
© 2019 Grant Thornton UK LLP | Annual Audit Letter | August 2019
8
Audit of the Financial Statements
Significant Audit Risks - continued
These are the risks which had the greatest impact on our overall strategy and where we focused more of our work.
Risks identified in our audit plan How we responded to the risk Findings and conclusions
Valuation of pension fund net liability
The Authority's pension fund net liability,
as reflected in its balance sheet as the net
defined benefit liability, represents a
significant estimate in the financial
statements.
The pension fund net liability is considered
a significant estimate due to the size of the
numbers involved and the sensitivity of the
estimate to changes in key assumptions.
We therefore identified valuation of the
Authority’s pension fund net liability as a
significant risk, which was one of the most
significant assessed risks of material
misstatement, and a key audit matter.
Our work included:
• documenting our understanding of the process and controls put
in place by management to ensure that the Authority’s pension
fund net liability is not materially misstated and evaluating the
design of the associated controls;
• liaising with the auditors of West Sussex Pension Fund to
evaluate the instructions and accuracy/completeness of
information issued by the Pension Fund to their management
expert (actuary – Hymans Robertson) for this estimate and the
scope of the actuary’s work;
• assessing the competence, capabilities and objectivity of the
actuary who carried out the pension fund valuation;
• testing the consistency of the pension fund asset and liability
and disclosures in the notes to the core financial statements
with the actuarial report from the actuary;
• undertaking procedures to confirm the reasonableness of the
actuarial assumptions made by reviewing the report of the
consulting actuary (as auditor’s expert) and performing
additional focussed audit procedures suggested within the
report; and
• obtaining assurances from the auditor of West Sussex Pension
Fund as to the controls surrounding the validity and accuracy of
membership data; contributions data and benefits data sent to
the actuary by the pension fund and the fund assets valuation in
the pension fund financial statements.
Due to national developments around public sector pensions
(see page 9 for more detail) we were required to carry out more
extensive work to challenge the actuary’s estimate of the
potential liability for McCloud and Guaranteed Minimum
Pensions. An initial estimate had been provided by the pension
fund administering authority, but this was not considered
sufficiently accurate to conclude on the issue of materiality and
therefore the suitable treatment of the estimated liability.
Therefore we requested an updated estimate verified by the
actuary and reviewed the method and assumptions made in
coming to this estimate.
In completing this work we were able to conclude that the
potential additional liabilities were not material and therefore
the pension fund net liability in the accounts was materially
correctly stated.
Our audit work did not identify any further issues in respect of
the pension fund net liability.
Agenda Item 9 Report PR19/20-20 Appendix 1