Fee variation process

Outline of the process as of April 2021 (updated January 2022)


Review process

A PSAA officer reviews the fee variation proposals submitted, including some or all of the following as applicable:

  • confirming that the fee variation form has been filled in correctly;
  • considering the value of the fee variation and its size relative to other similar fee variations;
  • comparing the size of the fee variation to the scale fee to consider whether it is proportionate;
  • reviewing the justification (including any supporting workings/documents) provided by the firm to support the fee variation proposal,  and assessing whether the complexity of the issue and the challenges described are in proportion to the fee variation submitted;
  • checking that the work performed meets the requirements as set down in regulations for a fee variation, for example, it is work required under the Code of Audit Practice;
  • confirming that the work detailed in the firm’s justification is consistent with PSAA’s other records, for example, a delay in the issue of an accounts opinion, statement of reasons issued;
  • exercising judgement when considering the grade mix used and hours taken (for example, do they appear reasonable?);
  • considering any specific outputs resulting from the additional work undertaken;
  • checking whether or not the audited body has agreed the fee variation proposal. In the case of claims that are not agreed, we make  contact with the audited body (where possible, the Section 151 Officer) to hear the body’s concerns so that we can take them into consideration when we make the fee determination;
  • checking that the relevant issues raised in the firm’s justification have been reported to TCWG (for example the ISA260 report or Annual Audit Letter);
  • checking that the appropriate fee variation value is being reported in the Audit Plan/ISA260/Annual Audit Letter;
  • for high value and complex fee variations the following may also be undertaken:
    • a PSAA officer will contact the body (normally s151 officer or Director of Finance) to discuss the variation;
    • PSAA officers may have a meeting with the firm’s audit team and perform a review of the audit file to obtain a better understanding of the additional work;
  • reviewing whether any approved fee variation is one-off or recurring, to assess whether it relates to additional audit work that will be repeated in future audits (for example, pension fund valuations, PPE valuations, group accounts, increased challenge on audit quality). Where we are satisfied that the fee variation is recurring we will aim to include it in the scale fee at the earliest opportunity, which is determined in accordance with the Appointing Person regulations.
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