Terms of Appointment

This page provides the terms of appointment for auditors and the statement of responsibilities of auditors and audited bodies.

Public Sector Audit Appointments Limited (PSAA) is responsible for appointing auditors, setting audit fees, overseeing the delivery of consistent, high quality and effective audit services to local public bodies, and ensuring effective management of the contracts with the audit firms.

Under Schedule 1 of the Local Audit and Accountability Act 2014 (the Act), all contracts for audit and related services, let by the Audit Commission, were transferred to PSAA on 1 April 2015. PSAA is responsible for managing and monitoring compliance with the contract requirements and reporting publicly on the results.

Terms of Appointment

The Terms of Appointment for auditors (the Terms) are issued by PSAA under powers delegated by the Secretary of State for Communities and Local Government. The Terms set out additional requirements that auditors must comply with, over and above those set out in the Code of Audit Practice (the Code) issued by the National Audit Office (NAO) and in legislation, and covers matters of practice and procedure which are of a recurring nature. Each year, we will assess auditors’ compliance with these statutory terms of appointment. The key aspects of compliance that will be monitored are:

  • the delivery of audit outputs against target dates;
  • consideration and, if appropriate, approval of auditors’ requests for variations to the scale audit fee where they have had to carry out more (or less) work; and
  • consideration of, and where we are satisfied that the work does not create a threat to the auditor’s independence, approval of auditors’ proposals to provide non-audit services to audited bodies.

The Terms are not year-specific and will be updated regularly as changes are required. They become effective when issued.

Revised Terms of Appointment for the audit of principal local government and police bodies were issued on 23 February 2017.

Terms of Appointment (updated 23 February 2017)

The Terms of Appointment for the audit of NHS Trusts, CCGs and smaller authorities are as issued on 30 September 2015. They remain in place for the audit or limited assurance reviews at these bodies until the 2016/17 work has been certified as closed.

Terms of Appointment (NHS and smaller bodies)

Appendix 1 of the Terms of Appointment is the Memorandum of Understanding between PSAA and the NAO. The signed version of the MoU is available here:

Appendix 1 MoU between PSAA and NAO

Statement of responsibilities of auditors and audited bodies

The Statement of Responsibilities (the Statement) serves as the formal terms of engagement between appointed auditors and audited bodies. It summarises where the different responsibilities of auditors and of the audited body begin and end, and what is to be expected of the audited body in certain areas.

The responsibilities of auditors are derived from statute, principally the Local Audit and Accountability Act 2014 and from the NAO Code. Nothing in the Statement is intended to limit or extend those responsibilities. In particular, audited bodies should note that, because auditors must not prejudice their independence, the role of the appointed auditor does not include providing financial or legal advice or consultancy services to the audited body.

Auditors may wish to refer to, and/or incorporate, the Statement in audit planning documents, annual audit letters, reports and other audit outputs.

2017/18 audits

The Statement, issued by PSAA for principal local government and police body audits for 2017/18 can be found here:

Statement of responsibilities of auditors and audited bodies (LG and Police)

2015/16 and 2016/17 audits

The Statement, issued by PSAA, for local government, police bodies and NHS audits for 2015/16 and 2016/17 audits can be found here:

Statement of responsibilities of auditors and audited bodies

2014/15 audits

The previous Statements, issued by the Audit Commission, served as the terms of engagement up to and including audits for 2014/15. The Statements covering local government bodies, NHS bodies and small bodies can be found here.