Sixtieth Report - Timeliness of local auditor reporting

Select Committee
Public Accounts Committee HC 995 23 June 2023
Report Status Government responded
Conclusions & Recommendations 28 items (1 rec)
Source View on Parliament website
Government Response (AI assessment · 27 of 28 classified)
Accepted 13
Acknowledged 3
Deferred 11
Government response
Treasury minutes: Government response to the Committee of Public Accounts on the Sixtieth report from Session 2022-23 · published 24 Sep 2023
Read the government response ↗ Response on the tracker
Clear

Recommendations & Conclusions

11 results
5 Conclusion Deferred
Address the lack of incentives and sanctions for timely local auditor reporting by October 2023.
Conclusion
There are no consequences for local government bodies or local auditors failing to deliver audited accounts on time. Audit contracts cannot specify the delivery of opinions by a certain date. The FRC and the Department say that they want to … Read more
Government Response Summary
The government agrees but states that work on incentives and sanctions requires careful consideration and is a longer-term issue. It is prioritising clearing the audit backlog and commits only to exploring transparency and considering wider consequences once the backlog is resolved.
HM Treasury
View Details
7 Conclusion Deferred
Department confident in audit timeliness improvement despite auditor market exit concerns.
Conclusion
We asked the Department why it was confident that performance on audit timeliness would improve and what signs of improvement it would be looking for. The Department described its particular focus on valuation issues which it told us has been … Read more
Government Response Summary
The government agrees with the committee's observation on audit timeliness, updating that early work to deliver reforms and review complex accounting areas, including asset valuation, is underway. A further update will be provided after the summer once this work has progressed.
HM Treasury
View Details
12 Conclusion Deferred
Local audit delays caused by authorities, auditors, and regulatory pressures on complex valuations.
Conclusion
The Department described the local audit system to us as having no ‘single version of the truth’ for what is holding up individual audits, in some cases issues being with the authority preparing the accounts and in other cases the … Read more
Government Response Summary
The government agrees with the committee's observation and will provide its approach in October 2023. It will also explore how greater transparency around audit delays could influence behaviour and consider a wider system of consequences in the longer term after clearing the backlog.
HM Treasury
View Details
13 Conclusion 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 … Read more
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.
HM Treasury
View Details
14 Conclusion Deferred
Insufficient oversight and sanctions for local authorities missing draft account deadlines.
Conclusion
Compared to the level of scrutiny over the quality of their audits, local audit providers highlighted a contrasting lack of oversight or sanction over the quality and timeliness of 28 Qq 97–99 29 Q 40 30 TAR0011 31 Q 40, … Read more
Government Response Summary
The government agrees with the committee's observation and will write to the committee in October 2023 with its approach to addressing the lack of oversight. It commits to exploring how greater transparency around audit delays could influence behavior and will consider a wider system of consequences for the longer term, once the backlog of delayed audits is resolved.
HM Treasury
View Details
16 Conclusion Deferred
New local audit contracts significantly increase fees, improving financial viability for providers.
Conclusion
We recommended in 2021 that the Department ensured PSAA’s procurement exercise for the next round of audit contracts covering 2023–24 to 2027–28 financial years bring fees into line with the costs of work and be appropriately funded. The procurement completed … Read more
Government Response Summary
The government agrees with the committee's observation on audit fees and market viability, confirming that the FRC plans to progress the Local Audit Workforce Strategy and will provide a further update on determined actions before the end of 2023.
HM Treasury
View Details
17 Conclusion Deferred
Local audit market faces persistent capacity challenges despite recent procurement efforts.
Conclusion
When we asked PSAA about its confidence in the future of the market, it cautioned that the procurement had been very tough, having only secured 90% of the capacity PSAA needed in the initial round. PSAA described this outcome as … Read more
Government Response Summary
The government agrees with the committee's observation on market challenges, stating that the FRC plans to progress the Local Audit Workforce Strategy and will provide a further update before the end of 2023 detailing necessary actions across the local audit system.
HM Treasury
View Details
18 Conclusion Deferred
Critically low number of ageing key audit partners threatens local audit resilience.
Conclusion
There are less than 100 key audit partners registered to perform local audits.52 We asked PSAA whether it felt there were enough audit partners in the market. PSAA described the number of key audit partners on the register as ‘worryingly … Read more
Government Response Summary
The government agrees with the committee's observation. The Permanent Secretary has written to the Committee outlining the FRC's plans for a Local Audit Workforce Strategy and will provide a further update by the end of 2023 detailing the determined actions across the local audit system.
HM Treasury
View Details
19 Conclusion Deferred
New local audit qualification launch delayed, hindering efforts to boost auditor supply.
Conclusion
In 2021 we recommended the Department accelerate training to increase the supply of auditors quickly. The Department told us that it has worked with the Chartered Institute of Public Finance Accountancy (CIPFA) in developing a new qualification it now expects … Read more
Government Response Summary
The government agrees with the committee's observation on auditor supply, stating that the FRC plans to progress the Local Audit Workforce Strategy and will provide a further update before the end of 2023 detailing necessary actions to address the supply of auditors.
HM Treasury
View Details
20 Conclusion Deferred
New local audit qualification's attractiveness and efficacy for private sector auditors questioned.
Conclusion
We challenged the Department on whether the qualification would equip staff to make judgements that are quite different to those in private audits. The Department accepted that difficult judgements require experience and joint working with council leadership teams. We pressed … Read more
Government Response Summary
The government states it has agreed with the committee's observation. The Permanent Secretary has written to the committee about the FRC's plans to progress the Local Audit Workforce Strategy and will provide a further update by the end of 2023 setting out determined actions.
HM Treasury
View Details
26 Conclusion Deferred
Pursuit of optimal accounting standards obstructs understandable local audit and financial reporting.
Conclusion
We asked whether the desirable pursuit of the best possible accounting standards was preventing accounts being understandable. The FRC recognised the issue, yet despite the consensus it described around the need to reset the purpose of local audit and financial … Read more
Government Response Summary
The government agrees with the committee's observation, stating that early work to deliver reforms and review complex accounting areas, particularly asset valuation and pensions, is underway. A further update will be provided after the summer once this work has progressed.
HM Treasury
View Details