AH ANNUAL REPORT 2018

KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion
thereon, and we do not provide a separate opinion on these matters.
Risk Our response to the risk Key observations communicated to the
Audit Committee
Management override
There is a risk that the financial
statements as a whole are not
free of material misstatements
whether caused by fraud or
error.
As identified in ISA (UK and
Ireland) 240, management is in
a unique position to perpetrate
fraud because of its ability to
manipulate accounting records
directly or indirectly and
prepare fraudulent financial
statements by overriding
controls that otherwise appear
to be operating effectively.
We identify and respond to
this fraud risk on every audit
engagement.
Risk of fraud in revenue and
expenditure recognition
Under ISA 240 there is a
presumed risk that revenue
may be misstated due to
improper revenue recognition.
In the public sector, this
requirement is modified by
Practice Note 10 issued by the
Financial Reporting Council,
which states that auditors
should also consider the risk
that material misstatements
may occur by the manipulation
of expenditure recognition.
We carried out procedures for
identifying fraud risks during the
planning stages, and inquired with
management about risks of fraud
and the controls put in place to
address those risks.
We gained an understanding of the
oversight given by those charged
with governance of management’s
processes over fraud.
We considered the effectiveness of
management’s which are controls
designed to address the risk of
fraud.
We carried out specific audit
procedures to test journal entries
in the accounts, particularly
testing journal entries and other
adjustments in the preparation of the
financial statements.
We reviewed and tested revenue and
expenditure recognition policies;
We reviewed accounting estimates
for evidence of management bias,
including testing of expenditure
accruals and provisions;
We reviewed the financial statements
for evidence of significant or unusual
transactions. We also tested a
sample of income and expenditure
transactions from material revenue
streams including year-end debtor
and creditor balances;
We tested cut-off of income and
expenditure at the year-end and
conducted testing to identify any
unrecorded liabilities at the year-end.
We did not identify any material
weaknesses in controls or evidence of
management override.
We did not identify any instances of
inappropriate judgements being applied
which would indicate manipulation in
accounting records or fraudulent financial
reporting.
We did not identify any other transactions
during our audit which appeared unusual
or outside the Trusts normal course of
business.
Our testing did not identify any material
misstatements from revenue and
expenditure recognition.
There is a transaction where we concluded
that management’s judgements in regards
to the in-year recognition of revenue is not
in accordance with applicable accounting
standards. We did not consider this to be
a case of fraud in revenue recognition as
Management outlined at an early stage of
our audit the background to the transaction
, the basis of their judgements , they did not
take any action to conceal their proposed
accounting treatment and the transaction
does not materially alter the reported
financial position. We recommended that
the financial statements be amended for
this transaction.
Our audit work did not identify any material
issues or further unusual transactions to
indicate any improper misreporting of the
Trust’s financial position.
Alder Hey Children’s NHS Foundation Trust 196
Annual Report & Accounts 2017/18