RAPC 599/26 – Ernst & Young: Rebuilding Audit Assurance – Annex 1

The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited. A list of members’ names is available for inspection at 1 More London Place, London SE1 2AF, the firm’s principal place of business and registered office. Ernst & Young LLP is a multi-disciplinary practice and is authorised and regulated by the Institute of Chartered Accountants in England and Wales, the Solicitors Regulation Authority and other regulators. Further details can be found at http://www.ey.com/UK/en/Home/Legal.

Private and Confidential 30 July 2026

Dear Resources, Audit and Performance Committee Members

Rebuilding audit assurance – risk assessment update

We attach our risk assessment update for consideration at the forthcoming meeting of the Resources, Audit and Performance Committee.

The purpose of this paper is to provide the Resources, Audit and Performance Committee with further detail on the risk assessment procedures performed in respect of opening reserve balances. These procedures have been undertaken in response to the 2022/23 disclaimed audit opinion and in accordance with the National Audit Office’s Local Authority Reset and Recovery Implementation guidance.

This update should be read in conjunction with our Audit Planning Report for the 2025/26 audit, issued on 22 April 2026.

We welcome the opportunity to discuss this report with you at the meeting on 7 September 2026, and to understand whether there are any additional matters which the committee considers may influence our risk assessment.

Yours faithfully

Simon Mathers, Partner
For and on behalf of Ernst & Young LLP

Enc

Confidential — All Rights Reserved

Rebuilding audit assurance – risk assessment update

Rebuilding audit assurance: the path to an unqualified opinion - New Forest National Park Authority 4

1. Background and regulatory context

Appendix A explains the expected timeline to full assurance set out in the National Audit Office’s (NAO) Local Authority Reset and Recovery Implementation Guidance (LARRIG 01), together with our assessment of New Forest National Park Authority’s (the Authority’s) current position. During 2023/24 and 2024/25, the focus of the rebuild process has been on the Authority’s “natural” rebuild, through completing planned audit procedures for each respective audit year.

As set out in Appendix A, as all planned audit procedures for the 2023/24 and 2024/25 audits were completed, the Authority’s “natural” rebuild is now well progressed.

LARRIG 06, issued by the NAO, requires auditors to perform specific risk assessment procedures over reserves. The guidance recognises that reserves balances may contain the cumulative effect of unaudited transactions over more than one financial year and may therefore represent an area of accumulated audit risk. The purpose of this risk assessment is to identify the likelihood and potential magnitude of risks of material misstatement within reserves balances, together with management’s readiness to support the historical rebuild process. This assessment informs audit planning and any potential rebuild of assurance over future audit cycles as well as completion of the capacity and risk assessment return that we are required to make to the Ministry for Housing, Communities and Local Government (‘MHCLG’).

2. Scope of our risk assessment procedures

Our risk assessment covered all reserves disclosed in the Authority’s Movement in Reserves Statement, including both usable and unusable reserves. In performing the assessment, we considered:

• the nature and purpose of individual reserves;
• the scale and significance of movements during periods subject to disclaimer;
• susceptibility to material misstatement, including the risks of fraud and management bias;
• the wider governance and control environment of the Authority’s financial reporting processes; and
• risks associated with the classification of reserves between usable and unusable categories.

The assessment did not seek to re-establish assurance over historic balances. Its objective was to determine whether, where and when, such assurance could be rebuilt over time.

Confidential — All Rights Reserved 5

The risk assessment process identified that the risk of material misstatement is not uniform across reserves. Certain reserves were assessed as presenting a higher risk of material misstatement, reflecting factors including:

• the size of balances and the extent of movements during periods subject to disclaimed opinions;
• the degree of judgement required in determining the appropriate accounting treatment; and
• reliance on complex statutory and capital accounting arrangements.

Other reserves were assessed as lower risk, with characteristics that may support a more targeted and proportionate rebuilding of assurance, without undermining audit quality, subject to the availability of sufficient appropriate audit evidence. This assessment underpins the differentiation in audit response which will be adopted across reserves and is intended to promote a consistent and proportionate approach.

The following dashboard summarises our assessment of the risk of material misstatement by reserve following the disclaimers of opinion.

3. Summary of risk assessment findings

Rebuilding audit assurance – risk assessment update
Rebuilding audit assurance: the path to an unqualified opinion - New Forest National Park Authority

Confidential — All Rights Reserved

Rebuilding assurance over reserves – Risk assessment

Rebuilding audit assurance: the path to an unqualified opinion - New Forest National Park Authority 6

4. Implications for the 2025/26 audit

Our risk assessment process has found that the pre-2023/24 gaps in assurance - particularly those relating to reserves and other cumulative balances - can be sufficiently addressed as part of the 2025/26 audit, supporting future progression towards an unmodified audit opinion.

Before we commence our audit procedures, it will be essential for management to have completed a robust review and reconciliation of both usable and unusable reserves in the disclaimed periods, and to provide assurance to Those Charged with Governance that these balances are accurate, supportable, and appropriately documented. This reflects management’s primary responsibility for preparing the financial statements and maintaining the underlying evidence base.

To rebuild assurance over the historic position, we will need to audit certain transactions and movements from 2022/23. We will share details of these transactions with management and will require confirmation that high-quality working papers and supporting evidence can be provided, together with sufficient management capacity to support this historic rebuild without compromising the delivery of planned audit procedures for 2025/26 over closing balances and in-year movements. We will then take the decision, with management, when is most appropriate time to commence the rebuild of reserves.

5. Fees

The activities undertaken in relation to this risk assessment, the preparation of the submission required by MHCLG, and the drafting of this addendum are outside the scope of the scale fee set out in our Audit Planning Report issued on 22 April 2026. In addition, procedures relating to the rebuilding of historical assurance will also be outside the scale fee. Accordingly, we will seek a variation to the scale fee to reflect these changes to the scope of our work and will communicate further through our reporting once the costs are agreed.

Confidential — All Rights Reserved 7

Appendix A

Rebuilding audit assurance: the path to an unqualified opinion - New Forest National Park Authority

Confidential — All Rights Reserved

The chart below illustrates the expected timescale for rebuilding audit assurance as set out in the NAO’s LARRIG 01. It also shows our assessment of the Authority’s progress against that illustrative timescale, together with the reasons for that assessment and the key actions required to successfully rebuild assurance.

The guidance recognises that the journey to full assurance - and therefore an unqualified audit opinion - will typically take a number of years. Progress depends on sustained coordination and engagement between the Authority and the audit team across successive audit cycles. Since 2022/23, we have applied a structured, risk-based prioritisation approach to local government audits. This approach is designed to support a return to unqualified audit opinions wherever feasible, while continuing to meet the statutory backstop requirements introduced as part of the local audit reset.

8

Progress to full assurance

Appendix A — Rebuilding assurance
Rebuilding audit assurance: the path to an unqualified opinion - New Forest National Park Authority