The Audit Commission Act 1998 requires the Commission to prescribe scales of fees in respect of the audit of accounts which are to be audited in accordance with the Act. Before prescribing any scale of fees it has a statutory duty to consult with associations of local authorities and organisations connected with the NHS and the accountancy profession. We provide other stakeholders and audited bodies with copies of our proposals to ensure that our consultation is genuine and as productive as possible.
The Commission sets scales on a 'fee for audit' approach, i.e. one that is outcome-focused rather than based on input costs. The scales allow auditors to agree an audit fee with each audited body on the basis of delivering an agreed range of audit outputs to an agreed timetable.
The Commission has determined that the scales of audit fees for individual bodies will comprise:
- a fixed element, for different types of audited bodies, for example county councils, police authorities or primary care trusts
- an element related to gross expenditure of the audited body
- a regional premium for audits in London and the South East
The Commission has the power to determine the fee above or below the scale fee where it considers that substantially more or less work is required than envisaged by the scale fee. The Commission may therefore charge a fee which is larger or smaller than the scale fee to reflect the actual work that needs to be carried out to meet the auditor's statutory responsibilities, on the basis of the auditor's assessment of risk and the scale and complexity of the audit of a particular body. The Commission normally expects to vary the scale fee by no more than 30 per cent (upwards or downwards). This fee then becomes payable.
It is a matter for the auditor to decide the work necessary to complete the audit and, subject to approval by the Commission, to seek to agree variation to the scale fee with the audited body. The Commission will normally approve a proposed variation to the scale fee where that is agreed by the auditor and the audited body.
Fees for the auditor's consideration of objections (from the point at which they have been accepted as valid by the auditor) or special investigations, such as those arising from disclosures under the Public Interest Disclosure Act 1998, will be charged in addition to any variation to the scale fee for risk and complexity.
The Commission has also set a schedule of hourly rates for different levels of staff, for work relating to the certification of grant claims and returns.
Work programme and scales of fees
Separate fee scales are specified for small bodies reflecting the limited assurance audit regime which was introduced specifically to minimise the costs of audit for these bodies. These fees were set for 2006-2011, but have now been extended to include 2011/12.
Publication of audit fees
We have developed the audit fees comparator tool to assist audited bodies to compare their audit fees against similar bodies. The tool is intended to make the Commission's regime more transparent to audited bodies and other stakeholders.
The audit fees associated with fire and rescue services are included in those for county councils where relevant.
The fees do not include any inspection work, the certification of claims and returns and dealing with objections from local electors.
Audited bodies should, in the first instance, refer any queries regarding the published audit fee information to their appointed auditor.