This briefing sets out information for 2021/22 audits on the expected impact on audit fees of the requirement for a VFM commentary in the Code of Audit Practice 2020 and changes in auditing and accounting standards. PSAA is providing the information to support local discussions between opted-in bodies and auditors about fee variations for 2021/22 audits specifically.
PSAA sets fee scales based on the most accurate information available at the time of each annual fee consultation on audit requirements and the work needed to deliver them. Where sufficiently complete information is not available, or it is not possible to establish with reasonable certainty the level of any additional fees needed, additional requirements are assessed using the fee variations process.
Current local audit regulations allow PSAA to approve fee variation requests for additional audit requirements that become apparent during the course of an audit. Fee variations can be approved for individual opted-in bodies, or for groupings of bodies.
PSAA has commissioned external independent technical research to assess the expected impact on audit work programmes of a range of new or updated local audit requirements. The research was initially undertaken in 2021 and has been refreshed in 2022.
The research in 2021 concluded that where changes are relevant and require significant additional audit work, the impact during the initial implementation period will be variable depending on the local circumstances and arrangements of individual opted-in bodies. The updated findings in 2022 confirms that a further audit year is needed to assess the additional fees needed in the longer term.
This means that at this stage it would not be equitable to set a fixed additional fee across all or most bodies for these particular changes. However, the research has shown that the estimated minimum fee ranges developed for 2020/21 audits remain appropriate for 2021/22 audits and are a reliable benchmark.
We have therefore set out in this document the information we think will be helpful to opted-in bodies and auditors for 2021/22 audits on the factors and minimum additional fee ranges associated with specific additional audit work requirements. This information is indicative and cannot be prescriptive because of the potential impact of specific local circumstances or audit risks for individual opted-in bodies. The information is based on estimates and reflects the minimum additional core audit work required.
We expect to re-evaluate this position in setting the 2023/24 fee scale in twelve months’ time, with the aim of consolidating the additional fees into the fee scale and removing the need for continuing local discussion of additional fees for these particular audit requirements.