Councillors are to be given a greater say in shaping the new Comprehensive Area Assessments.
The LGA had expressed concerns the new inspection regime failed to recognise the value of peer reviews in helping councils improve their organisation and services.
Now the Audit Commission has agreed its inspectors will involve councillors more fully in the process.
Cllr David Parsons, chairman of the LGA improvement board said: ‘The change will give inspectors a better understanding of what's happening in local areas, and lead to much fuller and more comprehensive assessments.'
An Audit Commission spokesperson acknowledged: ‘We have been working with the LGA on the best ways to ensure that the experience and perspective of elected councillors can be brought to bear on our assessments.'
The LGA says CAA must be clearly focused, cut the burden on councils, involve peer reviews, and rely on more than just statistics.