6. Other matters
6.1 This section covers other requirements relevant to Firms including:
- Audit fee information.
- Audit fee variations.
- Work in progress and fee information.
- Indemnity.
- Key Audit Partners.
- Cooperation with other auditors.
- Complaints.
- Audit contract quality monitoring.
- Responding to information requests.
Audit fee information
6.2 Under the Regulations, PSAA must specify the scale fee for each body by 30 November of the financial year to which it relates. PSAA will consult Firms on the proposed scale fees and confirm the scale fees once set.
6.3 Auditors must formally report the fee to bodies twice per audit cycle:
- At the planning stage when the audit planning report is presented to Those Charged with Governance.
- Upon the conclusion of the audit.
6.4 At both stages, the reported fee must be broken down into Code audit work and any non-Code work, including audit related services. If no non-Code work was undertaken for the body, a confirmation statement must be included.
6.5 Both communications must specify comparative fee information. At the planning stage, the auditor should compare the proposed fee with the prior year actual fee and the published scale fee. At the completion stage, the auditor should compare the proposed final fee with the fee proposed at the planning stage and the original scale fee. Auditors must provide an explanation for all variances.
6.6 When reporting the proposed fee for the audit, auditors must make clear to the audited body:
- The specific factors which the auditor has taken into account in proposing the fee (particularly the risk assessment).
- The assumptions upon which the fee is based in terms of, for example, the standard of the body’s control environment, coverage of internal audit, quality of working papers (these are the assumptions taken account of in the process of setting the scale audit fees and referenced in the Statement of Responsibilities).
- What is included in the fee and what is not included.
- The process for agreeing the proposed fee with PSAA if it varies from the published scale fee.
- The process for notifying and determining any subsequent proposed fee variations which may arise if circumstances change or the assumptions upon which the fee is based are not met.
6.7 PSAA will use the information provided in the audit planning report, auditor’s annual audit report, audit completion report or other ISA (UK 260 communication) to verify the communication of fee information to Those Charged with Governance.
6.8 PSAA will review audit documents on a sample basis for financial reconciliation purposes.
Audit fee variations
6.9 PSAA publishes the scale of fees (audit fees) for bodies, based on the work auditors are required to undertake each year.
6.10 Under Regulation 17 of the Regulations, PSAA may vary fees where it determines that substantially more or less audit work was required than envisaged by the scale fee. It will determine each variation on a case-by-case basis, unless it is a standard fee variation.
6.11 The auditor will decide the work necessary to complete the audit, provide a full explanation and seek to agree a variation to the scale fee with the body, subject to final determination by PSAA. The auditor must give notice to the body of the proposed fee variation and the reasons. Where possible PSAA expects such information to be included in audit planning and/or audit completion communications.
6.12 PSAA publishes its fee variation process on its website.
6.13 Firms must submit proposed variations to scale fees in line with set methodology set out in clause 18 of the contract which includes:
- Providing fee variation proposals in the required format along with all supporting documentation, as per the documentation contract management activity timetable.
- Informing the body of the proposed variations including the amount of time spent by different categories of fee earner and reasons for them.
- Maintain appropriate billing records.
- Respond to any PSAA requests for further information or file review within the specified timescale.
Work in progress and fee information
6.14 Firms must submit Work in Progress (WIP) returns to report the position at quarter end i.e. June, September, December, and March.
6.15 The WIP returns enable PSAA to:
- Calculate payments between PSAA and the Firm (based on scale fees, the published fee variation rate card and Firm-specific contract remuneration rates).
- Track performance against milestones (clause 20 of the contract).
- Reconcile final fees (as per clause 18 of the contract).
- Determine the final fee on completion of the audit.
- Support its financial management arrangements.
6.16 PSAA or its external auditor may need to examine a Firm’s billing records so Firms must ensure adequate accounting records are maintained and comply with any such requests.
Contact information
6.17 PSAA maintains information about bodies to support its statutory responsibilities relating to auditor appointments and fees. Each quarter, PSAA will issue a list of relevant Directors of Finance to Firms to confirm or update.
6.18 PSAA is statutorily required to publish a directory of auditor appointments on its website including the contact details of the relevant KAP. Firms are therefore required to provide details on a quarterly basis of the appointed KAP and AM at each body.
Indemnity
6.19 PSAA indemnifies auditors against the first £75,000 of external charges, losses, expenses and liabilities properly incurred and not otherwise recoverable, arising out of the exercise by the auditor of certain of their statutory functions, providing PSAA have had the opportunity to comment on the “draft” version (paragraphs 5.4 to 5.8).
6.20 Firms must notify PSAA promptly as soon as they are aware of any circumstances which are reasonably likely to give rise to a claim as this is a condition of the cover. The indemnity may not apply if PSAA is not notified or consulted.
