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Local Audit and Accountability BillPage 60

(6) For paragraph 13 substitute—

Monitoring of audits

13 (1) The body must—

(a) have adequate arrangements for enabling the performance
5by its members of local audit functions, other than
functions in respect of major local audits, to be monitored
by means of inspections,

(b) in the case of members of the body who perform any local
audit functions in respect of major local audits—

(i) 10participate in arrangements within paragraph
23(1), and

(ii) have rules and practices designed to ensure that a
sanction determined under paragraph 23(1)(b) is to
be treated as if it were a sanction which the body
15had determined under arrangements for
enforcement within paragraph 12(1A), and

(c) have rules designed to ensure that members of the body
take reasonable steps to enable their performance of any
local audit functions to be monitored by means of
20inspections.

(2) Any monitoring of members of the body under the arrangements
within paragraph 23(1) is to be regarded (so far as their
performance of local audit functions in respect of major local
audits is concerned) as monitoring of compliance with the body’s
25rules for the purposes of paragraph 12(1) and (1A).

(3) The arrangements referred to in sub-paragraph (1)(a) must
include an inspection which is conducted in relation to each
person eligible for appointment as a local auditor at least once
every six years.

(4) 30The inspection must be conducted by persons who—

(a) have an appropriate professional education,

(b) have experience of—

(i) local audit work,

(ii) statutory audit work within the meaning of this
35Part of this Act as it has effect apart from its
application by virtue of Schedule 5 to the Local
Audit and Accountability Act 2013,

(iii) other audit work relating to any body whose
accounts form part of a group for which the
40Treasury prepares accounts under section 9(1) of
the Government Resources and Accounts Act 2000,
or

(iv) work equivalent to that within any of sub-
paragraphs (i) to (iii) on the audit of accounts under
45the law of an EEA State, or part of an EEA State,
other than the United Kingdom,

(c) have received adequate training in the conduct of
inspections concerning the audits of relevant authorities,
and

Local Audit and Accountability BillPage 61

(d) do not have any interests likely to conflict with the proper
conduct of the inspection.

(5) The inspection must review one or more local audits in which the
person to whom the inspection relates has participated.

(6) 5The inspection must include an assessment of—

(a) the person’s compliance with the body’s rules established
for the purposes of paragraphs 9 (professional integrity
and independence), 10 (technical standards) and 10A
(technical standards for group audits),

(b) 10the resources allocated by the person to local audit work,

(c) in the case of an inspection in relation to a firm, its internal
quality control system, and

(d) the remuneration received by the person in respect of local
audit work.

(7) 15An inspection conducted in relation to a firm may be treated as an
inspection of all individuals responsible for local audit work on
behalf of that firm, if the firm has a common quality assurance
policy with which each of those individuals is required to comply.

(8) The main conclusions of the inspection must be recorded in a
20report which is made available to—

(a) the person to whom the inspection relates, and

(b) the body.

(9) The body must, at least once every calendar year, give to the
Secretary of State a summary of the results of inspections
25conducted under this paragraph.

(10) For the purposes of this Schedule a local audit of the accounts of a
relevant authority is a “major local audit” if the authority is
specified in, or of a description specified in—

(a) regulations made for the purposes of this sub-paragraph
30by the Secretary of State, or

(b) a direction (which has not been revoked) given by the
Secretary of State to the body.

(11) Regulations under sub-paragraph (10)(a) may in particular specify
a description of relevant authority by reference to its income or
35expenditure.

(12) Regulations under sub-paragraph (10)(a) are subject to negative
resolution procedure.

(13) A direction may be given under sub-paragraph (10)(b) only if the
Secretary of State thinks that there is significant public interest in
40the authority, or in authorities of the description, specified in the
direction.

(14) In this Schedule “local audit function” means any function
performed as a local auditor.

(7) In paragraph 23 (arrangements for independent monitoring of audits of
45listed companies and other major bodies)—

Local Audit and Accountability BillPage 62

(a) in the heading, for “audits of listed companies and other major
bodies” substitute “major local audits”,

(b) for “statutory audit functions” in each place substitute “local audit
functions”,

(c) 5for “major audits” in each place substitute “major local audits”, and

(d) omit sub-paragraph (2).

