Recommendation 26

For the next procurement round for audits of local authorities from 2023, PSAA is looking at measures to reduce the barriers to entry for new audit firms. One measure proposed is for firms to enter the market while carrying out relatively small packages of audit work. PSAA is also open to consortia, in which an accredited firm would work with an unaccredited firm, to enable it to learn the ropes and gain experience of the unusual aspects of auditing local authorities.72 PSAA told us that it had consulted audit firms to gain their views on gaining accreditation and entering the market to audit local authorities. This included the option of working in consortia with accredited firms. It was also in contact with firms which had left the market to take soundings from them on returning to the market.73 PSAA explained that its strategy was to convince audit firms that auditing local authorities was an attractive market in which to work; one which would be worth their while; and worth their investment in training their staff. However, PSAA accepted that audit firms had a choice of audit markets and that it faced a challenge in making the offer attractive enough to audit firms.74 The Local Government Association also told us that the attractiveness of auditing local authorities had declined for audit firms, as the 65 C&AG’s report, Figure 1; Sir Tony Redmond, Independent Review into the Oversight of Local Audit and the Transparency of Local Authority Financial reporting, September 2020, para 3.2.1 66 Q 59 evidence session of 20 May 2021 67 Q 44 evidence session of 20 May 2021 68 Qq 63–66 evidence session of 20 May 2021 69 Q 11 evidence session of 20 May 2021 70 Q 28 evidence session of 17 May 2021 71 Institute for Chartered Accountants in England and Wales, page 5 72 Q 11 evidence session of 20 May 2021 73 Q 45 evidence session of 20 May 2021 74 Q 46 evidence session of 20 May 2021 Local auditor reporting on local government in England 17 demands of the audits had increased