Frequently Asked Questions

The proposed 2026/27 fee scale applies a 3.0% contractual inflationary increase to 2025/26 scale fees. Some bodies will also receive an adjustment where evidence shows a recurring increase or reduction in audit work. Examples include changes to group arrangements, special case factors, and recurring work relating to pension asset surpluses. Including this recurring work in the scale fee gives bodies greater cost certainty and reduces the need for annual fee variations.

Firms are required to comply with the Code of Audit Practice (COAP), and when issuing a disclaimed audit opinion under the COAP they must have regard to the statutory guidance, which sets out that they should use professional judgement. 

The firms have performed work to issue a disclaimer opinion in line with the COAP/statutory guidance, which is why specific fees are appropriate for disclaimed audits. Furthermore, Ministerial statements have said that firms would be paid for work done in good faith.

We will consider what work has been done in total when determining the total audit fee – so if the auditor has not done all the work envisaged when we set the scale fee, the total fee will be adjusted to reflect that. For some audits, the total fee will reflect only the work for the VFM arrangements plus the work that the firm judged to be professionally appropriate to deliver the disclaimed audit opinion in line with the statutory guidance. 

We include work in the scale fee where evidence shows that it is recurring and can be estimated reliably. We use fee variations where work is temporary, depends on a body’s individual circumstances or cannot be quantified when the scale fee is set. This includes rebuilding assurance work and may include additional work arising from accounting or auditing changes where the effect depends on local arrangements.

Our fee variation process uses a defined set of categories for our review of  fee variation proposals from auditors. This enables us to consider whether proposals relating to additional audit requirements, are proportionate and comparable. We use these categories in our fee variation statements to bodies. Auditors may, however, choose to use different terminology or groupings in their reporting to bodies.

We chose not to determine fee variations related to the issuing of a disclaimed opinion until MHCLG had confirmed the arrangements for allocating the £49 million additional funding announced in April 2025. MHCLG paid the first funding instalment in June 2026 and set out further information about the allocations in a technical note.

Disclaimer fee variations received for review before the funding announcement were marked TBC when we reported the outcome of our reviews to bodies. We explained this process in our email of 17 December 2024, sent to all bodies and copied to the firms. We will now be writing to bodies in relation to the disclaimer fee variations we have previously reported as TBC.

We will communicate the final fee position for each body once we have determined it. When we determine a fee, it becomes statutorily payable. 

Additional fees for this work will depend heavily on the specific circumstances of each audited body, including its level of preparedness, the completeness and accuracy of accounting records, and the quality of supporting documentation and evidence. We anticipate a significant impact in the first year, which is unlikely to recur in subsequent years.

As part of their planning process, your audit firm should be able to provide an estimate of the likely costs for budgeting purposes. At this stage, there is insufficient certainty for PSAA to incorporate these amounts into scale fees.

Once appointed, auditors are independent and PSAA is unable to direct their work.

The Ethical Standard issued by the FRC prohibits contingent fee arrangements. This includes any agreement made at the start of an engagement where a set amount or percentage is payable to the firm upon the occurrence of a specified event or the achievement of an outcome, or a penalty imposed for not meeting a target.

Before the introduction of backstop legislation, there was no statutory deadline for completing audits.

The establishment of the Local Audit Office (LAO) will bring local audit under the oversight of a single organisation dedicated to supporting local audit bodies. We believe this will provide a much stronger framework and will hopefully ensure more proportionate audits and enable a holistic approach to managing the local audit system.

Following the abolition of the Audit Commission, the local audit system was deliberately fragmented across several bodies. The National Audit Office produces the Code of Audit Practice which instructs and advises auditors on their legal responsibilities. The Financial Reporting Council regulates the quality of audit work, while ICAEW determines the eligibility of firms and individuals to undertake audits. CIPFA/LASAAC prepares issues the Code of Accounting Practice.

PSAA’s role is limited to appointing auditors, setting audit fees and monitoring contract compliance. The creation of the Local Audit Office (LAO) will bring the regulation of local audit under an organisation dedicated to supporting local audit bodies, which we believe will provide a framework for more proportionate audits. This forms part of the Government’s strategic commitment for the LAO.

Once appointed, auditors are independent and determine the work required to comply with auditing standards.

The statutory  Code of Audit Practice (COAP) issued by the National Audit Office sets out what local auditors of relevant local public bodies are required to do to fulfil their statutory responsibilities under the Local Audit and Accountability Act 2014. 

Local auditors must comply with the COAP. Para 2.6 requires auditors to apply the extant auditing standards set for the UK by the Financial Reporting Council as the relevant regulatory body and applicable at all audits both corporate and public sector. 

The contracts agreed with firms in 2022 run for a five-year term, with the option of a two-year extension. To ensure continuity and maintain auditor capacity, it was necessary to include provisions that mitigate the impact of inflation. This is a standard practice for contracts of this length and helps support stability and sustainability of the audit market throughout the agreement period.