(8) In paragraph 24 (arrangements for independent investigation for
disciplinary purposes of public interest cases)—

(a) in sub-paragraph (1)(a) omit “or third country audit functions”, and

(b) 10in sub-paragraph (2) omit the definitions of “statutory audit
function” and “third country audit function”.

(9) In paragraph 25(1) (supplementary: arrangements to operate independently
of body)—

(a) at the end of paragraph (c) insert “, or”, and

(b) 15omit paragraph (ca).

(10) In paragraph 26 (supplementary: funding of arrangements) omit “, 23A”.

(11) In paragraph 27 (supplementary: scope of arrangement) omit “, 23A”.

29 In Schedule 13 (supplementary provision with respect to delegation
order)—

(a) 20in paragraph 9 (legislative functions) omit “(or, in Scotland,
sufficient evidence)”, and

(b) in paragraph 10(6) (requirement for auditor of body established by
order to be eligible for appointment as statutory auditor), for “a
statutory auditor” substitute “a local auditor, or a statutory auditor
25in accordance with this Part of this Act as it has effect apart from its
application by virtue of Schedule 5 to the Local Audit and
Accountability Act 2013.”

Section 19

SCHEDULE 6 Codes of audit practice and guidance

30Duty to prepare code

1 (1) The Comptroller and Auditor General must prepare one or more codes of
audit practice prescribing the way in which local auditors are to carry out
their functions under this Act.

(2) Different codes may be prepared for different relevant authorities (but the
35Comptroller and Auditor General must ensure that each kind of relevant
authority is covered by a code).

(3) A code may contain different provision for different relevant authorities.

(4) A code must embody what the Comptroller and Auditor General considers
to be the best professional practice with respect to the standards, procedures
40and techniques to be adopted by local auditors.

(5) Before preparing a code, the Comptroller and Auditor General must
consult—

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(a) such associations or representatives of relevant authorities as the
Comptroller and Auditor General thinks appropriate,

(b) the recognised supervisory bodies,

(c) the persons appearing on the register of auditors kept under
5regulations under section 1239 of the Companies Act 2006 as it has
effect by virtue of Schedule 5,

(d) the Secretary of State,

(e) the Treasury,

(f) each body to whom the Secretary of State has delegated functions
10under section 1252 of the Companies Act 2006 as it has effect by
virtue of Schedule 5, and

(g) such other bodies or persons as the Comptroller and Auditor
General thinks appropriate.

Procedure for code

2 (1) 15After preparing a code of audit practice, the Comptroller and Auditor
General must—

(a) publish it in draft, and

(b) send it to a Minister of the Crown, who must lay it before Parliament.

(2) If, within the 40-day period, either House of Parliament resolves not to
20approve the code—

(a) it must not be published by the Comptroller and Auditor General,
and

(b) the Comptroller and Auditor General must prepare another code.

(3) If no such resolution is made within that period, the Comptroller and
25Auditor General must publish the code.

(4) This paragraph does not apply to a code of audit practice prepared to replace
an existing code of audit practice (but see paragraph 5).

Duty to keep code under review

3 The Comptroller and Auditor General must keep each code of audit practice
30under review.

Alteration of code

4 (1) The Comptroller and Auditor General may prepare alterations to a code of
audit practice.

(2) Paragraph 1(5) applies to alterations to a code as it applies to a code.

(3) 35After preparing alterations to a code, the Comptroller and Auditor General
must—

(a) publish the code as altered in draft, and

(b) send the code as altered to a Minister of the Crown, who must lay it
before Parliament.

(4) 40If, within the 40-day period, either House of Parliament resolves not to
approve the code as altered, it must not be published by the Comptroller and
Auditor General.

Local Audit and Accountability BillPage 64

(5) If no such resolution is made within that period, the Comptroller and
Auditor General must publish the code as altered.

