Standard 8 of the TRAC principles referred to in the TRAC Guidance refers
to audit. Refer to Part II, Section C,
Chapter C.3 of the TRAC guidance for information on Internal Audit requirements.
Please
click here for a copy of the audit programme planned for Cardiff and Swansea
universities.
Q1 I read in the Guidance Manual that we have to carry out an audit of the work we do for the Transparency Review. Should we build this work into our internal audit programme?
Yes. The audit check should normally be carried out by the internal auditor, who may be able to rely on any checks the institution has itself undertaken. The audit work, which will provide assurance on the approach, could be undertaken as part of the regular internal audit programme which will have been agreed by the Audit Committee. The work of the internal auditor should be reported to the Audit Committee, however, the Finance Committee may also want to see the report.
Q2 The Transparent Approach to costing is built on several key principles. What is meant by the principle of auditability'?
Institutions should be able to demonstrate the validity of their cost calculations by appropriate audit trails between summary reporting and base data. Audit for Transparency Review is to be carried out as part of the institution's normal audit processes and will probably be included as part of the rolling internal audit programme.
Auditability means that the reported figures should be reconcilable to the institution's externally audited annual accounts; traceable; supported (verified) by surveys; and supported by managers' statements that they fairly reflect cost attribution.
Q3 We are a member of an internal audit consortium - should we ask them to include this in their annual programme?
Yes. The institution's internal audit consortium will be aware of the Transparency Review requirements and may already be arranging to cover compliance by its institutional members as part of their rolling programme. It is worthwhile checking with the audit consortium what they propose to do.
Q4 Several areas involve judgement and discretion; there can be no precise measurement in these areas. What approach should the audit take?
Audit does not require precise measurement in all areas. Several areas in costing involve judgement and discretion. Perhaps the most obvious of these is the allocation of staff effort, where even the most costly methods are not easily auditable in the sense of being externally verifiable.
Modern approaches to audit relate to a judgement based on risk, materiality, and the appropriateness of the methods used, in other words, a normal systems-based audit. This can be interpreted to imply that the costs produced by the Transparency Review should fairly reflect the full economic costs of the activity. The principles to be adopted here are:
By the end of a five-year period the audit review will need to reflect the five-year time cycle and the Transparency Review requirement to use robust methods by the end of this period.
Q5 Does our Audit Committee need to see the results of our tests for reasonableness?
Yes. Tests for reasonableness should be carried out on data collected through
an annual retrospective time allocation method as well as more robust methods.
A summary report on the results of these checks should be presented to the
Audit Committee (and probably to the Finance Committee) to give assurance
that the outcome is reasonable.
The audit report does not need to be very detailed, but we expect auditors
to provide the Audit Committee with:
See Section C2 page 31 of the Guidance Manual for examples of reasonableness tests.
Q6 We have used alternative methods from those suggested in the costing standards and discussed in the Guidance Manual. We know they are producing information that is at least as robust as that under the methods suggested. Who do we need to satisfy that this is the case?
Institutions are free to use alternative methods from those suggested in the Guidance Manual as long as they are robust enough. The Audit Committee, working on behalf of the governing body, must satisfy itself that this is the case.
Q7 Should we ask our internal audit unit to check the figures?
No. The internal audit unit need only confirm that the institution has complied
with the set of process standards as set out in the Guidance Manual. They
should carry out a systems-based audit, that is to say an audit of the process
by which the data is produced, not the data itself.
The process standards include the following:
See Section C6 page 3 of the Guidance Manual.
Q8 Who audits the figures then?
The audit process as described above will ensure that the figures reported are a fair reflection of the cost of activities. The head of institution will be responsible for signing off the final figures.
Q9 Should we inform our internal audit service now about their role?
Yes. You should involve your internal audit function and Audit Committee at an early stage. The institution may want a representative of internal audit or the Committee to attend some steering group meetings. Early involvement will ensure the internal audit team understands the particular costing methods chosen by the institution at an early stage in the project.
Q10 Should we ask our external auditors to look at what we have done?
No. It is not a requirement of the Transparency Review that external auditors scrutinise or audit the calculations or methods used.
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