News item: independent review of the sustainability of the local government audit market

PSAA has recently commissioned an independent review of the sustainability of the local government audit market. The review was undertaken by an independent consultancy, Touchstone Renard (TR). The full report is available at PSAA – Future Procurement and Market Supply Options Review.

PSAA commissioned this work in its role as the ‘appointing person’ for the national scheme for the appointment of external auditors to principal local authorities in England.

The TR report draws on the views of audit firms active in the local authority market as well as others that are not. In doing so it identifies a number of distinctive challenges in the current local audit market. In particular it highlights the unprecedented scrutiny and significant regulatory pressure on the auditing profession; the challenges of a demanding timetable which expects publication of audited accounts by 31st July each year; and the impact of austerity on local public bodies and its effect on both the complexity of the issues auditors face and the capacity of local finance teams.

We are sharing the report publicly to inform debate and support ongoing work to strengthen the system and help to deliver long term sustainability. In particular, we hope that this work will be helpful to the review which Sir Tony Redmond is currently conducting.

Steve Freer, Chair of PSAA Ltd. said,

“We are grateful to Touchstone Renard for this very important report which will inform PSAA’s forward planning, especially in relation to future procurement processes. Their independent review has captured the views of firms at a point in time at which the audit industry is subject to extreme pressures. It highlights some of the difficulties which potentially arise downstream if action is not taken to address current uncertainty and instability.

The position will inevitably change as future developments occur. The Government’s response to the Kingman, Competition and Markets Authority and Brydon Reviews will hopefully bring welcome certainty for the industry in due course. And the Redmond Review, looking specifically at local audit and accounting, will conclude later in the year and, hopefully, make positive recommendations for the future of local audit.

PSAA’s current contracts provide medium term assurance for the audit of relevant local bodies. The TR report will help us to work with other local audit stakeholders to address the challenge of long term sustainability.”

Notes for editors

  1. PSAA is a not-for-profit company established by the Local Government Association following the closure of the Audit Commission.
  2. The Secretary of State has specified PSAA as an appointing person under provisions of the Local Audit and Accountability Act 2014. For audits of the accounts from 2018/19, PSAA appoints an auditor to relevant principal local government bodies that opt into its national scheme, and sets a scale of fees for the work which auditors undertake. 98% of eligible local government and police bodies (have opted into PSAA’s arrangements for an initial five year period covering bodies’ accounts to 31 March 2023.
  3. The work that auditors undertake is based on the requirements set out in the Local Audit and Accountability Act 2014 and the Code of Audit Practice published by the National Audit Office. The NAO’s proposed new Code that will apply from 2020/21 onwards is pending parliamentary approval.
  4. More information on PSAA is available from the PSAA website.
  5. Local government bodies in this context includes local authorities, combined authorities, national parks, passenger transport executives, waste authorities, functional bodies and other specified bodies.

For more information please contact:

Tony Crawley / Chief Executive
Public Sector Audit Appointments Limited