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Joint Organisation Section 417 Report on the Conduct of the Audit TemplateApplicationType of audit and assurance workType of entitiesThese instructions apply to the Report on the Conduct of the Audit prepared in accordance with section 417 of the Local Government Act 1993 (LG Act).joint organisations (JOs)does NOT apply to local and county councils (councils).Instructions Use this template for the Report on the Conduct of the Audit (Report) for JOs. A separate template is available for councils.Engagement Controllers (ECs) should: tailor the template so it is appropriate to the JOcommunicate information in the Report so it is useful, concise and easily understood ensure the content of the Report does not result in users questioning the validity of the opinion in the Independent Auditor’s Report (IAR) discuss the proposed content with the Executive Officer, Chairperson of the Board or others charged with governance prior to the Board meetingsend any reported significant matters to the Engagement Quality Control Reviewer (EQCR) or Assistant AuditorGeneral (where no EQCR has been appointed) for review and approval.Additional instructions for Audit Service Providers (ASPs)ASPs should:discuss any reported significant matters with the ECsend any reported significant matters to the EC. Timing, Issuing and SigningIssue the Report at the same time as the IAR for the JO’s general purpose financial statements (GPFS). Additional instructions for ASPsThe ASP needs to provide the draft Report to the EC in sufficient time to allow its issue at the same time as the IAR for the JO’s GPFS. AddresseesAddress the Report to the Chairperson of the Board and send a copy to the:Executive Officer Chair of the Audit, Risk and Improvement Committee (where appointed).The LG Act also required a copy of the Report to be sent to the Secretary of the Department of Planning, Industry and Environment (the Department). Reports for all JOs will be sent centrally to the Department.Additional instructions for ASPsThe Audit Office will centrally send Reports for all JOs to the Department.ObjectiveThis template outlines the format and content of the Report to help auditors comply with:Chapter 13, Part 3, Division 2 of the LG ActClause 227 of the Local Government (General Regulations) 2005 (LGGR)Local Government Code of Accounting Practice and Financial Reporting – Update 28 (the Code).DocumentationPrepare IARs using this crested template. Save the original signed Report in both the JO’s HPCM z file container and in the audit file.Additional instructions for ASPsFile the signed Report in the audit file.Background JOs’ accounting and audit requirements are specified in Chapter 13, Part 3, Division 2 of the LG Act. Section 417 requires auditors to prepare the Report. The Report may include comments the auditor considers appropriate based on the conduct of the audit of the JO’s financial statements. The Code has not prescribed any matters that auditors must consider under section 415(3) of the LG Act and clause 227 of the LGGR when auditing a JO’s financial statements.407707810887Contact:Phone no:Our ref:00Contact:Phone no:Our ref:[Name]Chairperson[JO Name][JO Address Line 1][JO Address Line 2][date]Audit teams should replace the italic wording in brackets with the relevant wording in normal text.Dear ChairpersonReport on the Conduct of the Auditfor the [year ended 30?June?2020 / for the period 4?July?2018 to 30?June?2020][JO Name]Select the appropriate option belowOption 1 – JOs that prepared financial statements for the full financial year.I have audited the general purpose financial statements (GPFS) of the [JO Name] (the Joint Organisation) for the year ended 30?June?2020 as required by section 415 of the Local Government Act 1993 (the Act). I expressed [a modified / an unmodified] opinion on the Joint Organisation’s GPFS.This Report on the Conduct of the Audit (the Report) for the?Joint Organisation for the year ended 30?June?2020 is issued in accordance with section 417 of the Act. This Report should be read in conjunction with my audit opinion on the GPFS issued under section 417(2) of the Act.