Impact of additional audit requirements on 2022/23 fees
For the changes in audit requirements where our research has indicated an additional audit fee is needed, and it is possible to provide an estimated fee level for this work, we have set out below for each key change in requirements the:
- estimated minimum additional fee range for local fee variations; and
- potential factors that could influence the size of individual fee variations.
VFM arrangements commentary (Code of Audit Practice 2020)
The requirements in the Code of Audit Practice 2020 in relation to an audited body’s arrangements to secure value for money have a substantial impact on the auditor’s work and require additional fees.
The approach to this work requires an annual commentary on arrangements to secure value for money, published as part of the auditor’s annual report. The commentary should enable the auditor to explain the work they have undertaken during the year, and to highlight any significant weaknesses they have identified and brought to the body’s attention, along with their recommendations for improvement.
The expected additional minimum core fees for this work for 2022/23 are the same as published in our previous information papers for the 2020/21 and 2021/22 audit years:
Minimum additional fees – new VFM arrangements requirements for 2022/23 audits1
| District council | County council | London borough council | Met council | Unitary | Police – PCC + CC combined | Fire | Other LG bodies |
|---|---|---|---|---|---|---|---|
| £6,000- £11,000 | £10,000- £19,000 | £10,000- £19,000 | £10,000- £19,000 | £10,000- £19,000 | £6,000- £11,000 | £5,000- £9,000 | Variable based on individual characteristics |
1 To be considered on an individual basis, but the general ranges may provide a useful reference
These fee ranges cover the basic core work needed for the VFM arrangements commentary and represent the lowest minimum additional fee that may be needed. They do not cover any additional work an auditor will need to undertake where individual risks or specific weaknesses are identified in relation to a body’s value for money arrangements, which need to be reviewed and reported.
Factors that may affect the level of additional fee required at an individual body are set out at Appendix 1.
Further discussion between an opted-in body and the appointed auditor should establish the additional fee required for each body at the audit planning stage.
The research included the review of the fee ranges and the fee variations approved by PSAA following the completion of most of 2020/21 audits and some 2021/22 audits. The outcome of the review concluded that a set fixed additional fee across all bodies for the requirement for a VFM arrangements commentary and ISA 540 could be consolidated on an equitable basis in the fee scale for 2023/24, removing the need for continuing local discussion of additional fees, unless there are specific local risks that mean additional work is needed beyond the core requirements. The Consultation on the 2023/24 audit fee scale sets out more information on the proposals for 2023/24 audits.
ISA (UK) 540 (Revised) – Auditing accounting estimates and related disclosures
The precise quantum of the impact of the requirements of the revised ISA 540 depends on the circumstances of each body. In the absence of elevated risks, the minimum fees below are considered appropriate:
Minimum additional fees – ISA 540
| Overall minimum additional fees | ||||||||
|---|---|---|---|---|---|---|---|---|
| The additional fees below depend on body type and individual circumstances and the fee variation required may be higher than the suggested minimum | ||||||||
| Approximate minimum additional fee by body type: |
| District council | County council | London borough council | Met council | Unitary | Police – PCC + CC combined | Fire | Pension fund | Other LG bodies |
| £2,500 | £3,800 | £4,400 | £4,400 | £4,400 | £2,500 | £1,900 | £600- £1,900 | Too variable to estimate |
The level of additional fee required is highly dependent on audited body activities and preparedness. Factors that may affect the level of additional fee are set out at Appendix 1.
Once the impact of local circumstances on ongoing additional fees is clear, we will consider consolidation of the additional fees into the fee scale.
Other new requirements
Our research has concluded that it is not appropriate to set an additional fee range for the new requirements set out below. The individual fees required need to be discussed locally between the opted-in body and the auditor for 2022/23 audits as part of the fee variations process and then approved by PSAA.
Requirements where is it not appropriate to set an additional fee range
| New/updated requirement | Explanation |
|---|---|
| ISA 220: Quality control of an audit of financial statements | Impact of additional work on the scale audit fee is likely to be low in most cases. |
| ISA 600: Specific considerations – audit of group financial statements | The impact is for entities preparing group accounts. In practice it is likely only to be substantial where there are significant components, and the audit of the significant components is undertaken by other auditors. |
| ISA 240: The auditor’s responsibilities relating to fraud in an audit of financial statements | It has not been possible at this stage for the research to propose minimum fee ranges because the impact is likely to be variable. We have provided information at Appendix 1 on the factors that might affect the level of additional fees required, to support any early local discussions in advance of the 2022/23 audits. |
| ISA 315 Identifying and assessing the risks of material misstatement | It has not been possible at this stage for the research to propose minimum fee ranges. We have provided information at Appendix 1 on the factors that might affect the level of additional fees required, to support local discussions. |