Eleventh Report - Local auditor reporting on local government in England

Select Committee

Public Accounts Committee HC 171 14 July 2021

Report Status Government responded

Conclusions & Recommendations 34 items (5 recs)

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Government Response (AI assessment · 33 of 34 classified)

Accepted 21

Accepted in Part 1

Acknowledged 6

Not Addressed 5

Government response

Treasury minutes: Government response to the Committee of Public Accounts on the Eleventh report from Session 2021-22 · published 28 Oct 2021

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Recommendations & Conclusions

6 results

1 Conclusion Not Addressed

On the basis of a report by the Comptroller and Auditor General,1 we took evidence...

Conclusion

On the basis of a report by the Comptroller and Auditor General,1 we took evidence from the Ministry of Housing, Communities & Local Government (the Department); Public Sector Audit Appointments Ltd (PSAA); audit firms EY and Grant Thornton; and from … Read more

Government Response Summary

The government acknowledges the Committee's report and provides context for its response.

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7 Conclusion Not Addressed

We asked the Department to explain the causes of delays to audit firms’ audits of...

Conclusion

We asked the Department to explain the causes of delays to audit firms’ audits of local authorities, given these had begun before the impact of COVID-19. The Department indicated that there was no single cause for the delays in completing … Read more

Government Response Summary

The government's response is boilerplate text referring to unrelated rail reports and does not address the conclusion regarding the causes of delays in local authority audits.

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11 Conclusion

The Department said it considered itself to be the steward of the system for auditing...

Conclusion

The Department said it considered itself to be the steward of the system for auditing local authorities and acknowledged that it was important to maintain the quality of audits of local authorities.24 Audit firm EY told us that it safeguarded … Read more

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14 Conclusion Not Addressed

The audit firms EY and Grant Thornton told us that some local authorities had increasingly...

Conclusion

The audit firms EY and Grant Thornton told us that some local authorities had increasingly complex financial arrangements, for example in their borrowings, investments and financial instruments.34 EY explained that the more investment properties a local authority held, the more … Read more

Government Response Summary

The government responded by outlining plans to simplify accounts and reduce requirements for less risky areas, but did not directly address the committee's observation about increasingly complex financial arrangements or the FRC's challenge to auditors on audit quality in these areas.

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24 Conclusion Not Addressed

PSAA is the organisation responsible for appointing audit firms to audit those local authorities which...

Conclusion

PSAA is the organisation responsible for appointing audit firms to audit those local authorities which have opted into its arrangements, for an initial five-year period to 31 53 Sir Tony Redmond, Independent Review into the Oversight of Local Audit and … Read more

Government Response Summary

The government generally agrees on the crucial importance of skilled auditors and the need to encourage more firms into the market. However, it does not address PSAA's specific efforts to make the market more attractive or its contingency plans for the next procurement round.

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26 Conclusion Not Addressed

For the next procurement round for audits of local authorities from 2023, PSAA is looking...

Conclusion

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 … Read more 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 Show less

Government Response Summary

The government generally agrees on the crucial importance of skilled auditors and the need to encourage more firms into the market. However, it does not specifically address PSAA's proposed measures to reduce barriers to entry for new audit firms.

HM Treasury

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