The new regulator, which will contain a standalone local audit unit, will bring all regulatory functions into one place, with the aim of providing a better coordinated, simplified local audit framework. The Audit, Reporting and Governance Authority (ARGA) will continue to act as regulator and carry out audit quality reviews, as the FRC does now.
It will now also provide annual reports on the state of local audit and take over responsibility for the updated Code of Local Audit Practice – the guidelines councils are required to follow. The government has confirmed that the Public Sector Audit Appointments (PSAA) will continue as the appointing body for local audit, in charge of procurement and contract management for local government auditors.
“Today marks an important milestone as we announce that ARGA will have strengthened powers over local government audit, ensuring local audit systems are resilient, councils are truly accountable and providing the certainty the sector needs”, said Minister for Regional Growth and Local Government, Luke Hall. “It is essential we have an effective and transparent local audit system that ensures value for money for the taxpayer.”
Redmond Review response
In the immediate term, MHCLG will set up and chair a Liaison Committee, which will comprise senior stakeholders across the sector that will oversee the governance of the new audit arrangements and ensure they are operating effectively. These measures finalise the government’s response to Sir Tony Redmond’s independent review into local audit, carried out last year.
The government has already announced £15m to support councils with additional costs in audit fees, and recently consulted on the distribution of this funding. They are also consulting on improving flexibility on audit fee setting and have extended the deadline for when councils must publish their audited accounts, from 31 July – 30 September for an initial two years to give firms more time to complete audits.
The government continues to work closely with stakeholders, including local bodies and audit firms, to refine proposals for implementing their commitments around system leadership, as well the range of other commitments they have made in response to the Redmond Review. They also intend to publish a further consultation on implementing the above proposals in the summer.
ICAEW welcomes, in particular, the recommendation for at least one independent member of council audit committees, strengthening the ability of elected representatives to hold their local authorities to account on behalf of residents and council taxpayers. This report has been keenly awaited by a range of stakeholders (as discussed in a previous article) given how important it is to the direction of local public audit and financial reporting in England.
Commenting on the announcement Alison Ring, Director for Public Sector at ICAEW, said: “I am pleased that the government has accepted the need for a system leader for local public audit in England through the establishment of a dedicated unit within the new Audit, Regulatory and Governance Authority, together with a commitment to implement the majority of the recommendations of the Redmond Review.”
Ring continued: “This is a positive step forward, but it is important that the Ministry of Housing, Communities and Local Government moves quickly to implement the other Redmond Review recommendations on ensuring the viability of the local audit market. We look forward to continuing our regulatory role supporting ARGA on local public audit matters.”
Join the Public Sector Community
For accountants and finance professionals working in and advising the public sector, this Community is the go-to for the key resources and guidance on the issues affecting practitioners like you. With a range of dynamic services, we provide valuable tools, resources and support tailored specifically to your sector.
Restoring trust in audit and corporate governance
‘Restoring trust in audit and corporate governance’ is the BEIS white paper that sets out proposals on strengthening the UK’s corporate governance framework and the way companies are audited. Read ICAEW’s views on the consultation, explore what restoring trust means, and share information on the reform agenda.
Trust in organisations
Questions around public trust in companies, trust in the profession, trust in charities, and trust in government arise time and again. In this Insights Special ICAEW unpacks the building blocks of trust, and how organisations build, maintain or rebuild trust.View
Virtually Live returned for another three-day event in June 2021. ICAEW hosted a series on live and on demand sessions providing insight and expertise on the key issues effecting finance professionals. All sessions are now available on demand.