(6) A code published under sub-paragraph (3)(a) or (5) must show the
alterations that are proposed to be made to it or (as the case may be) have
5been made to it in such manner as the Comptroller and Auditor General
thinks appropriate.

Replacement of code

5 (1) The Comptroller and Auditor General may prepare a code of audit practice
to replace a code published under paragraph 2(3) or sub-paragraph (7).

(2) 10The Comptroller and Auditor General must—

(a) use reasonable endeavours to ensure that a code is published under
sub-paragraph (7) to replace a code published under paragraph 2(3)
or that sub-paragraph (“the original code”) before the end of 5 years
beginning with the date on which the original code was so
15published, or

(b) if it does not prove possible to comply with paragraph (a), ensure
that a code of the kind referred to in that paragraph is published
under sub-paragraph (7) as soon as is reasonably practicable after the
end of the period referred in that paragraph.

(3) 20Sub-paragraphs (1) and (2) apply regardless of whether the original code has
been published with alterations under paragraph 4 in the meantime.

(4) A replacement code prepared to comply with sub-paragraph (2) need not
make different provision from that made by the original code.

(5) After preparing a replacement code, the Comptroller and Auditor General
25must—

(a) publish it in draft, and

(b) send it to a Minister of the Crown, who must lay it before Parliament.

(6) If, within the 40-day period, either House of Parliament resolves not to
approve the replacement code—

(a) 30the code must not be published by the Comptroller and Auditor
General, and

(b) if the period of 5 years beginning with the date on which the original
code was published under paragraph 2(3) or sub-paragraph (7) has
expired, the Comptroller and Auditor General must prepare another
35replacement code.

(7) If no such resolution is made within that period, the Comptroller and
Auditor General must publish the replacement code.

Publication of code

6 (1) A code of audit practice may be published in such manner as the
40Comptroller and Auditor General thinks fit.

(2) A code comes into force on the day on which it is published under paragraph
2(3) or 5(7) unless it specifies a different commencement date.

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(3) Alterations to a code come into force on the day on which the code as altered
is published under paragraph 4(5) unless it specifies a different
commencement date for those alterations.

(4) A code may—

(a) 5specify different commencement dates for different purposes;

(b) include transitional provisions and savings.

(5) A code may, in particular, provide that all or part of an existing code of audit
practice has effect until all or part of the new code comes into force.

Assistance from relevant authority

7 10A relevant authority must provide the Comptroller and Auditor General
with the information that the Comptroller and Auditor General reasonably
requires for the purposes of this Schedule.

Saving for codes of practice under Audit Commission Act 1998

8 (1) Despite the repeal of section 4 of the Audit Commission Act 1998 by this Act,
15a provision of a code of audit practice under that section continues in force
until it is replaced by a provision of a code of audit practice under this
Schedule.

(2) A provision of a code under that section is to be read subject to the
modifications necessary for it to have effect in relation to the functions of a
20local auditor under this Act.

(3) A code under that section—

(a) is not to be treated as a code of audit practice for the purposes of this
Schedule (other than this paragraph), but,

(b) is otherwise to be treated as a code of audit practice for the purposes
25of this Act.

Guidance

9 (1) The Comptroller and Auditor General may issue guidance as to the exercise
by local auditors of their functions under this Act.

(2) Guidance under this paragraph may, in particular, explain or supplement
30the provisions of a code of practice under this Schedule.

Application to auditors of NHS foundation trusts

10 (1) The duty imposed on the Comptroller and Auditor General by paragraph 1
includes a duty to prepare one or more codes of audit practice prescribing
the way in which auditors of accounts of NHS foundation trusts are to carry
35out their functions in relation to such accounts.

(2) This Schedule, apart from paragraph 1(2) and (3), paragraph 8 and this
paragraph, applies in relation to a code relating to auditors of accounts of
NHS foundation trusts as it applies in relation to a code relating to local
auditors, subject to the following sub-paragraphs.

(3) 40Paragraph 1(4) is to be read as if the reference to “local auditors” were a
reference to auditors of accounts of NHS foundation trusts.

