17
PRRT [Single Entity]
In the event that Futures (NI) continues to trade beyond 31 March 2013 and is not wound up in
2013/14, NIAO will apply an inflationary uplift to the tender prices for expected final year of
trading (2012/13) and expected year of wind-up (2013/14) to subsequent years as appropriate.
3.2
Please provide a matrix of costs for each audit by staff mix and daily/hourly fee rates, together
with planned days/hours for each stage of the audits, i.e. planning, transactional testing and
completion stages. Prices should be inclusive of expenses but exclusive of VAT. These prices will
be variable only if the NIAO agrees that there has been a significant change in work or if the NIAO
specifically request additional work. Any changes must be agreed in advance with the NIAO
Assignment Director in writing. The tenderer must, therefore, fully assess all risks involved when
making their bid.
3.3
The lowest cost bid will be allocated the maximum marks and other bids will be awarded scores
on a pro-rata basis.
Quality of Services
3.4
In evaluating the quality of services offered, the NIAO will evaluate each aspect of quality as
follows:
Sub-Criteria
Weighting
Professional competency and ability to deliver
Tenderers must confirm their status as appropriately qualified auditors.
Pass/Fail
Tenderers must confirm that they are able to comply with NIAO’s five year
policy for rotation of engagement partners and managers. The policy
includes work on previous organisations which have subsequently
merged.
Pass/Fail
Tenderers must confirm that they are capable of fulfilling the Audit
Assignment regardless of location. This Audit Assignment may require
attendance at a number of locations within the organisation.
Pass/Fail
Tenderers must confirm that they are able to comply with the timetable.
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Pass/Fail
Proposed audit approach to the Audit Assignment
20 marks
The tender should include:

A description of the proposed approach to the assignment and
demonstrate how the intended level of assurance is to be
achieved;

Details of the proposed basis for materiality;

Details of the proposed reliance on internal controls and
substantive testing procedures, for individual audit areas;

Specific details as to how regularity will be addressed;

Information to demonstrate that the tenderer has an
understanding of public sector accounting and regulatory and
corporate governance frameworks, along with a sound general
knowledge of issues relevant to the sector; and

A description of the tenderer’s quality assurance
arrangements, outlining their arrangements for complying
with ISQC 1 and ISA 220.
Skills and application of relevant experience to the Audit Assignment
15 marks
The tender should include:

Details of previous experience of providing similar services
which the tenderer may consider relevant to this assignment;

Names of the partner and key members of the team proposed
for the assignment and an indication of their relevant
knowledge and experience, and how that knowledge and
experience will be applied to the Audit Assignment. For more
junior staff the number of years of trainee or post-qualification
experience should be disclosed;

Information to demonstrate that the proposed members of
the audit team staff are trained and suitably qualified to
undertake the audit work;

Full details of the tenderer’s training policies and practices
and the extent to which these address the requirement to
have an understanding of accounting, auditing and corporate
governance framework in the public sector.
Resources proposed for the Audit Assignment
The tender should provide details of:

the number of days/hours per grade of staff proposed for each
of the main stages of the audit i.e. planning, transactional
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15 marks
testing and completion stages; and

3.5
The best qualitative scoring bid for each sub-criteria above will be allocated the maximum marks
for that sub-criteria and other bids will be awarded scores on a pro-rata basis.
4.
4.1
the specific role of each of the key members of the proposed
audit team.
CONFLICTS OF INTEREST
Tenderers should supply information in relation to all existing and proposed contractual links. In
order for the NIAO to consider the impact on the firm’s independence of any other work
undertaken for PRRT/Futures (NI) or the DOJ and related bodies as detailed in Annex A,
tenderers must therefore provide a summary of:

details of all existing contractual links between the firm and the audited body which may
cause or be perceived to cause a conflict of interest situation to arise – this should include any
work carried out during the last two years and any major work on information systems which
are still in use within PRRT/Futures (NI) or its parent department and related bodies; and
• details of all existing contractual links between the firm and any third party, whose interest
may conflict or be perceived to conflict with those of the audited body.
5.
5.1
6.
6.1
CONTACT ARRANGEMENTS
Further information on the assignment can be obtained from Stephen McCormick (Tel: 028
90251067) (e-mail: Stephen.McCormick@niauditoffice.gsi.gov.uk). You should not contact
PRRT/Futures (NI) without prior clearance from the person named above.
PAYMENT PROFILE
The payment profile is full payment for the audit on formal issue of the final Report to those
charged with Governance, unless otherwise agreed with NIAO.
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Annex A
Profile of the Police Rehabilitation and Retraining Trust / Futures (NI)
PRRT
Aims, objectives and responsibilities
1.
Police Rehabilitation and Retraining Trust (PRRT) is a non-profit making Arms Length Body of the
Department of Justice. It was established as a company limited by Guarantee on 2 March 1999.
2.
The PRRT Mission is “To enable our clients to achieve and sustain a successful transition into
civilian life by providing unrivalled personal development and careers guidance, psychological
therapies, physiotherapy and education and training.
3.
PRRT Functions and Objectives (from 11/12 Annual Report)
Function
Objectives
Psychological Therapies
 Maintain waiting time for initial
assessment at average 14 days from
first contact,
 Achieve 95% client satisfaction,
 Provide training and submit academic
papers to raise department profile.
Physiotherapy
 Assess all clients within two weeks of
referral,
 Maintain 95% overall client satisfaction
rate,
 Host CPD event to raise department
profile.
Coaching and Development
 Manage and deliver service to meet
“matrix” accreditation standard,
 Delivery of services to current and new
customers in line with marketing
strategy,
 Preparation for ISO 9001:2008 audit
and accreditation
Training and Education
 Provide 1500 training places for eligible
clients,
 Achieve independent accreditation
/audit,
 Approve 90% of training support
applications.
Business Development and Marketing
 Develop 100 new business contacts
 Develop 50 new business quotes /
proposals / tenders with 60%
conversion,
 Implement Marketing and
Communications Strategy 2011-12.
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Future (NI)
Aims, objectives and responsibilities
4.
The principle aim of Futures (NI) is the provision of training and consultancy services. The
company was established as an independent social enterprise for the purposes of providing
services to organisations to support and develop people. It is essentially the trading arm of PRRT.
It is also a company limited by Guarantee.
5.
Futures (NI) had a turnover of £110,815 in 2011-12 (81,562 in 2010-11) and this expected to be
around £50,000 in 2012-13. Profits were £12,844 in 2011-12 (deficit of £2,626 in 2010-11). Net
assets were £15,863 at 31 March 2012 and £3,019 at 31 March 2011.
Organisational structure
6.
The PRRT Board of Directors is chaired by Mr Seamus Hamill. He is supported by the Vice Chair, Mr
A Sherrard, the Company Secretary Mr T Hanna and nine other members. The sub-committees
of the Board are the Audit Committee, Finance Committee and Operations Committee. Two of
PRRT’s directors are also directors of Futures (NI), Mr T Lewis and Mr S Hamill (Chair).
7.
The Chief Executive and Accounting Officer of PRRT and Futures (NI) is Mr Eddie Gaw. The
Accounting Officer is directly accountable to the Accounting Officer of the Department of Justice.
He meets weekly with his Senior Management Team who are:
Head of Psychological Therapies
Finance Manager
Head of Personal Development and
Employment Transition
Head of Training and Education
Head of Physiotherapy
8.
Dr Alastair Black
Una Buchanan
Sandra Herdman
Glenda Martin
Morna McGibbon
The average number of staff during the financial year, including the directors, was 65 in 2011-12
(74 in 2010-11). Staff in PRRT also provide administration services for Futures (NI).
Legislation governing activities
1.5
PRRT and Futures (NI) were established as companies limited by guarantee. They are required to
prepare financial statements in accordance with the Companies Act 2006. The Companies (Public
Sector Audit) Order (Northern Ireland) 2013 came into effect on 1 March 2013 and requires
PRRT’’s and Futures (NI)’s accounts to be audited by the C&AG. The accounts should also be laid in
the Northern Ireland Assembly.
Funding
9.
Grant in Aid from the Department of Justice 2011-12 was £3,282,903 (2010-11, £2,987,129). PRRT
income on activities for 2011-12 was £444,778 (2010-11, £646,134) and related to the
recoupment of expenses for services relating to other organisations.
9
10.
A key activity for PRRT was support provided to the PSNI Full Time Reserve Severance Support
Programme which is due to end in December 2012. PRRT funding for 2012-13 is £2.2m for
ordinary activities and £0.3m for the Programme. This compares to £2.2m in 2011-12 for ordinary
activities and £1.1m for the Programme. Further details can be found in PRRT’s 2012-13 Business
Plan available at www.prrt.org/files/downloads/business%20plan%2012_13-nocover.pdf . From
2013-14 onwards it is anticipated that PRRT core funding will remain at around £2m with an
additional £0.2m in receipts from the provision of training courses.
11.
Futures (NI) provides training services devised by PRRT to organisations outside of DOJ. It aims to
generate sufficient income to cover its costs in providing those services.
Accounting and computing systems
12.
PRRT and Futures (NI) are administered by the same finance staff. The accounting system used is
Sage 200.
Relevant DFP Guidance
13.
PRRT and Futures (NI) comply with guidance in Managing Public Money Northern Ireland.
14.
The annual accounts are prepared in accordance with the Government Financial Reporting Manual
(FReM) www.hm-treasury.gov.uk/frem index.htm, and any other guidance which DFP may issue
from time to time in respect of accounts that give a true and fair view.
15.
In addition to this guidance, PRRT/Futures (NI) must also comply with guidance on other issues
