What is the mechanism for allocating the cost of individual audit firm bids?

The mechanism for allocating the costs of individual firm bids is the scale fee, which allocates the total costs of all firms tenders and PSAA total costs (approx. 4%) in a proportionate way across all bodies.

The scale fee does not vary in relation to which firm is appointed as auditor.  Contingencies are not built into the fees and where additional audit work is required this results in a fee variation in line with the statutory framework. These may result in a permanent adjustment to the scale fee (e.g. Group Accounts were required) or maybe for a single year only (e.g. introduction of a new ledger). The scale fee is linked to the relative risk and cost of a particular body’s audit, and contributes to the pot from which all auditors are paid.

The recent changes to the fee regulations will help to make the scale fees more accurate, over time.