Statement of Accounts 2020 / 21
Fraud and breaches of laws and regulations – ability to detect
To identify risks of material misstatement due to fraud (“ fraud risks ”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud . Our risk assessment procedures included :
• Enquiring of the Audit and Risk Committee , management and inspection of policy documentation as to the Group ’ s high-level policies and procedures to prevent and detect fraud , as well as whether they have knowledge of any actual , suspected or alleged fraud .
• Reading Council , Senate and Audit and Risk Committee minutes .
• Using analytical procedures to identify any unusual or unexpected relationships .
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit .
As required by auditing standards , and taking into account possible pressures to meet loan covenants we perform procedures to address the risk of management override of controls , in particular the risk that Group management may be in a position to make inappropriate accounting entries , and the risk of bias in accounting estimates and judgements such as pension assumptions .
On this audit we do not believe there is a fraud risk related to revenue recognition across all income streams , just in relation to :
• Research income – We consider there to be a significant risk of fraud and error in the recognition of research revenue largely due to inappropriate apportionment of overhead costs . The University also receives a number of non-standard grants which do not have any performance conditions and therefore there is a significant risk that income may be inappropriately recognised ; and
• Tuition fee income – We have rebutted the risk of fraud relating to undergraduate tuition fee income which is generally based on standard fee rates . Our risk assessment determined there was a risk of fraud for programmes crossing the year end and any other flexible provision as income may be recognised in the incorrect period .
We did not identify any additional fraud risks .
In determining the audit procedures we took into account the results of our evaluation and testing of the operating effectiveness of some of the Group ’ s-wide fraud risk management controls
We performed procedures including :
• Identifying journal entries to test based on risk criteria and comparing the identified entries to supporting documentation . These included those posted by senior finance management , those with an unexpected debit / credit posting , those posted by infrequent users and those posted to rarely used codes .
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience , and through discussion with the Audit and Risk Committee and management as required by auditing standards , and from inspection of the Group ’ s regulatory and legal correspondence and discussed with management the policies and procedures regarding compliance with laws and regulations .
We communicated identified laws and regulations throughout our team and remained alert to any indications of noncompliance throughout the audit .
The potential effect of these laws and regulations on the financial statements varies considerably .
The Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation , including related companies legislation , taxation legislation , pensions legislation and specific disclosures required by higher education legislation and regulation , charities legislation and related legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items .
Whilst the Group is subject to many other laws and regulations , we did not identify any others where the consequences of non-compliance alone could have a material effect on amounts or disclosures in the financial statements .
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit , there is an unavoidable risk that we may not have detected some material misstatements in the financial statements , even though we have properly planned and performed our audit in accordance with auditing standards . For example , the further removed noncompliance with laws and regulations is from the events and transactions reflected in the financial statements , the less likely the inherently limited procedures required by auditing standards would identify it .
In addition , as with any audit , there remained a higher risk of non-detection of fraud , as these may involve collusion , forgery , intentional omissions , misrepresentations , or the override of internal controls . Our audit procedures are designed to detect material misstatement . We are not responsible for preventing non-compliance or fraud and cannot be expected to detect noncompliance with all laws and regulations .
Other information
The Council is responsible for the other information , which comprises the Strategic Review and the Report of the Governors and Corporate Governance Statement . Our opinion on the financial statements does not cover the other information and , accordingly , we do not express an audit opinion or , except as explicitly stated below , any form of assurance conclusion thereon .
Our responsibility is to read the other information and , in doing so , consider whether , based on our financial statements audit work , the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge . Based solely on that work :
• we have not identified material misstatements in the other information ; and
• in our opinion the information given in the Strategic Review and the Report of the Governors and Corporate Governance Statement is consistent with the financial statements .
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