such as regularity and procurement contained in Managing Public Money Northern Ireland and
other miscellaneous DFP guidance.
16.
Copies of the guidance are available on DFP’s Accountability and Accountancy Services Division
website at www.dfpni.gov.uk/afmd .
Previous years audit findings
17.
Only PRRT’s accounts were audited previously. Futures (NI) claimed the exemptions from audit
under the special provision for small companies under the Companies Act 2006. This exemption
will not be claimed in 2012-13. PRRT’s audit opinions for the year ended 31 March 2012 were:
Opinion on Regularity:
The expenditure and income was applied to the purposes intended by the Northern Ireland
Assembly and the transactions conformed to the authorities that governed them.
Opinion on financial statements:
 the financial statements give a true and fair view of the state of the Trust’s affairs as at 31
March 2012 and of its result for the year then ended;
 have been properly prepared in accordance with International Financial Reporting Standards;
and
 have been prepared in accordance with the requirements of the Companies Act 2006.
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Opinion on other matters prescribed by the Companies Act 2006
The information given in the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
There were no matters reported by exception.
Location
18.
Maryfield Complex
100 Belfast Road,
Holywood,
BT18 9QY
Internal audit
19.
The Internal audit function is outsourced to a private firm of accountants.
WGA processes
20.
PRRT is not a designated body for WGA purposes.
Related entities
21.
Department of Justice (Sponsor Department)
Northern Ireland Office
PSNI
Some company directors are also on the board of the NI Police Fund, the Retired Police Officer’s
Association (NIRPOA) and Futures (NI).
Futures (NI) Limited is a wholly owned subsidiary of PRRT. The company raised invoices of
£64,881 to Futures (NI) Limited. The balance owed by Futures NI at 31 March 2012 is £2,275.
22.
All subsidiary bodies falling within the remit of the Department of Justice may have the potential
to be related parties. These will need to be considered on a case by case basis.
23.
PRRT/Futures (NI) board members, key management staff (and families and connected
businesses) etc. will have to be considered as potential related parties.
Alignment Project
22.
It is proposed under the ‘Alignment (Clear Line of Sight) Project’ to streamline financial reporting
with combined Departmental Resource accounts, consolidating NDPBs, to be published in June
each year, commencing in 2015-16. It is expected that any change to the timetable of the audits
included in these lots which may result from the Alignment Project will be accommodated by
the tenderer.
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Annex B
TIMETABLE FOR AUDIT WORK
1. It is anticipated that the first year of the audit will be on a different timeframe from the subsequent
years due to the timing of the legislation and subsequent procurement exercise. However, the
expected audit timetable for both PRRT and Futures (NI) accounts are:
Date
Action
Mid January
Submission of audit strategy and detailed audit approach for
audit to the NIAO.
End January
NIAO approval of audit strategy and detailed audit approach.
First week in May
Submission of draft Annual Report and Account by the PRRT to
NIAO.
End May
Draft Report to those Charged with Governance submitted to
NIAO for review (and at least one week in advance of the Audit
Committee).
June
Submission of Shadow Audit Opinion, Partner Completion Letter
and presentation of draft Report to those Charged with
Governance to the Audit Committee
July
Certification of accounts by C&AG.
July
Final Report to those Charged with Governance submitted with
management comments
These dates may be flexible but the successful contractor will be advised of any change as soon as it
is known. The firm should then confirm that it considers that it will be able to meet any new
timetable and that this will be at no extra cost (on the basis that the work is unchanged but it is
carried out earlier). As part of its overall scrutiny of the audit, and if any major issues arise, NIAO
may wish to review any interim work performed.
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2. Within this overall timetable the following meetings are expected to be required.
Date
Present
December / early
January
NIAO
January
NIAO
Firm
Firm
March
NIAO
Audit Committee
Nature of meeting and responsibilities
Pre-planning meeting prior to
commencement of strategy to discuss
potential risks.
Meeting to discuss strategy. Firm to brief
NIAO on main risks identified.
Presentation of strategy to the Audit
Committee.
Firm
May
NIAO
Firm
June
NIAO
Audit Committee
Firm
Meeting to discuss audit findings following
NIAO review of the firm’s working papers.
Presentation of audit findings to the Audit
Committee. The firm will lead on this and
will be expected to present any
Report/Qualification needed on the
accounts
3. Please refer to Annex C for suggested wording of reports to NIAO.
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Annex C
REPORTING ARRANGEMENTS
1. The NIAO has adopted the Auditing Practices Board’s International Standard on Auditing (UK and
Ireland), ISA 700: The auditor’s report on financial statements and the guidance contained in
Practice Note 10 (Revised): Audit of Financial Statements of Public Sector Bodies in the United
Kingdom (Revised) on the application of Auditing Standards to the audit of financial statements of
public sector entities in the United Kingdom.
2. The selected firm will be required to give a shadow audit certificate to NIAO at the conclusion of
each audit, in a form similar to the one issued by the C&AG (see Annex D). The audit certificate
should be signed by a partner on behalf of the firm.
3. NIAO will notify the firm of any amendments to the audit certificate as and when required.
4. Tenderers should note the need to provide a separate opinion on the regularity of the transactions
underlying the financial statements. Alternative wording will not be acceptable except in the case of
a qualified opinion or a Report on the account (see below) when advice should be sought from
NIAO.
5. Regularity is defined as the requirement that financial transactions should be in accordance with the
legislation authorising them, regulations issued by a body with the powers to do so under governing