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(4) Paragraph 1(5) applies as if—

(a) it required the Comptroller and Auditor General to consult Monitor
(as well as the other persons mentioned in that sub-paragraph), and

(b) paragraph (a) of that sub-paragraph required the Comptroller and
5Auditor General to consult such associations or representatives of
NHS foundation trusts as the Comptroller and Auditor General
thinks appropriate.

(5) Paragraph 7 is to be read as if the reference to “a relevant authority” were a
reference to an NHS foundation trust.

(6) 10Paragraph 9(1) is to be read as if the reference to “the exercise by local
auditors of their functions under this Act” were a reference to “the exercise
by auditors of accounts of NHS foundation trusts of their functions in
relation to such accounts”.

Meaning of “40-day period”

11 (1) 15In this Schedule “the 40-day period”, in relation to a code laid before
Parliament, means the period of 40 days beginning with—

(a) the day on which the code is laid, or

(b) if it is not laid before each House of Parliament on the same day, the
later of the 2 days on which it is laid.

(2) 20In calculating that period, no account is to be taken of any period during
which Parliament is dissolved or prorogued or during which both Houses
are adjourned for more than 4 days.

Section 24

SCHEDULE 7 Reports and recommendations

25Public interest reports

1 (1) A local auditor of the accounts of a relevant authority must consider
whether, in the public interest, the auditor should make a report on any
matter coming to the auditor’s notice during the audit and relating to the
authority or an entity connected with the authority, so it can be considered
30in accordance with this Schedule or brought to the public’s attention.

(2) A report under sub-paragraph (1) is referred to in this Act as a public interest
report.

(3) A public interest report may be made during or after the end of an audit.

(4) A local auditor must notify a relevant authority’s auditor panel (if it has one)
35as soon as is reasonably practicable after making a public interest report
relating to the authority or an entity connected with it.

(5) A local auditor may recover from a relevant authority—

(a) the reasonable costs of determining whether to make a public
interest report relating to the authority or an entity connected with it,
40and

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(b) the reasonable costs of making a public interest report relating to the
authority or an entity connected with it.

(6) Sub-paragraph (5)(a) applies regardless of whether the report is in fact
made.

5Written recommendations

2 (1) A local auditor of the accounts of a relevant authority may make a written
recommendation to the authority relating to the authority or an entity
connected with it, so that the recommendation can be considered under this
Schedule.

(2) 10A recommendation may be made during or at the end of an audit.

(3) A recommendation must be sent at the time it is made—

(a) to the Secretary of State,

(b) where the recommendation relates to an entity connected with the
relevant authority, to that entity and to any other relevant authority
15with which the entity is connected,

(c) where the relevant authority is itself a connected entity, to its related
authority or authorities,

(d) where the relevant authority is a clinical commissioning group, to
the National Health Service Commissioning Board, and

(e) 20where the relevant authority is—

(i) a functional body,

(ii) an entity connected with a functional body, or

(iii) the London Pensions Fund Authority,

to the Greater London Authority.

(4) 25A local auditor may recover from a relevant authority—

(a) the reasonable costs of determining whether to make a
recommendation relating to the authority or an entity connected
with it, and

(b) the reasonable costs of making a recommendation relating to the
30authority or an entity connected with it.

(5) Sub-paragraph (4)(a) applies regardless of whether the recommendation is
in fact made.

(6) In this Act “related authority”, in relation to a connected entity, means the
relevant authority with which the entity is connected.

35Supply of public interest reports

3 (1) If a local auditor makes a public interest report arising out of the audit of the
accounts of a relevant authority, the auditor must send the report to—

(a) the authority, and

(b) where the report relates to an entity connected with the authority, to
40that entity and to any other relevant authority with which the entity
is connected.

(2) The local auditor must also send the report—

(a) to the Secretary of State,

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(b) where the relevant authority is itself a connected entity, to its related
authority or authorities,

(c) where the relevant authority is a clinical commissioning group, to
the National Health Service Commissioning Board, and

(d) 5where the relevant authority is—

(i) a functional body,

(ii) an entity connected with a functional body, or

(iii) the London Pensions Fund Authority,

to the Greater London Authority.

