Compliance with Contractual requirements
- We monitor firms’ compliance with their contractual requirements by considering a range of performance indicators across expected local audit deliverables.
- During the year we have reported publicly on firms’ performance against areas of particular interest to opted-in bodies. This has included information on delivery of audit opinions and auditors’ use of powers to issue Public Interest Reports and make recommendations under Sch 7(2) of Local Audit and Accountability Act 2014 (LAAA 2014) (known as Statutory Recommendations).
Audit Opinions
- The 2024 Code of Audit Practice was laid before Parliament in September 2024. This gave effect to the backstop dates set in the Accounts and Audit (Amendment) Regulations 2024. It requires auditors to issue an opinion to enable audited bodies to publish audited financial statements by a statutory backstop date.
- The first backstop date set for completion for the audits of 2022/23 and earlier years was 13 December 2024. By this date it was hoped that all financial statement opinions would be given, and in cases where insufficient audit work had been completed a disclaimed (no assurance) opinion would be given. This type of opinion would necessarily be differentiated from those where a disclaimer audit opinion was issued following completion of the audit work.
- Prior to this legislation the publishing date for 2023/24 financial statements was 30 September 2024. Established practice in local government was that if auditors were unable to issue an opinion at the publishing date, then they would generally continue their audit until they judged they are able to do so.
- On 30 September 2024 the number of outstanding opinions for 2022/23 and earlier years was 518 affecting 284 local government bodies. Last year we reported that at the historical publishing date of 30 September 2023, only five (1%) of 2022/23 audit opinions had been given. The total number of outstanding audit opinions for 2022/23 and earlier years was 918.
- Table 1 below provides an overview of the completion of audits and the type of opinion given for the five financial years ended 31 March 2023. This period covers the first audit contracts under the appointing person arrangements of LAAA 2014. During the period a total of 1,935 non-backstopped opinions were provided. At the backstop date of 13 December 2024 the overall number of outstanding opinions remaining had reduced to 77.
Table 1: Audit delivery
Overview of audit delivery and outcomes for the five financial years ended 31 March 2023.
| Audit Opinion | 2018/19 | 2019/20 | 2020/21 | 2021/22 | 2022/23 | Total |
| Publishing Date*** | 31/07/19 | 30/11/20 | 30/09/21 | 30/11/22 | 30/09/23 | |
| Not yet delivered | 1 | 8 | 16 | 22 | 30 | 77* |
| Delivered by the original publishing date | 280 | 214 | 45 | 58 | 5 | 602 |
| Unmodified after the original publishing date | 199 | 240 | 370 | 274 | 210 | 1293 |
| Disclaimed (backstop) | 3 | 10 | 33 | 110 | 205 | 361 |
| Non-standard after the original publishing date | 4 | 6 | 10 | 3 | 17 | 40** |
| Total | 487 | 478 | 474 | 467 | 467 | 2373 |
Source: PSAA
*Five of the outstanding opinions are for two bodies that do not have an appointed auditor bodies not within the PSAA contract
**This covers modifications and additional disclosures in the auditor’s report (Definitions of audit opinions)
***13 December 2024 backstop date applies to the publication of audited accounts for Financial Years up to and including 2022/23
- A key part of the backstop legislation is to bring the outstanding audits up to 2022/23 to an end, but this was only possible with an unprecedented level of disclaimed audit opinions.
- There were 77 opinions that remained outstanding at the backstop date of 13 December 2024. The NAO Code of Audit Practice provides for an exemption from the backstop under certain circumstances such as the auditor is considering an objection that may have a material impact on their opinion on the financial statements. There are also several bodies which have not prepared financial statements for auditing or do not have an appointed auditor. By 31 January 2025 the total number of outstanding audits had reduced to 49 affecting 18 bodies. We provide monthly updates on audit delivery progress on our website.
Specific Powers and Duties of Auditors
- Auditors have specific powers and duties under the LAAA 2014. These include considering whether to issue Public Interest Reports and make recommendations under Sch 7(2) of that Act.