[OR]Option 2 – For the Far North West and Far South West JOs that prepared financial statements for the first time for the period 4?July?2018 to 30?June?2020.The [JO Name] (the Joint Organisation) was formed on 4?July?2018 by the following councils (member councils): [list the names of the member councils]].I have audited the general purpose financial statements (GPFS) of the Joint Organisation for the period 4?July?2018 to 30?June?2020 as required by section 415 of the Local Government Act 1993 (the Act). I expressed [a modified / an unmodified] opinion on the Joint Organisation’s GPFS.This Report on the Conduct of the Audit (the Report) for the?Joint Organisation for the period 4?July?2018 to 30?June?2020 is issued in accordance with section 417 of the Act. This Report should be read in conjunction with my audit opinion on the GPFS issued under section 417(2) of the Act.Section 417(3) of the Act states the Report may include statements, comments and recommendations the auditor considers appropriate based on the conduct of the audit of the JO’s financial statements. To address the above requirement, the Audit Office has determined that significant audit issues and observations should be included in the Report.Delete this section if there are no significant audit issues and observations to report.SIGNIFICANT AUDIT ISSUES AND OBSERVATIONSI identified the following significant audit issues and observations during my audit of the Joint Organisation’s financial statements. These issues and observations were addressed as part of my audit. [Issue Name]Review the significant matters included in the Engagement Closing Report (ECR) and include those matters the Engagement Controller (EC) considers appropriate, noting:the Report is a public document with a far wider audience than just those charged with governance (TCWG). Consequently, it may not be suitable to report all significant matters that were reported to TCWGthe needs of the Department of Planning, Industry and Environment (the Department) as a recipient of the Report.Audit teams should report all high and extreme risk management letter points that will be included in the AuditorGeneral’s Report to Parliament as a significant audit issue in this Report. Audit teams should use their discretion on the level of detail to include as this is a public report. For example, high and extreme risk management letter points are reported in the AuditorGeneral’s Report at a higher level with only a few sentences as opposed to the whole management letter point.Audit teams therefore need to ensure that the management letter point ratings are accurate as there will be no opportunity to change these.All significant matters should be sent to the Engagement Quality Control Reviewer (EQCR) or Assistant AuditorGeneral (where no EQCR has been appointed) for review and approval.Additional instructions for Audit Service Providers (ASPs)ASPs should review the significant matters included in the ECR and in consultation with the EC include those matters considered appropriate (refer above).All significant matters need to be sent to the EC. [Insert brief description of the issue].PERFORMANCE[Net result / Net operating result]Insert commentary on the JO’s financial performance. Example wording has provided below. Audit teams should tailor the wording to suit their JO’s circumstances. The Joint Organisation’s net [operating] result for the [year ended 30?June?2020 / period 4?July?2018 to 30?June?2020] was $[Insert amount]. [The Joint Organisation received $[Insert amount] from a gain on transfer of assets from [Insert name of entity] to give a total net result for the period of $[Insert amount]].The Joint Organisation’s primary income source during the [year/period] was from operating and capital grants of $[Insert amount] which contributed to [XX]?per?cent of the Joint Organisation’s income from continuing operations of $[Insert amount]. [Insert a description of the main sources of grant income]. The Joint Organisation also received $[Insert amount] of income from member council contributions.The Joint Organisation’s total operating expenses from continuing operations for the period was $[Insert amount] which primarily consisted of employee benefits and oncosts of $[Insert amount] and administration expenses of $[Insert amount].Financial positionAt 30?June?2020, the Joint Organisation had total assets of $[Insert amount] and net assets of $[Insert amount]. The Joint Organisation’s main assets consist of cash of $[Insert amount] and infrastructure, property, plant and equipment of $[Insert amount].OTHER MATTERSAudit teams should document any other material matters below. Only include matters that are material to the current year’s financial statements. Impact of new accounting standardsThe commentary on AASB 15, AASB 1058 and AASB 16 does not apply to the Far North West and Far South West JOs as these standards only apply to financial reporting periods beginning on or after 1?January?2019. As the Far North West and Far South West JO’s financial reporting period begins on 4?July?2018, these new standards are not applicable for them.AASB 15 ‘Revenue from Contracts with Customers’ and AASB 1058 ‘Income for NotforProfit Entities’The Joint Organisation