2021/22 fee scale
After careful consideration of the issues raised in the feedback to our consultation and the factors affecting auditors’ work, PSAA has set the scale fee for 2020/21 on the basis of the following elements:
- the 2020/21 scale fees as a baseline; plus
- relevant adjustments for ongoing additional audit work from 2018/19 approved fee variations built into the fee scale.
Additional requirements that are identified or quantified following publication of the fee scale, or are not ongoing requirements, will continue to be subject to the fee variations process.
Ongoing elements of 2019/20 fee variations (together with any further ongoing elements relating to 2018/19 variations which have still to be agreed), once determined, will be built into the next fee scale.
We recognise that this decision may disappoint some stakeholders, who would prefer PSAA to make ‘across the board’ increases in fees. However, we are clear that increases in fees must be based on evidence of the actual work required for any additional requirement.
In discussing the fee consequences of any factors, it is important that auditors and audited bodies consider both short- and longer-term implications. Some issues will have a one-off impact, affecting a single year and resulting in a fee variation proposal for a one-off adjustment. Others will have ongoing implications which may or may not be the same as the impact in the first year.
Fee variations process
The nature of audit is such that it may be necessary for an auditor to carry out more audit work than has previously been required or planned. PSAA has the power to vary the audit fee payable by an opted-in authority where it considers substantially more or less audit work was required than envisaged by the scale fee (which is set based on the most recent audit year for which complete fee information is available). Where it becomes clear that audit risk or complexity is significantly different from the level identified and reflected in the scale fee, the auditor may request a fee variation.
Variation requests must be made to PSAA by the auditor using a standard process. PSAA encourages discussions between the auditor and the body to take place as early as possible in the audit cycle, and ideally for the auditor to obtain agreement from the authority to the proposed variation before seeking approval from PSAA. However, irrespective of whether the proposed variation has or has not been agreed by the body concerned, PSAA will scrutinise every proposal and is responsible for the ultimate determination of every variation. The auditor cannot invoice an audited body until PSAA has approved the request.
PSAA regularly obtains updated fee information in relation to proposed variations from the scale fee from appointed auditors and considers the reasonableness of the explanations provided by auditors. For example, PSAA considers fee variations in relation to Code changes, regulatory changes and late or poor preparation of working papers are potentially valid (subject to individual circumstances and the body’s observations).
Fees are chargeable when auditors carry out work in line with their other responsibilities, such as considering information provided by third parties, objections or carrying out other investigations.
Statement of responsibilities
The statement of responsibilities of auditors and audited bodies sets out the expectations on which scale fees are based. The statement effectively represents the terms of engagement between appointed auditors and audited bodies and summarises their respective responsibilities.
Scale fees are based on the expectation that audited bodies can provide the auditor with complete and materially accurate financial statements and supporting working papers within agreed timeframes. Where an authority is unable to fulfil these requirements, local fee variations may be required.
The statement of responsibilities also applies to auditors. Additional audit costs that arise due to auditors not meeting expectations, for example where members of the audit team are inadequately prepared or where changes in audit teams lead to repeated questions, are ineligible for a fee variation.
The same expectations will apply to the expected work covered by national fee variations. If an audited body does not meet its responsibilities, creating a need for further additional audit work, an additional local fee variation could also apply, and auditors must also meet their responsibilities for the work that generates the additional fee.
Value added tax
Individual audit fees under the 2021/22 fee scale do not include value added tax (VAT), which will be charged at the prevailing rate, currently 20 per cent, on all work done.
Enquiries
If you have questions about this fee scale document, please send them to us by email to: workandfeesconsultation@psaa.co.uk.