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.
We set scales on a 'fee for audit' approach, ie 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 the power to determine the fee above or below the scale fee where it considers that substantially more or less work was required than envisaged by the scale fee. The scale fees are based on the expectation that audited bodies are able to provide the auditor with complete and materially accurate financial statements, with supporting working papers, within agreed timeframes.
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 a variation to the scale fee with the audited body.
The 2011/12 scale fees are based on the fee for 2010/11. So they already reflect the auditor’s assessment of audit risk and complexity. Therefore, we expect variations from the scale fee to occur only where these factors are significantly different from those identified and reflected in the 2010/11 fee.
The Commission will get final fee information from appointed auditors, and explanations for any proposed variations from the scale fee, after they have completed the 2011/12 audit. The Commission will consider the reasonableness of the explanations provided by auditors before determining the fee.
The Commission will charge fees for considering objections, from the point at which auditors accept an objection as valid, or any special investigations, such as those arising from disclosures under the Public Interest Disclosure Act 1998, as a variation to the scale fee.
Up to 2010/11, the Commission determined that the scales of audit fees for individual bodies would 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 would not normally expect to vary the scale fee by more than 20 per cent upwards and 10 per cent downwards. 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.