2020/21 audit fee scale

March 2020

2020/21 fee scale

Fee scale

After careful consideration of the issues raised in the feedback to our consultation and the factors affecting auditors’ work set out in this fee scale document, PSAA has set the scale fee for 2020/21 on the basis that scale audit fees for opted-in bodies will remain unchanged from the fee scale applicable for 2019/20. We recognise that this decision will disappoint a number of stakeholders who would prefer PSAA to make an “across the board” increase to fees.

However, there are several reasons why we believe that would not be the best way forward:

  • In our view it is crucially important that auditors maintain a regular dialogue with audited bodies to ensure that there is a good understanding in relation to new factors impacting the audit and the auditor’s work.
  • It is important that firms explain the factors concerned, many of which hinge upon their responses to specific feedback and criticism from the regulator.
  • Scale fees are intended to reflect local audit risk although clearly they can never be a definitive measure of risk. We see local discussions as a means of not only improving the dialogue between auditors and audited bodies but also of updating audit fees to reflect changing risks. Across the board fee changes for factors other than pooling of firms’ bid prices would conflict with a risk-based approach.
  • Given the current rapid pace of change and the requirement to set the fee scale so far in advance of the conduct of audits, PSAA simply does not have sufficient information about how changes will affect the amount of work that auditors will need to undertake to deliver Code-compliant 2020/21 audits.

We therefore request auditors and audited bodies to work closely together in order to develop a shared understanding of the issues which are likely to impact the 2020/21 audit, their implications for audit work and fees. In turn, PSAA, will play its part in scrutinising and ruling on any proposals for resulting fee variations.

In the light of the feedback we received about late notification of additional audit fees, we encouraged auditors to discuss the relevant issues and their local implications with bodies at the audit planning stage rather than late in the audit.

We expect auditors to give notice of factors which may require additional work as soon as possible, and also to help identify any actions which the body might take to mitigate the amount of work the auditor needs to undertake.

In discussing the fee consequences of any factors, it is important that the parties consider both short- and longer term implications. Some issues will have a one-off impact, affecting a single year and resulting in a fee variation proposal for a one-off adjustment. Others will have ongoing implications which may or may not be the same as the impact in the first year. These may point to a need to alter the body’s scale fee, ensuring that it remains appropriately aligned to audit risk.

Individual 2020/21 scale fees for opted-in authorities are available on the 2020/21 scale of fees page of our website.

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Fee variations process

The nature of audit is such that it may be necessary for an auditor to carry out more audit work than has previously been required or planned.

PSAA has the power to vary the audit fee payable by an opted-in authority where it considers substantially more or less audit work is required than envisaged by the scale fee (which is set based on the most recent audit year for which complete fee information is available). Where it becomes clear that audit risk or complexity is significantly different from the level identified and reflected in the scale fee, the auditor may request a variation to the scale fee.

Variation requests must be made to PSAA by the auditor using a standard process. PSAA is expecting discussions between the auditor and the body to take place as early as possible in the audit cycle, and ideally for the auditor to obtain agreement from the authority to the proposed variation before seeking approval from PSAA. The auditor cannot invoice an audited body until PSAA has approved the request.

Scale fees are based on the expectation that audited bodies are able to provide the auditor with complete and materially accurate financial statements with supporting working papers within agreed timeframes. Where an authority is unable to fulfil these requirements, fee variations potentially apply.

PSAA regularly obtains updated fee information in relation to any proposed variations from the scale fee from appointed auditors and considers the reasonableness of the explanations provided by auditors. For example, PSAA considers fee variations in relation to Code changes, regulatory changes and late or poor preparation of working papers are potentially valid (subject to individual circumstances and the body’s observations). However, we would not agree fee variations where it is clear the work relates to non-code work, or is covered by the scale fee or arises from auditor-related issues such as members of the audit team being inadequately prepared.

Fees are chargeable when auditors carry out work in line with their other responsibilities, such as considering information provided by third parties, objections or carrying out other investigations.

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Statement of responsibilities

The statement of responsibilities of auditors and audited bodies applies to the work covered by the fee scale set out in this document.

The statement effectively represents the terms of engagement between appointed auditors and audited bodies, and summarises their respective responsibilities.

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Value added tax

All the 2020/21 fee scales exclude value added tax (VAT), which will be charged at the prevailing rate of 20 per cent on all work done.

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