Recommendations & Conclusions
6 items
9
Conclusion
Eleventh Report - Local auditor reporti…
Acknowledged
We pressed the Department on when we would see improvements in the timeliness of local authorities publishing their audited accounts. The Department felt that it would not be possible to bring timeliness back on track in one audit cycle in 2021, given the impact of Covid-19. It explained that it …
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We pressed the Department on when we would see improvements in the timeliness of local authorities publishing their audited accounts. The Department felt that it would not be possible to bring timeliness back on track in one audit cycle in 2021, given the impact of Covid-19. It explained that it had adjusted the deadline for local authorities to publish their accounts to 30 September for 2021 and 2022. It would then review what the appropriate deadline should be. It expected to have better visibility of the completion of local authority audits by 2022, and that we would see progress in timeliness in the audit cycles for 2021 and 2022.19 The Local Government Association noted that the move of the audit deadline to 30 September for the next two years was a positive one.20
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Government response AI summary
The government has already taken steps such as extending audit deadlines, providing £15 million to local bodies, and amending regulations to improve timeliness. It is consulting on broader proposals and will provide further updates later in 2021, committing to review the audit deadline after 2021-22 …
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HM Treasury
23
Conclusion
Eleventh Report - Local auditor reporti…
Acknowledged
We pressed the Department on what it was doing to encourage a greater number of audit firms to carry out audits of local authorities. The Department agreed that maintaining capacity in the market for auditing local authorities was a serious matter.61 It reported that it kept a close watch on …
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We pressed the Department on what it was doing to encourage a greater number of audit firms to carry out audits of local authorities. The Department agreed that maintaining capacity in the market for auditing local authorities was a serious matter.61 It reported that it kept a close watch on the audit firms supplying the market for auditing local authorities, to monitor the situation and ensure that audit firms provided the necessary capacity.62 It added that it was in regular dialogue and meetings with the audit firms.63 The Department felt that, in taking the actions which Sir Tony Redmond had recommended in his review, this would provide the confidence that the market needed, and to ensure that there was sufficient capacity.64
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Government response AI summary
The government agrees on the crucial importance of auditor availability for market sustainability and acknowledges that more needs to be done to encourage additional firms into the market.
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HM Treasury
25
Conclusion
Eleventh Report - Local auditor reporti…
Acknowledged
PSAA recently commissioned research into the market for auditing local authorities which found challenges and barriers to audit firms looking to come into the market. New firms have to invest in their staff over time to build the specialist knowledge and accreditation needed to carry out audits. A member of …
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PSAA recently commissioned research into the market for auditing local authorities which found challenges and barriers to audit firms looking to come into the market. New firms have to invest in their staff over time to build the specialist knowledge and accreditation needed to carry out audits. A member of staff who leads an audit must also gain individual accreditation to become a key audit partner.69 EY added that key audit partners must have at least three years’ experience of oversight of delivering audits within this market.70 The Institute for Chartered Accountants in England and Wales (ICAEW) also felt that the requirements on key audit partners acted as a barrier to new entrants, even where audit firms did have audit partners with the experience that would make them eligible to apply.71
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Government response AI summary
The government agrees that a ready availability of skilled auditors is crucial for the local audit market's sustainability and recognises that more needs to be done to encourage new firms.
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HM Treasury
27
Conclusion
Eleventh Report - Local auditor reporti…
Acknowledged
We challenged the Department on the sustainability of firms auditing £100 billion a year of spending by local government while relying on only a few hundred auditors with the requisite skills. The Department and PSAA recognised the challenge which audit firms faced in having sufficient people to take on all …
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We challenged the Department on the sustainability of firms auditing £100 billion a year of spending by local government while relying on only a few hundred auditors with the requisite skills. The Department and PSAA recognised the challenge which audit firms faced in having sufficient people to take on all the work required in auditing local authorities.77 The Department had heard directly from audit firms that a shortage in specialist skills was a factor in their delays to completing audits.78 PSAA had seen that, within the four largest audit firms, some key audit partners had moved away from auditing local authorities to internal audit consultancy. Such moves had put additional pressures on the numbers available to lead audits of local authorities.79
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Government response AI summary
The government agrees on the crucial importance of skilled auditors for the long-term sustainability and quality of the local audit market. It acknowledges the current market's dependency on a few big suppliers.
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HM Treasury
28
Conclusion
Eleventh Report - Local auditor reporti…
Acknowledged
PSAA highlighted that the age profile of key audit partners was a factor likely to increase the challenge which audit firms faced, in having sufficient staff.80 EY confirmed that it was facing a retirement issue for its key audit partners, with most having been in careers in local audit for …
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PSAA highlighted that the age profile of key audit partners was a factor likely to increase the challenge which audit firms faced, in having sufficient staff.80 EY confirmed that it was facing a retirement issue for its key audit partners, with most having been in careers in local audit for 30 years or so, and in Grant Thornton the vast majority were aged over 50. EY was aware that when this cohort retired, it faced a risk of too few people coming behind them to take on their roles, and it considered that there was a generation of key audit partners missing.81 The Local Government Association also told us that among the relatively few accredited audit firms in the market, there were too few key audit partners to ensure the resilience of the system.82
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Government response AI summary
The government agrees that a ready availability of skilled auditors is crucial for market sustainability and quality, acknowledging that more needs to be done to encourage other firms into the market.
Read full response →
HM Treasury
29
Conclusion
Eleventh Report - Local auditor reporti…
Acknowledged
Sir Tony Redmond highlighted that his review found that the lack of career prospects and opportunities produced a real challenge for trainee accountants when considering whether to go into public sector accounting and auditing. He believed that audit firms needed to give more attention to career progression and training schemes …
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Sir Tony Redmond highlighted that his review found that the lack of career prospects and opportunities produced a real challenge for trainee accountants when considering whether to go into public sector accounting and auditing. He believed that audit firms needed to give more attention to career progression and training schemes for people to encourage them into public sector auditing.83 Sir Tony thought that the Department, accountancy institutes, and audit firms could be involved in developing a training scheme that encouraged people to pursue a career in public sector audit.84 ICAEW told us that the struggle that audit firms have in finding sufficient qualified and experienced individuals to deliver local authority audits could, in part, be due to low margins on the audits, which limited the ability to offer higher pay, and in part, be due to less attractive career paths. It added that pressure put on audit staff to work intensely over such a short period of time exacerbated staffing issues.85
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Government response AI summary
The government agrees on the crucial importance of skilled auditors for the long-term sustainability and quality of the local audit market. It acknowledges the current market's dependency on a few big suppliers.
Read full response →
HM Treasury