legislation, Northern Ireland Assembly authority and Department of Finance and Personnel
authority.
Qualifications and Reports on the Accounts
6
It will be the absolute responsibility of the firm to identify matters that may give rise to qualification
or other Report on the accounts.
7
For these auditsthe C&AG is statutorily required to report on the annual accounts. Where there are
no matters of substance to report, this is achieved by the use of the phrase, "I have no observations
to make on these financial statements" under the heading Report. Where there are matters of
substance to report the procedures below should be observed.
8
In accordance with ISA 705: Modifications to the opinion in the independent auditor’s report and
Practice Note 10 (Revised), the C&AG will qualify his audit opinion where:
a.
there is a scope limitation on the auditors’ examination;
b.
the auditors disagree with the treatment or disclosure of a matter in the financial
statements;
c.
the effect of a disagreement is so material or pervasive that the financial statements are
seriously misleading (adverse opinion);
d.
the effect of a scope limitation is so material or pervasive that the auditor is unable to
form an opinion (disclaimer); or
e.
there are material financial transactions which are not in compliance with the
appropriate authorities.
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9.
Whenever the C&AG qualifies his audit opinion he provides a Report, which briefly sets out the
circumstances and explains the reasons for his qualification. He may also prepare a Report on
matters which, whilst not in themselves material to the account, need to be drawn to the
attention of the Northern Ireland Assembly. This latter category may include irregular or
unusual transactions or misstatements to be published or considered in conjunction with the
audited financial statements.
10.
Having formed an opinion on the necessity for qualification or Report, the firm should
immediately contact the NIAO to discuss its conclusions. No additional work should be
undertaken without the approval of the NIAO. The NIAO reserves the right to investigate any
possible qualification or Report in any manner it considers appropriate. This may be achieved
within the remit of the existing contract or by way of an additional contract with the firm, a
contract with another body, or by direct investigation by the NIAO.
11.
When the NIAO reviews the audit, the firm should make available a list of those subjects
considered for qualification or Report but not earlier drawn to the NIAO’s attention. Significant
issues, such as these, should be communicated to the NIAO at the earliest opportunity during
the audit.
Annual Report and Accounts
12.
The firm is required to ensure that the financial information contained in the annual reports are
consistent with the annual accounts.
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Annex D
SHADOW AUDIT OPINION
Please find below the most recent model audit certificate for a limited company audited under the
Companies (Public Sector Audit) Order (Northern Ireland) 2013. This will be reviewed annually by the
NIAO and you will be provided with our most up to date version for each year of account.
Limited Company model Audit Certificate 2012-13
(for accounts prepared under IFRS)
[NAME OF COMPANY]
THE CERTIFICATE AND REPORT2 OF THE COMPTROLLER AND AUDITOR
GENERAL TO THE MEMBERS OF [INSERT NAME OF COMPANY]
I certify that I have audited the financial statements of the [name of company] for the year ended
[insert date] under the Companies (Public Sector Audit) Order (Northern Ireland) [2008/2013] 3.
These comprise the [Statement of Comprehensive Income, the Statement of Financial Position,
the Statement of Cash Flows, the Statement of Changes in Equity]4 and the related notes. These
financial statements have been prepared under the accounting policies set out within them. The
financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards as adopted by the European Union5. I have also
audited the information in the Remuneration Report that is described in that report as having
been audited.6
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a
true and fair view. My responsibility is to [audit / examine, certify and report on]7 the financial
statements in accordance with the Companies (Public Sector Audit) Order (Northern Ireland)
[2008/2013]2. I conducted my audit in accordance with International Standards on Auditing (UK
and Ireland). Those standards require me and my staff to comply with the Financial Reporting
Council’s Ethical Standards for Auditors.
2
Where there is a separate report, the words “AND REPORT” should be deleted from the title
3
Delete as appropriate. 2008 Order will still apply to any backlog audits with financial years ending 28 February
2013 or earlier.
4
This should match the exact names of the primary statements used in the financial statements.
5
Under Companies Act 2006, where a company applies IFRS they must apply it as endorsed by the European
Union.
6
Companies are not required to produce a remuneration report under Companies Legislation, however, as all these
companies that NIAO presently audit are NDPBs there is a requirement to produce one within their accounts for
compliance with FReM.
7
Delete as appropriate. For 2008 Order use “audit”; for 2013 Order use “examine, certify and report”.
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Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the financial statements. In
addition I read all the financial and non-financial information in the Annual Report8 to identify
material inconsistencies with the audited financial statements. If I become aware of any apparent
material misstatements or inconsistencies I consider the implications for my certificate.
In addition, I am required to obtain evidence sufficient to give reasonable assurance that the
expenditure and income recorded in the financial statements have been applied to the purposes
intended by the Assembly and the financial transactions recorded in the financial statements
conform to the authorities which govern them.
Opinion on Regularity
In my opinion, in all material respects the expenditure and income recorded in the financial
statements have been applied to the purposes intended by the Assembly and the financial
transactions recorded in the financial statements conform to the authorities which govern them.
Opinion on financial statements
In my opinion the financial statements:

