Effective relationship management
Effective relationship management is a key component of audit quality. Satisfaction surveys are the most effective way of obtaining this information.
We commissioned for a second year the LGA’s Research & Information team to administer the survey to provide assurance about independence and confidentiality. The views of both CFOs and Audit Committee Chairs were sought, recognising the importance of the auditor’s relationships with both Management and Those Charged With Governance. Given the pandemic and the current volume of data returns that bodies are required to complete, we used a shorter list of survey questions than for 2018/19. We surveyed all our bodies, and we received responses from 116 (24%) Audit Committee chairs and 198 (40%) Finance Directors. We reported the survey results in September 2021. A full copy can be found on our website. Whilst the response rate for finance director was consistent with the previous year, we were pleased that the number of audit committee chairs responding had increased from 75 to 116.
Survey Results
The survey results reflected the current challenges, and respondents expressed their concerns about the wider local audit regime. Responses highlighted the local impact of delayed audit opinions, the shortage of auditor resources, the level of scale fee variations, and the extent of the audit work now required on property and pension valuations.
Last year’s survey results found that audited bodies were concerned about the quality of auditor communications and the relevant skills, and so this year we asked specific survey questions about these areas as well as the impact of the pandemic. This year’s results show that there is still room for improvement. Only 40% of finance directors and 60% of audit committee chairs considered that they had received information on fee variations on a timely basis. However, the results were more positive in relation to the auditor providing an explanation of the cause of variations at 56% and 69% respectively.
Two-thirds (66%) of finance directors thought that communications during the audit were sufficiently frequent. The pandemic impacted on the audits in multiple ways, and around 80% of respondents thought they had had frequent communications on remote working and the increased audit procedures covering going concern, valuations and accounts disclosures. This fell to 60% for communications on the timeliness of audit work.
Last year 25% of finance directors reported that they did not think the audit team had the skills to deliver the audit. This year we asked for feedback by grade. Satisfaction with Key Audit Partners’ skills was highest at 82%, followed by managers at 77% and audit team members at 58%. The lowest rating of 40% satisfaction was for those outside the local team (auditors’ experts and firm technical team members).
We asked some relationship specific questions. Consistent with last year, 66% of finance directors felt their auditor could be approached as a sounding board when required.
However, only 20% of responses said that the audit committee had met privately with the auditors, a drop from 53% last year. This is concerning as these private sessions are widely acknowledged to contribute positively to an audit committee’s efficacy and specifically to the relationship between the auditor and the committee.
We also asked for views on how useful the audit had been in adding value and delivering improvements. A much higher level of Audit Committee chairs (72%) responded positively compared to finance directors (39%), one of the biggest differences across all of our questions.
We have shared the information with firms to assist in improving the quality of audit services.
The nature of the survey means that it is difficult to draw direct comparisons between firms but there is work to be done by all to achieve improvements. The systemic issues referred to by many will need to be addressed if clients’ concerns to receive a timely quality audit are to be addressed.