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Ministers publish plans for future of local audit

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By Lucy Phillips

30 March 2011

The government today published a consultation on its plans for local authority public audit following the abolition of the Audit Commission. 

It comes nearly eight months after Local Government Secretary Eric Pickles announced that the spending watchdog would be abolished from 2012.

Ministers are now consulting over a new audit regime that would allow all local public bodies with a turnover of more than £6.5m to appoint their own external auditor from an open market. 

Auditors would be regulated under a system akin to the audit of private companies, with an expanded role for current Companies Act audit regulator the Financial Reporting Council. The National Audit Office would set a code of audit practice.

Public bodies with a turnover below £6.5m would be audited in a more ‘proportionate’ way.  

Local government minister Grant Shapps said: ‘The Audit Commission has lost its way, becoming too focused on reporting to Whitehall and supporting the previous era of target-driven government.

‘The options we are developing for a future audit regime will shift power from Westminster to people, save taxpayers money, deliver high standards of auditing practice and maintain inspection and intervention arrangements for the most vulnerable.’

The consultationruns until June 30 and draft legislation will be published in the autumn.

Yesterday CIPFA chief executive Steve Freer said he expected audit fees to rise under the new regime. He was giving evidence to the Commons communities and government select committee.

Comments
Let us hope that Ministers have seen today's House of Lords report on the big accountancy firms, which found that:
1. The Big Four auditors' domination of the large firm audit market limits competition and choice;
2. The breakdown of dialogue between bank auditors and regulators made the financial crisis worse; and
3. Audit standards are slipping;

before introducing a similar approach to audit for local government

Rita Hale (30/03/2011 16:23:05)

Fees will rise under the new system and standards will fall. Is this the price taxpayers will have to pay for Eric Pickles' fit of peak?

Alfred La Vardera (30/03/2011 17:44:11)

I don't see why the choice has to be limited to one out of four, but even if it is, that's still better than the present 'pick any one from one'!

Mike Keene (30/03/2011 21:41:13)

The cheerleaders for the Audit Commission really are coming out in force aren't they. I think that many of the people who comment on these articles ought to get out into the real world and see what a work creation scheme has been created by the AC. I will be very surprised if well organised councils do not have lower fees than at present with no reduction in audit outcomes across local government.

Jim B (30/03/2011 22:54:40)

I believe there also ought to be some genuine consideration of where the best interests of public accountability lie, ie between public and private sectors. It has been very fashionable for a long time to defer to the merits of private sector providers in so many things but public sector accountability is highly important here; and that accountability may best (and most economically) come from some more regulated architecture - with at least some of the features of the one being abandoned.

Graham Miller (31/03/2011 10:12:32)

Hope the Big Four will remember when making recommendations that they are supposed to act independently and not in the interests of their consultancy wings.

Paul O'Brien (01/04/2011 15:53:05)

The issue may not be who does the audit but rather what is audited. For example, should it be that a Council permits different business processes and supporting ICT solutions to be implemented for different departments. Should Planning and Housing Maintenance (for example) be allowed the 'luxury' of unique processes when with a little change they could be common. On the same note should Social Services and Environment departments be permitted to implement separate HR processes and therefore 2 different IT systems. Anecdotal information suggests that within a County, individual councils may be running up to 20 different accounting solutions and practice and similar HR. Add to this all other internal practices and there is a lot to audit - or deem to be a waste of taxpayer resources.

David Goldberg (14/04/2011 14:24:41)