Effective relationship management
- Effective relationship management is a key component of audit quality. Satisfaction surveys are the most effective way of obtaining this information from a larger number of clients.
- We commissioned for a fourth year the LGA’s Research & Information team to administer the survey to provide assurance about independence and confidentiality. We sought the views of both CFOs and Audit Committee Chairs, recognising the importance of the auditor’s relationships with both management and ‘Those Charged with Governance’. We are mindful of the volume of data returns that bodies are required to complete, and so used a short list of survey questions consistent with that of previous years. We surveyed all our bodies and received responses from 142 (30%) Audit Committee Chairs and 220 (47%) Finance Directors. We reported the survey results in August 2023, and a full copy can be found on our website: 2023 PSAA Client Survey Report.
Survey Results
- The survey results again reflected the current crisis in local audit delivery with only 12% of 2021/22 audits completed by the 30 November 2022 publishing date contributing significantly to the backlog at that time.
- Many adverse effects flow from delayed audit opinions and these were highlighted by respondents. With the passing time they become less relevant and the value they provide to stakeholders becomes limited. They also raise uncertainties about an organisation’s financial position and weaken governance and accountability processes. Taxpayers are not given assurance about financial stewardship. Respondents also highlighted the additional workload that delayed audits placed on stretched finance teams. It is clear from correspondence and the information received from our client survey that timeliness is considered by our clients as a key element of receiving a good quality audit service.
- As in previous years respondents also expressed their concerns about the factors leading to delays in audit opinions: the shortage of experienced auditor resources; the extent of the audit work now required on property and pension valuations; the levels of additional review and scrutiny that audit firms are building into their process in response to regulatory challenge; and the format and complexity of the accounts produced under the current CIPFA/LASAAC code. The delays intrinsically create their own problems; respondents noted the adverse impact of changes to audit team membership as well as the difficulties of an extended post-balance sheet period.
- Unsurprisingly our broad question of whether the audit service provided had ‘met expectations’ continued to be unsatisfactory. However, Audit Committee Chairs are comparatively more satisfied than Finance Directors.
Table 7: Survey results – extent to which audit service met expectations
| Year | 2021/22 | 2020/21 | 2019/20 |
|---|---|---|---|
| Finance Directors | 58% | 57% | 73% |
| Audit Committee Chairs | 72% | 75% | 84% |
Source: LGA Survey for PSAA: “To what extent did the audit service provided to your organisation meet your expectations as set out in the auditor’s audit planning documentation?”
- We asked for views on the usefulness of the VFM arrangements commentary which was introduced in the NAO Code of Audit Practice for audits from 2020/21 onwards. Our survey found that 71% (2020/21 – 85%) of Audit Committee Chairs and 45% (2020/21 – 60%) of Finance Directors reported that they found the commentary useful. This perhaps reflects the falling value of delayed reporting. We note that the 2020 Code of Audit Practice requires auditors to report significant weaknesses in arrangements promptly once identified, even where the audit is not completed. Several respondents highlighted how the audit could add value by sharing good practice.
- We were pleased to note that the survey also captured points raised highlighting the value of audit; comments included ‘the auditors have provided valuable work to the Council and the Audit Committee. Access to the audit team and partners is excellent, I hold confidential pre-Committee meetings for Committee members which the Audit partner attends and makes a valuable contribution’.
- PSAA has continued to raise the concerns expressed in the survey with key stakeholders to inform the decisions made on the future of the local audit regime. Where comments are not anonymised we have shared detailed comments with individual audit firms so that they can address the issues raised.