give a true and fair view of the state of the company’s affairs as at [insert date] and of
its [surplus/deficit/profit/loss]9, cash flows and changes in taxpayers’ equity for the
year then ended;

have been properly prepared in accordance with International Financial Reporting
Standards as adopted by the European Union; and

have been prepared in accordance with the Companies Act 2006.
Opinion on other matters
In my opinion:

the part of the Remuneration Report4 to be audited has been properly prepared in
accordance with the Government Financial Reporting Manual10; and
8
This must be a description of all the information which accompanies the financial statements, not limited to the
elements on which we give a positive consistency opinion (e.g. includingthe Governance Statement ). If the
document containing the financial statements is not called “Annual Report and Accounts” then the individual titles
of each section may need to be spelled out.
9
Delete as appropriate- This should be the naming convention in the performance statement and should be the result
for the year.
10
For all current companies audited by NIAO which are also NDPBs the authority will be FReM. These accounts
cannot be subject to an accounts direction, so this cannot be quoted as an authority.
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
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which I report by exception
I have nothing to report in respect of the following matters which I report to you if, in my
opinion:

adequate accounting records have not been kept; or

the financial statements and the part of the Remuneration Report5 to be audited are
not in agreement with the accounting records; or

I have not received all of the information and explanations I require for my audit; or

the Governance Statement does not reflect compliance with Department of Finance
and Personnel’s guidance. 11
Report12
I have no observations to make on these financial statements.
KJ Donnelly
Comptroller and Auditor General
Northern Ireland Audit Office
106 University Street
Belfast
BT7 1EU
Date
11
The companies that we audit are NDPBs and as such are required to comply with DFP guidance in respect of the
Statement of Internal Control.
12
Delete heading and section where there is a separate C&AG’s report.
18