Additional information for 2020/21 audit fees

Impact of additional audit requirements on 2020/21 fees

For the new changes in audit requirements where our research has indicated an additional audit fee will be needed, we have set out below for each key change in requirements the:

  • estimated minimum additional fee range for local fee variations; and
  • potential factors that could influence the size of individual fee variations.

VFM arrangements – new requirements in the Code of Audit Practice 2020

The new requirements in the Code of Audit Practice 2020 in relation to an audited body’s arrangements to secure value for money are likely to have a significant impact on the auditor’s work and require additional fees.

The new approach to this work from 2020/21 audits onwards requires an annual commentary on arrangements to secure VFM, published as part of the auditor’s annual report. The commentary should enable the auditor to explain the work they have undertaken during the year, and to highlight any significant weaknesses that they have identified and brought to the body’s attention, along with their recommendations for improvement.

Expected additional minimum core fees for this work for 2020/21 audits are set out below.

Minimum additional fees – new VFM arrangements requirements for 2020/21 audits1

District council County council London borough council Met council Unitary Police (PCC + CC combined) Fire Other LG bodies
£6,000-£11,000 £10,000-£19,000 £10,000-£19,000 £10,000-£19,000 £10,000-£19,000 £6,000-£11,000 £5,000-£9,000 Variable based on individual characteristics

1 To be considered on an individual basis, but the general ranges may provide a useful reference

These fee ranges cover the basic core work needed to comply with the new approach in the Code and represent the lowest minimum additional fee that may be needed. They do not cover any additional work an auditor will need to undertake where individual risks or specific weaknesses are identified in relation to a body’s value for money arrangements, which need to be reviewed and reported.

The fee ranges are estimates in advance of firms’ completion of work under the new Code. These estimates will be reviewed subsequently, taking account of the impact of Covid-19 for both audited bodies and auditors. This information will provide a better basis for estimating the ongoing impact of the new work and the potential to propose national variations following further research.

Factors that may affect the level of additional fee required at an individual body are set out at Appendix 1.

Further discussion between an opted-body and the appointed auditor should establish the additional fee required for each body.

The precise quantum of the impact of the new requirements of ISA 540 will depend on the circumstances of each body. In the absence of elevated risks, the minimum fees below for the first year of implementation of the new requirements are considered appropriate:

Minimum additional fees – ISA 540

Overall minimum additional fees
The additional fees below depend on body type and individual circumstances and the fee variation required may be higher than the suggested minimum
Approximate minimum additional fee by body type:
District council County council London borough council Met council Unitary Police (PCC + CC combined) Fire Pension fund Other LG bodies
£2,500 £3,800 £4,400 £4,400 £4,400 £2,500 £1,900 £600-£1,900 Too variable to estimate

The level of additional fee required is highly dependent on audited body activities and preparedness. Factors that may affect the level of additional fee are set out at Appendix 1.

Following the implementation period and once the impact of local circumstances on ongoing additional fees is clear, we will consider whether a national fee variation may be appropriate for this change in requirements.

Other new requirements

Our research has concluded that it is not appropriate to set an additional fee range for the following new requirements applicable to 2020/21 audits. Additional fee proposals will need to set out the individual circumstances for which audit work is required.

New 2020/21 requirements where is it not appropriate to set an additional fee range

New/updated requirement Explanation
ISA 220: Quality control of an audit of financial statements Impact of additional work on the scale audit fee is likely to be low in most cases.
ISA 600: Specific considerations – audit of group financial statements The impact is for entities preparing group accounts. In practice it is likely only to be significant where there are significant components, and the audit of the significant components is undertaken by other auditors.

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