Local Audit (Appointing Person) Regulations 2015

Debate between Baroness Williams of Trafford and Lord Palmer of Childs Hill

Tuesday 27th January 2015 Grand Committee

[Lord Palmer of Childs Hill]

I was for 28 years until last May, yes.

[Baroness Williams of Trafford]

I conducted a peer review on Barnet Council some time ago and I wondered whether that was indeed my noble friend.

[Lord Palmer of Childs Hill]

As an opposition councillor, I was chair of the audit committee for four years.

[Baroness Williams of Trafford]

Marvellous, so our paths have crossed. My noble friend asked about the draft guidance on the limited assurance review and whether it was understood by the accountancy profession. It is well understood by the audit and accountancy professions because it is already in use. It is about European standards and defined in the guide, so I hope I can give him comfort on that.

My noble friend also made a point about internal audit and about there not being enough detail in the guide. It may be helpful if I point out that these regulations and the guide are about external auditors and do not really focus on internal audit. However, that is not to say that we do not agree entirely that internal audit is extremely important.

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[Lord Palmer of Childs Hill]

The point is that a very small local authority would not have an auditor and would have to appoint someone if an action took place. If an auditor was in situ, I am sure that they would behave very responsibly—I have seen them do so—but my point concerns when you have to appoint one. I am sorry for interrupting my noble friend.

[Baroness Williams of Trafford]

I totally understand where my noble friend is coming from. If you are a small authority—for example, a parish council—and someone makes a vexatious claim against you, I am making the assumption, although I stand to be corrected if I am wrong, that the appointing body could do that for you. I understand that that is correct. Therefore, the body appointed by the Secretary of State could do that for you—it could take on the role that a larger authority would avail itself of. I hope that that helps my noble friend.

Both my noble friend Lord Palmer and the noble Lord, Lord Beecham, talked about the limited audit market. The Government’s view is that the repackaging of the audit contracts by a sector-led body could in fact open up the market. That is the hope. It may be helpful for noble Lords to know that we are working with the sector to encourage new entrants.

The noble Lord, Lord Beecham, talked about the turnover of auditors. The NAO will have a key role in complaints, similar to that of the current Audit Commission. I am happy to share with him the letter from Kris Hopkins MP and Andy Sawford MP on this very point if that would be helpful.

The noble Lord, Lord McKenzie, asked about the number of staff to be transferred and the cost of the transfer. If it is okay with him, I will write to him about that. He also talked about the specification and who the Government will appoint as the specified persons. Much will depend on what is put forward by the sector, but it is open to the sector to bring forward specialised bodies. In terms of extending the current contracts, as the noble Lord pointed out, we will run them until 2017. We can extend them to 2020, and we will make that decision in the summer of 2015.

The noble Lord also asked about the independence of the auditor from the appointing person. That is a very good point. The auditors’ own codes and proper practices remain in place under the new regime.

The noble Lord also mentioned the concerns raised by the Audit Commission, which we do not agree with because we are of the view that the new system is cheaper. It is true that smaller authorities may pay more due to no longer being cross-subsidised by larger authorities, as is currently the case, but I assume that, in pooling arrangements, they will try to make those processes more efficient.

In terms of the limited assurance engagement, the limited assurance order is already under way. This will not change. Officials understand that firms are eager to engage with limited assurance contracts and will be meeting them on 2 February.

The noble Lord, Lord McKenzie, mentioned that the arrangements are very complex to maintain for smaller authorities. Smaller authorities will all have to self-certify income, and this information will be held on a spreadsheet just as the Audit Commission holds it, so it is not as complicated as it may first seem. The new regime for smaller authorities is proportionate to their size and the amount of public money that they handle.

I hope I have covered most points. If I have not, I shall write to noble Lords. On that note, I commend the order to the Committee.