Scottish Public Finance Manual

The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance on the proper handling and reporting of public funds.

Annex 1: audit of accounts

Statutory requirements

1. Accounts which are required by statute to be audited by or on behalf of the Auditor General for Scotland (AGS) must be sent to the AGS not later than 6 months after the end of the financial year to which the accounts relate. (Earlier deadlines will normally be agreed consistent with the faster closing objective for the accounts of public bodies.) The auditor's report on an account must set out the auditor's findings on the matters specified in section 22(1)&(2) of the Public Finance and Accountability (Scotland) Act 2000 (the PFA Act) including whether expenditure and receipts shown in the account were incurred or applied in accordance with any applicable guidance issued by Scottish Ministers e.g. the Scottish Public Finance Manual (SPFM).

Conduct of audits

2. Audits are designed to provide sufficient, relevant and reliable evidence to support the conclusions expressed by the auditors' certificates. It is an ongoing exercise throughout the financial year and relies on a review of accounting systems and controls and a test examination of transactions. The timing of visits by auditors will normally be agreed in advance between the auditors and the bodies concerned, but the nature of the work requires that the auditors may request information or documents at any time and at short notice. To enable accounts to be certified by the due dates, information or documents requested by auditors should be provided promptly and accounts should be prepared in accordance with a timetable agreed in advance between the auditors and the bodies concerned.

3. A protocol setting out procedures for the reporting of audit work by Audit Scotland to the Scottish Government (SG) in relation to the SG's accounts is reproduced at Appendix A. Other bodies the accounts of which are subject to audit by the AGS, including separate accounting entities within the Scottish Administration, should establish appropriate procedures with Audit Scotland or other auditors appointed by the AGS.

Reports on accounts

4. If the auditor is not satisfied in relation to any of the matters specified in section 22(1)&(2) of the PFA Act an explanation will be sought from the body concerned. If the explanation is not satisfactory the auditor's opinion - and therefore the accounts - will be modified. (Modification can take the form of an emphasis of matter paragraph, a qualified opinion, a disclaimer of opinion or an adverse opinion.) At the conclusion of the audit the auditor will prepare a report for publication together with the accounts consisting the auditor's detailed opinions on the accounts including the reasons for any modifications. At the same time the auditor will provide an "Annual Audit Report" to the audited body and the AGS summarising the auditor's opinions and conclusions and, where appropriate, matters of substance or significant issues arising from the audit. Annual Audit Reports will not be published with the accounts but will be published on Audit Scotland's website. They may also give rise to separate reports by the AGS - commonly referred to as section 22 reports - which must be published with the accounts. While the terms and contents of reports for publication with the accounts are for the auditors and the AGS respectively to determine the audited bodies should be given the opportunity to comment before any such reports are finalised.

Laying and publishing

5. The AGS must send the accounts and reports to the Scottish Ministers in sufficient time for them to be laid before the Parliament and then published no later than 9 months after the end of the financial year to which they relate - laying and publishing dates should however be consistent with the faster closing objective for the accounts of public bodies. The accounts must not be laid before they have been formally sent by the Auditor General to the Scottish Ministers and must not be published before they have been laid.

Public Audit Committee

6. Section 22 reports by the AGS are invariably considered by the Public Audit Committee which may lead to requests for written and/or oral evidence and Committee reports.

Management reports

7. In the course of the audits of accounts - or following their completion - the auditors will send management reports to relevant Accountable Officers. Bodies will be given the opportunity to comment on the reports in draft form via the relevant Director of Finance - or equivalent. The purpose of the reports is to draw attention to material areas of weakness in governance, systems and controls or performance management arrangements and to provide recommendations for improvements. Accountable Officers should respond formally to management reports explaining what actions have been taken or are planned in order to address the issues raised by the auditors. Both the management reports and formal responses should be considered by the audited bodies' audit committees. Management reports and formal responses relating to bodies sponsored by the SG should be copied to the SG. If an audit of a body sponsored by the SG reveals weaknesses in the SG's controls or oversight of the body, Audit Scotland will report its findings to the SG.

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