Key themes identified in consultation responses
Many consultation responses provided detailed additional comments for each question and on the consultation in more general terms. While there is clearly overall support for PSAA’s proposals, the comments suggest that stakeholders may have different views and concerns about aspects of the detail.
Opted-in bodies
In general terms opted-in bodies are supportive of the proposals to introduce national fee variations arrangements. They would like to see the approach applied to as wide a range of topics as possible and would like more information on how the arrangements will work in practice. There is a contrary view from a small number of bodies that national fee variations are not needed, and that local discussion about additional audit requirements works well for them.
Some consultation responses highlight an expectation that national variations will need to take account of the local circumstances of individual bodies, implying that local discussion about the applicability of any national changes will continue to be required.
All consultation responses confirm that local discussion about additional fees for local changes in audit risk should continue.
PSAA has commissioned a programme of research to assess the potential suitability for national determination of a series of forthcoming changes in audit requirements, such as the introduction of IFRS 16 on leases. Where it is possible to determine a national variation, that is a national fee that would be appropriate across all, or groupings of, relevant bodies, we will consult opted-in bodies and other stakeholders on our proposals. Where it is not possible to determine a national variation, we aim to provide information on appropriate fee ranges for groups of audited bodies and other factors that may need to be considered.
While there is overall support for an increase in the fee rates applicable to fee variations, there is a broad spectrum of views about the need for the increase. Some responses recognise that rates must be consistent with the work auditors need to undertake to discharge their responsibilities, and that securing the sustainability of the local audit market is very important in the longer term. Others are less supportive, questioning the basis of the proposal and reflecting on the challenging financial circumstances for local government bodies and the delays experienced in recent years in finalising audits.
Audit firms
Audit firms are also generally supportive of the consultation proposals, seeing them as logical and welcoming the aim of improving efficiency in the process of determining additional fees for additional work. They highlight their concerns about the time and effort currently involved in local discussions about additional fees and the time it takes for PSAA to challenge and, ultimately, determine local fee variation requests. Two firms suggest that where opted-in bodies and firms agree on additional fees, it should not be necessary to seek PSAA approval.
While they support the proposed increase in the fee rates for variations, the firms are unanimous that the proposed increase is not sufficient to address their concerns. Firms pointed out that additional work often relates to more complex or higher risk areas and can require input from specialists, which has an impact on fees.
Other stakeholders
The main group in this category of responses is the representative organisations for local government bodies. These consultation responses provide opposing views, from those which are supportive of PSAA’s proposals to those that are not. Responses on behalf of organisations representing district councils do not support the proposed introduction of national fee variations arrangements or the increase in fee rates for variations.
Key themes
The key themes raised in responses to the consultation are summarised in the table below.
Consultation themes
| Theme | Number* of organisations | %** |
| National fee variations | ||
| Separating out the two types of fee variations as proposed is logical. It should help to streamline the process, and provide clarity, consistency and improved efficiency | 26 | 29% |
| The fees for any national variations should take account of the local circumstances of individual bodies to ensure they are applied fairly | 20 | 22% |
| The process for determining national fee variations should be clear and transparent, should apply to the broadest range of issues as is possible, and should be mapped out in more detail | 17 | 19% |
| It is important to consult on any proposals before setting a fee for national variations | 15 | 17% |
| National variations should be identified as early as possible to provide clarity on additional fees, and preferably sufficiently early to enable them to be reflected in the scale fee | 8 | 9% |
| The current approach is not onerous, and could provide greater flexibility | 3 | 3% |
| Local variations | ||
| More guidance is needed to help bodies understand the process and to challenge local variations | 14 | 16% |
| PSAA must have a role to adjudicate where there is no agreement between auditor and body | 10 | 11% |
| There should be a more realistic timetable for the fee variations process | 6 | 7% |
| Where an auditor and body have agreed a local fee variation, PSAA should accept the agreed fee | 2 | 2% |
| Fee rate increase | ||
| An increase in fee rates should be accompanied by improvements in audit quality, timeliness and resourcing | 19 | 21% |
| A clearer justification is needed on the rationale for a 25% increase specifically and how it relates to any increase in costs | 14 | 16% |
| Fees should not increase – existing contracts should already allow a contingency for any additional work or fees needed | 11 | 12% |
| Fees are too low for the market to be sustainable | 7 | 8% |
| The increase in fee rates is not sufficient to cover the additional work and does not allow for use of specialists | 4 | 4% |
Source: PSAA analysis
*Respondents generally commented on more than one theme ** % of total responses
We have set out more information on the questions raised in the consultation in the Q&As in the Appendix to this consultation summary.