Source · Select Committees · Public Accounts Committee
Recommendation 13
13
Deferred
Absence of audit contract deadlines for opinions challenges the independence-timeliness balance.
Conclusion
The Society of London Treasurers told us there also needed to be consequences for late sign-off of accounts, suggesting auditors should report on the causes of delay to audit committees. The Society also queried whether better contract management might help the delivery of audits, suggesting a simpler procurement process might better enable management of auditors locally rather than by PSAA.37 We asked PSAA about the contractual obligations of audit providers and they confirmed that its audit contracts cannot specify that auditors issue their opinions by a certain date. PSAA emphasised that this was deliberate to preserve auditor independence, though accepted this causes a challenge for the system.38
Government Response Summary
The government agrees and will write to the Committee in October 2023 with its approach, but states that exploring incentives and sanctions for late sign-off is a longer-term consideration requiring very careful thought, to be addressed after the current backlog of delayed local audits is cleared.
Government Response
Deferred
HM Government
Deferred
5.1 The government agrees with the Committee’s recommendation. Target implementation date: October 2023 5.2 The department will write to the Committee in October 2023 with its approach. 5.3 The government recognises the potential role incentives and sanctions can play in a well-balanced system. Incentives and sanctions, however, can also result in unforeseen behavioural impacts. Given the range of issues the government is trying to address across the local audit market, any work in this area would require very careful consideration. 5.4 As stated by Minister Rowley on 17 July 2023 in his evidence given to the Levelling Up, Housing and Communities Committee inquiry into local financial reporting, the government is currently prioritising clearing the backlog of delayed local audits. The government, however, has committed to explore how greater transparency around audit delays could influence behaviour and believes the wider system of consequences is a vital area to consider for the longer term once the urgent issue concerning the backlog has been resolved.