Issues with the timeliness of audit opinion delivery are caused by a variety of factors. In common with all stakeholders in the local audit system, we want to see the earliest possible return to a position in which virtually all local bodies can publish their audited accounts by the target date specified in the Accounts and Audit Regulations.
There are several significant obstacles which need to be overcome before that goal can be realised. They include:
- a backlog of delayed prior year audit opinions which are still outstanding;
- a shortage of audit staff with the requisite skills and experience;
- more demanding regulatory requirements which increase the time and resources needed to complete each audit; and
- local bodies entering more frequently into innovative transactions which require detailed examination by auditors, and capacity shortages in finance and other staff to deal with the volume and complexity of local government accounts.
In January 2023, the NAO published a progress update on the timeliness of local auditor reporting in England. This was an update on their original report issued in March 2021.
The 2020 NAO Code of Audit Practice requires auditors to report on a timely basis, clearly, concisely, and objectively without fear or favour. Timely reporting includes producing audit reports in time, insofar as the auditor can do so under auditing standards, to allow local bodies to comply with the requirements placed on them to publish their audited financial statements.
We have amended our expectation of firms within the 2021 Terms of Appointment. This states that where in the auditor’s view it would not be possible to issue an audit report in compliance with the auditing standards and the guidance issued by the NAO by the publishing date, the audited body must be consulted on an alternative target date. The auditor must notify the audited body promptly of any delays to the agreed timetable, and reissue the timetable having regard to those delays after further consultation.
The local audit system working together as a whole is the most effective way to drive the timely delivery of audits. It is important to recognise that any improvements will take time to materialise given the nature of retrospective audits and the significant number of delayed audits. There are no easy solutions which we or any other parties can simply action. The reality is that returning to a more predictable and stable position is going to take some time and will be a gradual process. Our e-bulletins provide updates on developments across the local audit system to seek to address the well-documented challenges.