Themes in the consultation responses
Although the level of support for the consultation proposals was high, there is a broad range of views reflected in individual responses, from those who consider the proposed approach to be a sensible way forward to those who think that fees should not change.
The positive responses generally welcome PSAA’s proposed actions to build into scale fees the additional fees for ongoing audit requirements. Opted-in bodies welcome more certainty about audit fees, and many think the approach we have adopted in setting out our proposals for the 2021/22 fee scale is helpful and reasonable given current circumstances in local audit.
While confirming their support for the consultation proposals, some opted-in bodies have highlighted particular issues or caveats. Some are concerned that building into the fee scale the ongoing additional fees for 2018/19 alone at this stage will not produce a realistic indication of the audit fee payable for 2021/22. Their view is that the fee scale should cover all requirements and they would prefer that additional fees for 2019/20 are included in the fee scale as well. This is not straightforward because all additional fees required for 2019/20 audits cannot be confirmed yet by auditors and opted-in bodies, and then determined by PSAA. PSAA is required under current regulations to determine additional fees after audit work has been completed.
Responses from opted-in bodies also raise concerns about the size of some additional fees, particularly in the context of the financial pressures they are experiencing themselves. The additional fees under approved fee variations are required because audit requirements have increased as a result of changes in scope and regulatory oversight. PSAA’s process for approving fee variation requests from auditors includes careful checks, balances and challenge before determination. Only the ongoing elements of fee variations will be included in the fee scale and will remain under review from year to year.
Consultation responses which do not support the proposal generally take the view that opted-in bodies should not be required to pay additional fees, and that any additional requirements should be allowed for in the audit contracts. The local audit framework under which the contracts were let requires the appointing person to set audit fees based on the requirements of the Code of Audit Practice. The legal framework recognises the potential need for additional audit work and includes a provision in the regulations for these. In the interests of safeguarding public funds, the contracts do not provide for potentially costly contingencies for changes in requirements that may or may not occur and for which the specific impact could not be quantified at the time of contract award.
The consultation responses we received from audit firms consistently present a strong view that the challenges of increased regulation and additional technical requirements mean that scale fees are no longer aligned with the level of audit work now required. The view of the firms is that scale fees need to increase, and that some form of percentage increase in the 2021/22 fee scale would be appropriate. Firms are also concerned that using fee variations for additional work limits their ability to allocate the necessary audit resources appropriately. PSAA is working to incorporate additional requirements into scale fees within the constraints of current regulations.