Part 2: Scope of our additional assurance work

In December 2017, the Chairman of Wintec asked Audit New Zealand to carry out additional assurance work, in conjunction with the annual audit process, on travel expenses of the Chief Executive and executive staff members, and amounts paid to former Wintec employees as redundancy payments or severance payments. We agreed to undertake this work as part of our 2017 annual audit by extending the scope of our normal testing approach to focus on these areas.

The additional work was to cover:

• the expenses incurred in relation to all travel to Hong Kong and China by the Chief Executive, from the beginning of 2009 to the end of 2017;
• the expenses incurred in relation to all travel to Hong Kong and China by all other members of the executive team both past and present, from the beginning of 2009 to the end of 2017;
• the expenses incurred in relation to all travel, other than to Hong Kong and China by the Chief Executive, from the beginning of 2013 to the end of 2017;
• the expenses incurred in relation to all travel by all other members of the executive team both past and present, other than to Hong Kong and China, from the beginning of 2013 to the end of 2017; and
• all redundancy and severance payments made to former Wintec employees, from the beginning of 2013 to the end of 2017, including those made where the contract providing for payment, between Wintec and the former employee, includes obligations to keep details confidential.

The scope and extent of this work is far more detailed than we would normally conduct to complete our annual audit. The objective of an annual audit is to provide reasonable assurance that the financial statements and (where relevant) performance information are fairly presented, in all material respects. As an example, routine examinations of sensitive expenditure are done on a limited sample basis. Given the nature of that work, governors of public entities should not rely solely on the annual audit to provide assurance about all aspects of the entity.

To gain an understanding of the work involved in completing the additional assurance work, Wintec agreed to a staged approach to the audit of travel expenses. We started with travel to Hong Kong and China in 2009 and 2010, and then extended our work to cover 2013 and 2017. This allowed us to compare the controls, processes and patterns of behaviour for travel to Hong Kong and China at different points in time – in the early years, at a mid-point and in the most recent full year.

We have now completed the following work:

• The expenses incurred by the Chief Executive in relation to all travel to Hong Kong and China in 2009, 2010, 2013, and 2017.
• The expenses incurred by all other members of the executive team, both past and present, in relation to all travel to Hong Kong and China in 2009, 2010, 2013, and 2017.
• All redundancy and severance payments made to former employees of Wintec¹, from the beginning of 2013 to the end of 2017, including confidential settlements.

Our review of travel expenses found similar issues and deficiencies present in each year. While there was some improvement in policies and the level of documentation by 2017, we still found some concerning practices that need to be urgently addressed by Wintec. Given this, we discussed the value of reviewing travel expenses for the remaining intervening years (2011, 2012, 2014, 2015, and 2016) with the Chair of Wintec’s Audit and Risk Committee. We agreed that further work was unlikely to add meaningfully to the issues already identified in this report.

1: The testing of severance and redundancy payments to former employees of the Wintec Group has been done on a sample basis.