The National Audit Office has backed down on a proposal to allow the introduction of new reporting criteria for local authority audits during the lifetime of a new Code of Audit Practice being introduced in April.
The NAO this week published its response to its consultation on the text of the new code, which will contain three main criteria – financial sustainability, governance and improving economy, efficiency and effectiveness.
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However, it has removed wording which would have allowed it to extend the remit of auditors in the code, which will apply to all audits of public sector bodies.
In its response to the consultation, the NAO said: “This concerned some respondents, who thought this could lead to an extension of scope and an increase in costs.
“We will instead address any emerging issues relevant to the reporting criteria through the underlying statutory guidance.”
The NAO said that some respondents had suggested the code should include a new criterion covering partnership working.
However, it said that partnership working remains in the scope of the improving economy, efficiency and effectiveness arrangements, which it will clarify in supporting statutory guidance to accompany the code.
The public sector finance watchdog said that respondents largely supported the introduction of a “narrative-style” commentary against specified criteria, although some worried this could make comparisons between bodies and sectors more difficult.
However, the NAO said: “In our view, the inclusion of a requirement in the code to make recommendations where the auditor is not satisfied with the arrangements in place will allow for some comparison between bodies.”
Respondents also stressed that supporting statutory guidance should require this commentary to “provide effective and meaningful reporting on the adequacy of arrangements, and not simply describe the arrangements that the body has in place”, the NAO said.
It said that it had considered delaying the new code to wait for reviews including the .
However, it said that legal requirements mean the code must be in place by April 2020.
In July last year, the NAO said it would retain a principles-based approach to the code, saying that a more prescriptive code could limit auditors’ ability to make judgements in the light of local circumstances.
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