adopted the new accounting standards AASB 15 ‘Contracts with Customers’ and AASB 1058 ‘Income of NotforProfit Entities’ (collectively referred to as the Revenue Standards) for the first time in their 2019–20 financial statements.AASB 15 introduces a new approach to recognising revenue based on the principle that revenue is recognised when control of a good or service transfers to a customer. AASB 15 impacts the timing and amount of revenue recorded in a joint organisation’s financial statements, particularly for grant revenue. AASB?15 also increases the amount of disclosures required.AASB 1058 prescribed how notforprofit entities account for transactions conducted on noncommercial terms and the receipt of volunteer services. AASB 1058 significantly impacts the timing and amount of income recorded in a joint organisation’s financial statements, particularly for grant income and rates which are paid before the commencement of the rating period.The Joint Organisation recognised a $XX.X?million adjustment to opening accumulated surplus at 1?July?2019 on adoption of the new Revenue Standards.The Joint Organisation disclosed the impact of adopting the new Revenue Standards in Note [13].AASB 16 ‘Leases’The Joint Organisation adopted the new accounting standard AASB 16 ‘Leases’ for the first time in their 2019–20 financial statements.AASB 16 changes the way lessees treat operating leases for financial reporting. With a few exceptions, operating leases will now be recorded in the Statement of Financial Position as a rightofuse asset, with a corresponding lease liability. AASB 16 results in lessees recording more assets and liabilities in the Statement of Financial Position and changes the timing and pattern of expenses recorded in the Income Statement.The Joint Organisation recognised rightofuse assets of $XX.X?million and lease liabilities of $XX.X?million at 1?July?2019 on adoption of AASB?16.The Joint Organisation disclosed the impact of adopting AASB 16 in Note [13].The commentary on AASB 9 only applies to the Far North West and Far South West JOs as this standard applies to financial reporting periods beginning on or after 1?January?2018. JOs that are preparing financial statements for the year ended 30?June?2020 applied AASB 9 for their first time in the previous period financial statements.AASB 9 ‘Financial Instruments’ and revised AASB 7 ‘Financial Instruments: Disclosures’The Joint Organisation adopted the new accounting standard AASB 9 ‘Financial Instruments’ for the first time in their financial statements for the period 4?July?2018 to 30?June?2020.AASB 9 changes the way financial instruments are treated for financial reporting. Key changes include:a simplified model for classifying and measuring financial assetsa new method for calculating impairmenta new type of hedge accounting that more closely aligns with risk management.AASB 7 ‘Financial Instruments: Disclosures’ was revised to include new disclosures required as a result of AASB 9. The Joint Organisation disclosed the impact of adopting AASB 9 and the revised AASB 7 in Note [13].[Insert Heading Name][Include a brief description of other matters material to the current year’s financial statements].Legislative complianceSelect the option appropriate to the JO and tailor as requiredMy audit procedures did not identify any instances of noncompliance with legislative requirements or a material deficiency in the Joint Organisation’s accounting records or financial statements. The Joint Organisation’s:accounting records were maintained in a manner and form to allow the GPFS to be prepared and effectively auditedstaff provided all accounting records and information relevant to the audit.[OR]My audit procedures identified [instances of noncompliance with legislative requirements and / or a material deficiency in the Joint Organisation’s accounting records or financial statements] that will be reported [in the Management Letter / to the Minister for Local Government]. [Insert details of noncompliance or material deficiency].The Joint Organisation’s:accounting records [were / were not] maintained in a manner and form that facilitated the preparation and the effective audit of the general purpose financial statementsstaff [provided / were unable to provide] all accounting records and information relevant to the audit.[Name of Officer][Position of signing officer – optional at the signing officer discretion]Delegate of the AuditorGeneral for New?South?Walescc:[Name], [Executive Officer][Name], [Chair of Audit, Risk and Improvement Committee]Jim Betts, Secretary of the Department of Planning, Industry and Environment ................
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