When we review firms’ proposals for fee variations we will distinguish between central project costs, such as firm-wide methodologies, guidance and training, and work carried out on an individual body’s audit.
Firms must use the standard templates we developed to provide a total build-back cost estimate for each individual audit. Once the auditor has completed its assessment, the firm should share the estimate and supporting assumptions with the relevant body, and we will share the estimate with MHCLG. This will give bodies early sight of the expected costs and allow them to discuss the scope and assumptions with their auditor.
We will use each estimate as a baseline when reviewing build-back fee variations already received and future proposals.
Our review will include:
- a scope check to exclude firm-wide work already covered by the central project cost fee variation;
- an estimate check to compare the proposal with the expected work, hours, staff grades and timing;
- an evidence check to confirm what work was completed, why it was needed and how the cost was calculated; and
- a cross-firm comparison of similar work, taking account of body type, audit complexity, the number of disclaimed years and the work undertaken. Cross-firm averages will act as a challenge indicator.
We will investigate significant differences and require firms to explain and evidence them. We will also consider the body’s comments. If the evidence does not support all or part of a proposal, we will seek further information and reduce or reject any unsupported amount. We will exclude costs already recovered through the central project cost fee variation before determining the fee.