Additional information
Statement of responsibilities
The statement of responsibilities of auditors and audited bodies sets out the expectations on which scale fees are based. The statement effectively represents the terms of engagement between appointed auditors and audited bodies and summarises their respective responsibilities.
Scale fees are based on the expectation that audited bodies can provide the auditor with complete and materially accurate financial statements and supporting working papers within agreed timeframes. Local fee variations may be required where a body is unable to fulfil these requirements.
The statement of responsibilities also applies to auditors. Additional audit costs that arise due to auditors not meeting expectations in relation to their responsibilities are ineligible for a fee variation.
Value added tax
Individual audit fees under the 2023/24 fee scale do not include value added tax (VAT), which will be charged at the prevailing rate, currently 20 per cent, on all work done.
New contract management arrangements
We have strengthened contract management provisions in the 2022 audit services contracts to reflect the changed local audit market and to address feedback from opted-in bodies about audit delivery. It remains the case that, once appointed, auditors exercise their responsibilities independently under local audit legislation and the professional framework.
Our audit firms are contractually obliged to deliver the audits in accordance with the method statements outlined in their tender responses. Where this does not occur, we have mechanisms we can use to support performance improvement. These measures include:
- firms will be paid when they deliver on four predefined audit milestones (each attracting 25% of the scale fee), rather than on the basis of four quarterly payments as previously;
- we have introduced KPIs linked to the audit delivery lifecycle and a quarterly contract monitoring review process;
- there is a review procedure through which we can require a supplier at their own cost to amend its method statement, if it becomes clear that the current one does not satisfy its obligations under the contract; and
- there is a rectification plan process which we may invoke if the supplier fails to comply with its obligations under the contract.
We will revisit the actual milestones and KPIs if the expected backlog solution changes the framework. We also recognise that while we have strengthened the contract provisions to reflect changes in local audit, the ultimate sanction of being able to remove auditors from appointments remains largely moot as there is no surplus capacity in the local audit market. PSAA is committed to working with all stakeholders to support the changes needed in the local audit system.