Concerns over audit quality have been raised after an 18% saving was revealed in the cost local government will pay for audit services.
Public Sector Audit Appointments (PSAA), the body in charge of appointing auditors, this week announced the winners of six lots to provide audit services to the 484 eligible local bodies in 2018/19.
It said that aggregate savings are expected to exceed £6m a year over the current fees being paid.
Steve Freer, chairman of PSAA, said: “At the outset our objectives included maintaining high standards of audit quality and attracting very competitive prices. We are extremely pleased by the outcomes on both criteria.”
However, Stephen Sheen, managing director at Icabod’s Industries, said that the fee savings are only good news for those whose only interest in audit is related to cost.
He said: “Concerns had already been expressed after earlier contract rounds that fees had been reduced below those for which a standards-compliant audit could be performed, so serious questions need to be asked about assurances that the 18% fall in fees will not be secured by an 18% fall in audit quality.”
The PSAA said that the process had encouraged firms to think creatively about opportunities to achieve social benefits, leading to 400 new finance apprenticeships within the appointed firms.
But Sheen warned that using inexperienced staff could lead to problems.
He said: “The suggestion is intriguing but will they deliver the experience and expertise that local government audits demand, particularly at a time when authorities are being pushed into increasingly risky areas to balance their budgets?
“The two month contraction of the audit timetable programmed for 2017/18 is already going to reduce the senior audit resources available to oversee audits.”
The firms awarded lots (which have been divided by value rather than geographic area) are: Grant Thornton, EY, Mazars, BDO, Deloitte, plus a consortium of Moore Stephens and Scott-Moncrieff.
Big Four accountant KPMG completely missed out on any awards, despite bidding.
A KPMG spokesman told Room151: “The PSAA has advised us of the outcome of its audit tender process and while we are pleased to have scored highly on the quality aspects of the procurement process, we are disappointed not to have won any of the available lots.
“We will use this as an opportunity to cement the strong relationships we already have within local government and to develop our other assurance offerings as well as our tax and consulting offerings.
“We will continue as auditors through the 2017/18 year ends and we are committed to supporting the local government bodies in question through the subsequent transition period.”
Sheen said that KPMG’s failure was another sign that “insufficient consideration of quality and stability over price is being given in tender assessment.
“There must be a worry that there is no incentive for firms to invest in local government audit for any other purpose than to minimise cost.”
