Independent Auditors' Report

Independent auditor's report to Transport Scotland, the Auditor General for Scotland and the Scottish Parliament

I have audited the financial statements of Transport Scotland for the year ended 31 March 2012 under the Public Finance and Accountability (Scotland) Act 2000. The financial statements comprise the statement of comprehensive net expenditure, the statement of financial position, the cash flow statement, the statement of changes in taxpayers' equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and international financial reporting standards (IFRSs) as adopted by the European Union, and as interpreted and adapted by the 2011/12 government financial reporting manual (the 2011/12 FReM).

This report is made solely to the parties to whom it is addressed in accordance with the public finance and accountability (Scotland) act 2000 and for no other purpose. In accordance with paragraph 125 of the code of audit practice approved by the Auditor General for Scotland, I do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties.

Respective responsibilities of accountable officer and auditor

As explained more fully in the statement of the chief executive's responsibilities, the accountable officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and is also responsible for ensuring the regularity of expenditure and income. My responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and international standards on auditing (UK and Ireland) as required by the code of audit practice approved by the Auditor General for Scotland. Those standards require me to comply with the auditing practices board's ethical standards for auditors. I am also responsible for giving an opinion on the regularity of expenditure and income.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts, disclosures, and regularity of expenditure and income in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the body's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the accountable officer; and the overall presentation of the financial statements. In addition, I read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies I consider the implications for my report.

Opinion on financial statements

In my opinion the financial statements:

give a true and fair view in accordance with the public finance and accountability (Scotland) act 2000 and directions made thereunder by the Scottish ministers of the state of the body's affairs as at 31 March 2012 and of its net operating costs for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union, as interpreted and adapted by the 2011/12 FReM; and
have been prepared in accordance with the requirements of the public finance and accountability (Scotland) act 2000 and directions made thereunder by the Scottish ministers.

Opinion on regularity

In my opinion in all material respects:
the expenditure and income in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish ministers, the budget (Scotland) act covering the financial year and sections 4 to 7 of the public finance and accountability (Scotland) act 2000; and
the sums paid out of the Scottish consolidated fund for the purpose of meeting the expenditure shown in the financial statements were applied in accordance with section 65 of the Scotland act 1998.

Opinion on other prescribed matters

In my opinion:

the part of the remuneration report to be audited has been properly prepared in accordance with the public finance and accountability (Scotland) act 2000 and directions made thereunder by the Scottish ministers; and
the information given in the annual report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which I am required to report by exception

I am required to report to you if, in my opinion:
adequate accounting records have not been kept; or
the financial statements and the part of the remuneration report to be audited are not in agreement with the accounting records; or
I have not received all the information and explanations I require for my audit; or
the governance statement does not comply with guidance from the Scottish ministers.

I have nothing to report in respect of these matters.

Brian Howarth, ACMA, CGMA
Assistant Director
Audit Scotland
7^th Floor Plaza Tower
East Kilbride
G74 1LW

Date: 9 August 2012