Auditor-General’s Report on the Annual Financial Report of the State of Victoria: 2017–18

Tabled: 24 October 2018

Appendix E. Management letter risk rating definitions

Figure E1
Risk definitions applied to issues reported in audit management letters

Rating

Description

Management action required

High

This issue represents:

  • a material misstatement in the financial reports has occurred, which could potentially result in a modified audit opinion if not addressed as a matter of urgency by the entity
  • a control weakness which could cause or is causing a major disruption of the process or the entity's ability to achieve process objectives in relation to financial reporting and comply with relevant legislation.
  • Requires executive management to correct the misstatement in the financial report as a matter of urgency to avoid a modified audit opinion.
  • Requires immediate management intervention with a detailed action plan to be implemented within one month.

Moderate

This issue represents:

  • a misstatement in the financial report that is not material and has occurred, or that may occur, the impact of which has the possibility to be material,
  • a control weakness which could have or is having a moderate adverse effect on the ability to achieve process objectives and comply with relevant legislation.
  • Requires management intervention with a detailed action plan implemented within three to six months.

Low

This issue represents:

  • a misstatement in the financial report that is likely to occur but is not expected to be material, or
  • a minor control weakness with minimal but reportable impact on the ability to achieve process objectives and comply with relevant legislation.
  • Requires management intervention with a detailed action plan implemented within six to 12 months.

Source: VAGO.

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