Auditing Pension Schemes Whats the risk

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Auditing Pension SchemesWhats the risk?

• Mark Mainwaring
• BDO Stoy Hayward

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Taking risks.
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If things seem under control, you are just not
going fast enough...
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Overview

• what does an audit cover?
• what doesnt it cover?
• what are the risks for auditors?
• what are the consequent risks for actuaries?

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The scope of the auditors work

• The audit report
• truth and fairness of
• transactions
• current assets and liabilities
• Statement on contributions...
• contributions paid in accordance with schedule of
  contributions
• Are these the same type of document?

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Different types of audit document

• audit report opinion
• no absolute certainty
• issue of materiality
• contributions factual statement
• materiality not such an issue
• contributions in accordance with schedule of
  contributions or not
• qualified opinions - impact?

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Truth and Fairness

• what do this phrase mean?
• auditing and accounting Holy Grail
• encompass a number of qualities
• understandability
• relevance
• reliability
• neutrality
• prudence
• materiality

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Materiality

• potential misstatement likely to be of interest
  to a user of the financial statements
• a matter of professional judgement
• will differ from audit to audit

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Audit Strategy

• based on an assessment of risk
• seek to mitigate risks through audit testing of
• transactions
• balances
• how much work is enough?
• .question of professional judgement

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What an audit doesnt cover

• long-term liabilities
• absolute assurance that there is no fraud
• absolute assurance about content of the trustees
  report
• guarantee that all OPRA reporting issues
  identified

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Points for actuaries

• member numbers
• audit work v trustees report
• post year end issues
• scope of auditors work
• asset valuations?
• qualification of auditors report?

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Member numbers

• potential impact on actuarial recommendations
• problems with multi-location schemes
• issues where DB section is frozen
• is there any double-counting?
• what are the terms of transfer?

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Post year end issues

• scope of audit work
• up to date of audit report
• up to date of issue
• asset valuations
• unlisted securities
• property

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Audit Qualifications

• what are the options?
• non-compliance with Audited Accounts Regulations
• non-compliance with the Sorp
• limitation of audit scope
• failure to keep proper books and records
• problems with contributions

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Qualifications re contributions

• not paid in accordance with schedule of
  contributions
• not paid in accordance with scheme rules
• actuarial recommendations ignored
• limitation in scope of auditors work

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Limitation of scope

• what does it mean?
• no procedures available to gather sufficient
  evidence
• often caused by poor record keeping
• contributions
• membership numbers
• potential impact on actuarys work

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Key points

• audit reports should be read carefully
• scheme changes always a potential problem
• if in doubt, ask the auditor!

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Auditing Pension SchemesWhats the risk?

• Mark Mainwaring
• BDO Stoy Hayward