Summary
This briefing sets out information on the expected impact on audit fees of the new requirements in the Code of Audit Practice 2020 and new or updated auditing and accounting standards for 2020/21 audits. PSAA is providing the information to support local discussions between opted-in bodies and auditors about fee variations for 2020/21 audits specifically.
PSAA sets fee scales based on the most accurate information available at the time of each annual fee consultation on audit requirements and the work needed to deliver them. Where sufficient information is not available, or it is not possible to establish with reasonable certainty the level of any additional fees needed where substantial extra work is required, these are assessed using the fee variations process.
Current local audit regulations (regulation 17.2) allow PSAA to approve fee variation requests only at individual bodies, for additional audit requirements that become apparent during the course of an audit. MHCLG has announced the intention, following a consultation, to amend the regulations to provide more flexibility. This would include the ability for PSAA to approve standardised fee variations to apply to all or groupings of bodies where it may be possible to determine additional fees for some new requirements nationally rather than for each opted-in body individually.
PSAA commissioned external independent technical research for setting standardised fee variations to assess the expected impact on audit work programmes from 2020/21 of a range of new and updated audit requirements.
The research has concluded that where changes are relevant and will require additional audit work, the impact during the initial implementation period will be variable depending on the local circumstances and arrangements of individual opted-in bodies. This means that at this stage it would not be equitable to set a fixed additional fee across all or most bodies for these particular changes even if the regulations allowed us to do so. Subsequently, however, as ongoing requirements clarify it may well be possible to propose national variations for different classes of body and, at the earliest opportunity, to adjust scale fees accordingly. We will therefore carry out further research at the appropriate stage and publish our findings.
However, it has been possible to estimate a range of minimum additional fees for some additional requirements. These minimum additional fee ranges are set out in this briefing, to provide a structure for local discussion at individual opted-in bodies about the amount of additional audit work and fees needed on the new requirements.
We have therefore set out in this document the information we think will be helpful to opted-in bodies and auditors on the factors and minimum additional fee ranges associated with specific new requirements for 2020/21 audits. This information is indicative and cannot be prescriptive because we cannot estimate the impact of local factors. The information is based on estimates, before the work has been undertaken for the first year, of the time needed to complete the additional work. The estimates reflect the minimum additional core audit work required, and do not include the impact of any specific local circumstances or audit risks of individual opted-in bodies.