Consultation on the 2019/20 audit fee scale

Proposed fee scale for 2019/20

The Local Audit (Appointing Person) Regulations 2015 (the Regulations) require PSAA to specify, before the start of the financial year to which the fees relate, the scale of fees for the audit of the accounts of opted-in authorities.

We propose that the scale of fees for 2019/20 should be the same as the scale of fees applicable for 2018/19. PSAA was able to reduce scale fees for 2018/19 by 23 per cent compared to the fees applicable for 2017/18 as a result of the favourable prices secured from firms in our audit services procurement and having regard to planned savings in PSAA’s own operating costs. We have reviewed our costs in preparation for this consultation and are pleased to confirm that we are able to sustain 2018/19 fees for a second year.

The proposed scale of fees for 2019/20 reflects the cost of the expected work programme outlined below.

The proposed scale fee for each opted-in local government and police audited body is available on our website. The section on fee variations below explains the arrangements that apply to the variation of fees in certain circumstances.

Work programme

Under the provisions of the Local Audit and Accountability Act 2014 (the 2014 Act), the National Audit Office (NAO) is responsible for publishing the statutory Code of Audit Practice and supporting guidance for auditors. Audits of the accounts for 2019/20 will be undertaken in accordance with the requirements of the Code.

The Code requires the auditor to give an opinion on the financial statements of a body subject to audit under the 2014 Act, and a conclusion on the arrangements for value for money. Further information on the Code and supporting guidance is available on the NAO website.

Auditors tailor their work to reflect local circumstances and their assessment of audit risk. They do this by assessing the significant financial and operational risks facing an audited body, and the arrangements it has put in place to manage those risks.

The scale of fees set out in this consultation is based on the assumption of no significant changes in NAO guidance for auditors, professional standards, or CIPFA/LASAAC financial reporting requirements that would affect materially the amount of audit work to be undertaken for 2019/20 audits. A previous example of such a material change in audit work was the implementation of international financial reporting standards (IFRS) for local government bodies for 2010/11.

Audit quality

PSAA is very aware of the need to maintain and, where possible, strive for improvements in, audit quality. Our responsibilities in this area were a major driver in our audit services procurement and are emphasised in the contracts we have entered into with successful firms.

We have developed new arrangements for monitoring and reporting on auditor performance and audit quality under the contracts for the appointing period 2018/19 to 2022/23. The new arrangements will be implemented to coincide with the start of the audits of 2018/19 accounts. Further information is available on the audit quality pages of our website.

Fee variations

PSAA has the power to determine the fee above or below the scale fee, where it considers that substantially more or less work was required than envisaged by the scale fee. Scale fees are based on the expectation that audited bodies are able to provide the auditor with complete and materially accurate financial statements, with supporting working papers, within agreed timeframes.

The proposed scale of fees for 2019/20 is based on the individual scale fees applicable for 2018/19 because these represent the most accurate reflection available of auditors’ current assessments of audit risk and complexity for each opted-in body. Where it becomes clear that audit risk or complexity have changed, the auditor may request a variation to the scale fee. We would only expect variations to occur for 2019/20 where these factors are significantly different from those identified and reflected in the 2018/19 scale fee.

Variation requests must be made to PSAA by the auditor using a standard process and cannot be invoiced to an audited body by the auditor until they have been approved by PSAA.

PSAA obtains updated fee information, and explanations for any proposed variations from the scale fee, from appointed auditors on a regular basis. We consider the reasonableness of the explanations provided by auditors, and require the auditor to confirm that they have discussed the reasons for the additional fee with the audited body before we finalise our decision on any variation to the scale fee.

PSAA will charge fees for considering objections as a variation to the scale fee, from the point at which auditors accept an objection as valid, or for any special investigations, such as those arising from disclosures under the Public Interest Disclosure Act 1998.

Value added tax

All the 2019/20 fee scales exclude value added tax (VAT), which will be charged at the prevailing rate of 20 per cent on all work done.

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