Title

Public Sector Audit Appointments (PSAA) chair Bill Butler delivered a stark warning to MPs in June about the state of local government auditing.While a clearing of backlogs has taken the audit system out of ‘intensive care' it is still in ‘high dependency', said Butler, who also chairs the Local Audit Office (LAO) that is being created to drive improvement. Further weight to his bleak description emerged last week in PSAA's latest council finance leaders survey. While the survey showed some areas of improvement, with more audits being completed and better satisfaction levels overall in the quality of reports, problems remain. The survey found timeliness was improving but is still an issue. More than one in five finance directors said their audit was not completed by a target or revised date, although this is lower than the more than one in four who reported such issues last year. More than half of audit committee chairs warn that resourcing and capacity issues within their finance team is a key reason for this lack of timeliness. PSAA said this was a ‘significant increase' on the one in three reporting such capacity concerns the previous year.Among chairs and finance directors more than half are warning of resourcing issues on the part of their audit firm, with EY's performance a particular concern.Among those using EY, fewer than three in 10 council finance directors said changes to fees were explained in good time. The proportion was between eight and nine in 10 for other firms. Also, just under two-thirds of finance directors said EY had finished their audit by the target or revised date, the lowest proportion of any firm. In comparison almost nine in 10 using Grant Thornton and KPMG, and all those using Azets and Bishop Fleming, praised their timeliness.In addition, EY was ranked the lowest for the usefulness of its auditor's annual report and value for money commentary. An EY spokesperson said the firm was taking this feedback ‘seriously', adding that ‘delivering high-quality audits that serve the public interest is our priority'. PSAA chief executive Tony Crawley said the audit monitoring body has discussed the outcome of the survey with each firm, with an expectation they ‘address the concerns raised in the responses'. However, he added that PSAA had ‘limited leverage over firms' performance, including having no role in assessing audit scope, quality or reporting. Crawley suggested this underlined the case for reform and the greater clout the LAO could have to improve performance and the auditing system. ‘In our view, the creation of the LAO with its holistic remit for local audit is critical to making the changes that are needed, albeit accepting that it needs time to deliver,' said Crawley, who added there was ‘no quick fix to the local audit crisis'.Another improvement Crawley hopes reform will deliver is the development of accounting and audit products that are ‘more useful and therefore better value for money'. The LAO is due to be formed this autumn and be fully established by April. While responses in PSAA's survey backed this reform, council finance leaders also highlighted concerns.Almost three in 10 finance directors and audit committee chairs wanted more information about the reforms and one in five were concerned about the red tape and costs involved. The time taken to implement change was another issue, raised by more than one in four chairs and more than one in 10 finance directors. ‘The changes will not be as effective without sufficient skills and capacity in the audit market,' said one respondent.Another said: ‘Councils need more time and more flexibility… employing more internal auditors is not only difficult but is expensive for councils on tighter… budgets.'Director of public financial management at the Chartered Institute of Public Finance and Acountancy Iain Murray remains concerned about the high number of disclaimer opinions, which he says points to an absence of assurance.As an example, disclaimed audit opinions for 2023-24 and 2024-25 were highlighted last month by EY in its interim value for money report into Tower Hamlets LBC's ‘deteriorating financial position' as the council tackles a £19m overspend this year.Crawley shares Murray's concerns, adding: ‘There are more than 200 local government bodies that have a disclaimer of their audit opinion for 2024-25, and building back the missing assurance on this scale is an unprecedented position for all parties.' Ensuring local government auditing emerges from ‘high dependency' to even a regular ward may be some way off.

Title

POLICY AND POLITICS

Survey reveals audit still struggling

By Joe Lepper | 05 October 2026

Popular articles by Joe Lepper

SUBSCRIBE TO CONTINUE READING

Popular articles by Joe Lepper