The responsibilities for the framework within which local
authority audits are conducted is the Local Audit and
Accountability Act 2014. It gave effect to commitments to
abolish the Audit Commission and its centralised performance
and inspection regimes and put in place a new localised audit
regime, refocussing local accountability on improved
transparency.
Now the Act has been fully implemented, the Government is
required to review its effectiveness. The Government wants to
use this opportunity to step back and review the effectiveness
of the local authority financial reporting and audit regime.
Developments in the sector have led to a perceived widening of
the ‘expectation gap’; that is, the difference between what
users expect from an audit and the reality of what an audit is
and what auditors’ responsibilities entail.
This is why I am today announcing a Government commissioned
independent review to assess the effectiveness of the local
authority audit framework and of the transparency of local
authority financial reporting. I have asked Sir Tony Redmond, a
former Local Government Ombudsman, former Local Government
Boundary Commissioner for England and former President of the
Chartered Institute of Public Finance and Accountancy to chair
this review.
This new review will examine the existing purpose, scope and
quality of statutory audits of local authorities in England and
the supporting regulatory framework to in order to determine:
- Whether the audit and related regulatory framework for
local authorities in England is operating in line with the
policy intent set out in the Act and the related impact
assessment;
- Whether the reforms have improved the effectiveness of the
control and governance framework along with the transparency of
financial information presented by councils;
- Whether the current statutory framework for local authority
financial reporting supports the transparent disclosure of
financial performance and enables users of the accounts to hold
local authorities to account; and
- Appropriate recommendations on how far the process,
products and framework may need to improve and evolve to meet
the needs of local residents and local taxpayers, and the wider
public interest.