Key Audit Partners
6.21 Firms must ensure that each local audit engagement lead is authorised as a KAP by the Recognised Supervisory Bodies.
6.22 Firms are not required to consult on the allocation of KAPs with an individual body, but PSAA encourages this approach.
Cooperation with other auditors
6.23 Auditors should cooperate with other external auditors as set out in the Code, AGN01 (the NAO Auditor Guidance Note – General Guidance Supporting Local Audit), have regard to any relevant NAO guidance and the requirements of the RSBs or any guidance and requirements as may be published by any other entities, for example the Local Audit Office, pursuant to or as part of successor arrangements as made by the Government.
6.24 Outgoing Firms should cooperate with incoming Firms. Appendix 2 sets out PSAA’s expectations of Firms on handover of a PSAA audit appointment.
6.25 Where disagreements between outgoing and incoming auditors arise, especially if this is likely to result in a qualified audit opinion or a PIR, the Firms should meet to discuss the issue and notify PSAA.
Complaints
6.26 Under the Regulations PSAA has a duty to design and implement systems to resolve disputes or complaints from local auditors, bodies and local government electors relating to the contract and the work carried out by the Firms it has appointed.
6.27 In the first instance, a Firm must deal with a complaint under their own procedure. PSAA will only consider a complaint if it has been through all appropriate stages of a Firm’s procedures. Only if the complaint remains unresolved, can it be passed to PSAA.
6.28 PSAA will not investigate complaints about an auditor’s professional judgements. The complaints procedure is set out in Appendix 3.
6.29 Firms must report any upheld complaints to PSAA on a quarterly basis. PSAA will inform a Firm of any upheld complaints against it.
6.30 Complaints may also be received by the RSBs. A memorandum of understanding has been agreed with the RSBs to ensure that complaints are dealt with by the body most appropriate to deal with them. In concluding or dealing with a complaint PSAA may pass their findings to the relevant RSB.
Audit contract quality monitoring arrangements
6.31 PSAA is committed to ensuring good quality delivery of audit services are provided to bodies. Its holistic approach considers three strands:
- Adherence to professional standards and guidance.
- Compliance with contractual arrangements.
- Relationship management.
6.32 As part of its audit quality monitoring programme PSAA will consider:
- Firms’ performance against a range of contract performance indicators.
- Firms’ compliance with their specified method statements.
- Audit inspection results by the FRC’s Audit Quality Review (AQR) team and the ICAEW Quality Assurance Department.
- Information provided in Firms’ Transparency Reports.
- Results from its satisfaction surveys issued to audited bodies.
6.33 PSAA’s audit contract quality monitoring arrangements are published on its website.
6.34 Firms must cooperate with PSAA audit contract quality monitoring arrangements set out in the contract with PSAA. Contract monitoring enables PSAA to provide assurance to stakeholders about the quality of service delivered by the contracted Firms.
6.35 PSAA publishes quarterly and annual contract monitoring reports on its website.
Responding to information requests
6.36 PSAA is subject to The Freedom of Information Act 2000 (FOIA) and The Environmental Information Regulations 2004 (EIR). Firms appointed by PSAA operate under their own statutory powers, separate from those of PSAA. Firms are not ‘public authorities’ for the purposes of the FOIA and the information they hold may therefore not be subject to the provisions of the FOIA or EIR.
6.37 PSAA’s duties under the FOIA and/or EIR may require it to disclose information concerning the underlying procurement and/or the Firm’s contracts to anyone who makes a reasonable request. PSAA will consult with a Firm to discuss relevant information requests.
6.38 PSAA’s Publication Scheme lists the range of information we proactively make available without the need for specific FOI requests. It also gives details of how the information can be obtained and any charges.
6.39 PSAA will not be liable for any loss or prejudice caused by the disclosure of information that:
- Has not been clearly marked as “Not for disclosure to third parties” and / or for which supporting reasons for withholding (referring to the relevant category of exemption under the FOIA or EIR where possible) have not been provided; or
- Does not fall into a category of information that is exempt from disclosure under the FOIA or EIR (for example, a trade secret or would be likely to prejudice the commercial interests of any person); or
- In cases where there is no absolute statutory duty to withhold information, then notwithstanding the previous clauses, disclosure may still be appropriate if, under section 2 of the FOIA, the public interest favours release.
6.40 Firms must assist and cooperate with PSAA to enable it to comply with its information disclosure obligations as per clause 33 of the contract.
Statement of Responsibilities
6.41 PSAA publishes a Statement of Responsibilities of auditors and audited bodies which serves as the formal terms of the engagement. It summarises the extent of the responsibilities of the Firm and of the body including what the Firm can expect of the body in certain areas.
6.42 PSAA may update the document from time to time and will consult the Firm of any changes.