- The table below shows how auditors have used their specific powers in the period covered by this report. The last quarter has seen a small increase in the auditors making written recommendations under Sch 7(2) LAAA 2014. This is connected to the issuing of audit opinions on delayed accounts.
Table 2: Use of auditors’ specific powers
Use of statutory powers by date of issue.
| Year | Issued Public Interest Report under Sch 7 (1) | Made written recommendation under Sch 7 (2) |
|---|---|---|
| Year to 30 September 2022 | 2 | 6 |
| Year to 30 September 2023 | 2 | 8 |
| Year to 30 September 2024 | 1 | 7 |
| Period to 13 December 2024 | 0 | 4 |
Source: PSAA
Objections
- Local electors have the right to raise formal objections with the auditor about the financial statements and other matters, a unique feature of local government audits. There is an inspection period of 30 days linked to the publication of pre-audit accounts in which to raise objections. At 30 September 2024 there were 34 objections under investigation, compared to 40 at September 2023. Whilst auditors had resolved 34 objections within the last year a further 28 objections had been raised by objectors.
Table 3: Objections under investigation
Progress in resolving objections in the year to 30 September 2024.
| Audit Year | Objections under investigation 30 Sept 2023 | New objections raised by electors | Objections resolved | Objections under investigation 30 Sept 2024 |
|---|---|---|---|---|
| 2018/19 and prior years | 10 | 1 | 8 | 3 |
| 2019/20 | 5 | 0 | 0 | 5 |
| 2020/21 | 13 | 2 | 8 | 7 |
| 2021/22 | 8 | 6 | 6 | 8 |
| 2022/23 | 4 | 19 | 12 | 11 |
| Total | 40 | 28 | 34 | 34 |
Source: PSAA
Non-compliance with Terms of Appointment
- We have issued Terms of Appointment to our contracted firms which set out requirements that audit firms must comply with and cover matters of practice and procedure that are of a recurring nature.
- On two occasions in the year ended 31 March 2024 firms did not provide a copy of a statement of reasons issued to an elector in advance of issue as required.
Independence issues
- We have no matters to report in respect of the year ended 31 March 2024.
Non-audit services
- Firms are able to provide certain non-audit services to audited bodies subject to the requirements of the FRC’s Ethical Standard and the NAO’s Auditor Guidance Note 1. Where the fee for such services exceeds the higher of £18,000 or 20% of the scale fee then the firm must seek PSAA’s confirmation that undertaking such work will not compromise their independence as auditor. The requirement that local auditors provide a VFM arrangements commentary is relevant to making this judgement. We typically receive very few requests.
Table 4: Non-audit service requests
Number and value of non-audit service requests for the last three financial years.
| Financial Year | Number of requests approved for non-audit services | Total fee value of requests approved |
|---|---|---|
| 2020/21 | 0 | £0 |
| 2021/22 | 3 | £185,500 |
| 2022/23 | 1 | £56,500 |
Source: PSAA
Complaints
- Complaints can be an indicator of poor-quality audit services. Under our complaints policy PSAA can consider complaints that relate to maladministration by one of our supplier firms, but we cannot consider complaints about the professional judgements and decisions made by auditors, or the process followed in relation to elector rights as these are matters for the courts. We have arrangements with the relevant regulators for dealing with such complaints.
- Some bodies contacted us about the lack of timeliness in audit completion. We share their concerns. However, as we and others have reported previously, the reasons for delay at any individual body are most often for a combination of different reasons.
- Our policy is that complaints about auditors should, in the first instance, be dealt with under firms’ own processes, independently of PSAA. Therefore, as and when we receive a complaint that has not already been investigated by the relevant firm, we will pass to the firm’s contact partner to deal with in the first instance. In the year ended 31 March 2024 we partially upheld one complaint; this related to undue delay in responding to an objector’s correspondence.