Themes in the consultation responses
Although the level of broad support for the consultation proposals was high, there is a range of views reflected in individual responses, from those who consider the proposed approach to be a sensible way forward (some with reservations), 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. These responses highlight the view that the scale fee should be a realistic reflection of the work needed under current audit requirements. Opted-in bodies say they need more certainty about total audit fees, and many think the approach of consolidating ongoing additional requirements into the fee scale is helpful in this respect. However, there are also concerns about the increasing volume of audit work, the focus of some of that work, and the additional fees needed, particularly given the financial pressures bodies are experiencing themselves.
There are concerns raised in many responses, supportive and not supportive, about delays in audit completions. There are also concerns about the service some bodies report they have received from the firms, with comments about timeliness, staffing and resourcing, delivery of audit work and consistency of approach. The audit contracts with the firms reflect the requirements of the Local Audit and Accountability Act 2014 and the Appointing Person Regulations (2015) and are very different to a typical services contract in relation to any sanctions PSAA could apply. In addition, the FRC’s Ethical Standard does not permit contingent fees so it is not possible to reduce supplier payment for not delivering an audit opinion by the target publishing date. However, the new audit contracts that will apply from 2023/24 contain a range of additional provisions designed to improve service delivery.
Consultation responses which do not support the scale fee proposals 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. These views are, however, in the minority. The local audit framework under which the contracts are 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 this. 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 national stakeholders who responded to the consultation largely support the fee scale proposals, with one exception. This stakeholder raised concerns about the reasonableness and consistency of the additional fees now needed for additional audit requirements, particularly as the additional fees have not prevented the delays experienced in completing audits in line with the target reporting date. They also raised concerns about funding and the ability of some opted-in bodies to pay higher audit fees.
The consultation responses we received from audit firms 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 to complete a Code of Audit Practice compliant audit. The view of the firms is that scale fees need to increase beyond the ongoing fee variations to be consolidated into the 2022/23 fee scale.