(3) 10A report required to be sent under sub-paragraph (1) or (2) must be sent as
soon as is reasonably practicable after it is made.

(4) If a relevant authority to which a report is sent under this paragraph is a
health service body, it must take the report into consideration as soon as is
reasonably practicable after receiving it.

(5) 15If paragraph 5 applies to a relevant authority to which a report is sent under
this paragraph, it must, if required by that paragraph to do so, take the
report into consideration in accordance with that paragraph.

(6) If a relevant authority to which a report is sent under this paragraph is the
Greater London Authority, it must, if required by that paragraph to do so,
20take the report into consideration in accordance with paragraph 6.

Publicity for public interest reports

4 (1) This paragraph applies to a relevant authority if a local auditor has made a
public interest report relating to the authority or an entity connected with it.

(2) As soon as is practicable after receiving the report, the relevant authority
25must publish the report and a notice that—

(a) identifies the subject matter of the report, and

(b) unless the authority is a health service body, states that any member
of the public may inspect the report and make a copy of it or any part
of it between the times and at the place or places specified in the
30notice.

(3) As soon as is practicable after receiving the report, the relevant authority
must supply a copy of the report to—

(a) each of its members (if it has members), and

(b) its auditor panel (if it has one).

(4) 35Sub-paragraph (3)(a) does not apply in relation to a parish meeting.

(5) From the time when the report is received, the relevant authority, unless it
is a health service body, must ensure that any member of the public may—

(a) inspect the report at all reasonable times without payment,

(b) make a copy of it, or any part of it, and

(c) 40be supplied with a copy of it, or any part of it, on payment of a
reasonable sum.

(6) The local auditor may—

(a) notify any person the auditor thinks fit of the fact that the auditor has
made the report, and

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(b) supply a copy of it or any part of it to any person the auditor thinks
fit.

(7) A notice or report required to be published under this paragraph must be
published—

(a) 5if the authority has a website, on its website;

(b) otherwise, in accordance with sub-paragraph (8).

(8) A relevant authority publishes a notice or report in accordance with this sub-
paragraph if—

(a) in the case of an authority other than a health service body, it
10publishes the notice or report in such manner as it thinks is likely to
bring the notice or report to the attention of persons who live in its
area;

(b) in the case of a clinical commissioning group, it publishes the notice
or report in such manner as it thinks is likely to bring the notice or
15report to the attention of—

(i) persons who live in the area of the group, and

(ii) persons who do not live in the area of the group but for
whom the group is responsible;

(c) in the case of special trustees for a hospital, they publish the notice or
20report in such manner as they think is likely to bring the notice to the
attention of persons to whom services are provided at that hospital.

(9) Nothing in this paragraph affects the operation of paragraph 9.

Consideration of report or recommendation

5 (1) Subject to sub-paragraphs (2) and (4), this paragraph applies to a relevant
25authority if—

(a) a local auditor has made a public interest report relating to the
authority or an entity connected with it, or

(b) a local auditor has made a recommendation relating to the authority
or an entity connected with it.

(2) 30This paragraph does not apply to a relevant authority which is itself a
connected entity, subject to sub-paragraph (3).

(3) This paragraph applies to the Mayor’s Office for Policing and Crime where
a local auditor has made a report or recommendation relating to the
Commissioner of Police of the Metropolis regardless of whether the Office is
35a connected entity or was such an entity at the time to which the report or
recommendation relates.

(4) This paragraph does not apply to—

(a) the Greater London Authority (but see paragraph 6), and

(b) health service bodies.

(5) 40The relevant authority must consider the report or recommendation at a
meeting held before the end of the period of one month beginning with the
day on which it was sent to the authority.

(6) At that meeting the relevant authority must decide—

(a) whether the report requires the authority to take any action or
45whether the recommendation is to be accepted, and

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