Summary
This briefing explains how changes in local audit requirements may affect fees for 2025/26 audits. It supports discussions between opted-in bodies and auditors about fee variations. It also highlights changes that may affect future audit years.
We are publishing this briefing alongside the launch of our consultation on the 2026/27 fees. The final 2026/27 fee scale will be published on our website.
Our 2026 technical research reviewed revised auditing standards, accounting standards, the Code of Practice on Local Authority Accounting (The Accounting Code), the Service Reporting Code of Practice and National Audit Office (NAO) guidance. The research focused on changes that could materially affect audit work.
The research found no new requirement that should cause a general substantial increase in audit work for all 2025/26 audits. Most changes are narrow, apply to few bodies or have little effect on auditor input.
Additional work may still arise at individual bodies. The main sources are audit procedures to rebuild assurance after a backstop-related disclaimed opinion, value for money work where the auditor identifies significant weaknesses. These costs depend on each body and will be considered through the fee variations process.
The 2025/26 Accounting Code changes the treatment of non-investment assets. The changes simplify accounting, but auditors must still obtain sufficient appropriate audit evidence over material asset values. We do not expect a significant general change in audit input as the new financial reporting requirements are implemented in the first-year. CIPFA Bulletin 22 – Indexation application guidance has been issued to assist practitioners with the application of these requirements.
Bodies can limit additional work by preparing complete records, documenting key judgements and controls, resolving prior-year issues and responding promptly to audit queries. Engagement with auditors is essential on identification of risks of material misstatement both at audit planning and throughout the audit.
Some 2025/26 audits will have had a disclaimed or modified opinion in 2024/25 because of the ‘backstop’ legislation. In these cases, the total 2025/26 audit fee may include audit costs from auditors undertaking ‘build-back’ work in accordance with Local Audit Reset and Recovery Implementation Guidance (LARRIG) 06 issued by the NAO. These costs and any corresponding adjustment to the published scale fee will be dealt with using the fee variation process.
MHCLG wrote to relevant Section 151 Officers on 26 June 2026 to explain the arrangements for clearing the audit backlog and rebuilding assurance, including audit fees and the build-back grant. Bodies affected by build-back work should discuss this with their auditor and consider the implications for financial planning.
The standards reviewed do not support a general adjustment to the 2025/26 fees. Body-specific additional work should continue to be addressed through fee variations until evidence supports any ongoing change to scale fees.