Written evidence submitted by Mid Kent
Internal Audit
It is suggested that the following issues require
attention:-
1. A review and re-statement of the accounting
rules for Local Authorities. This issue is currently before the
Economic Affairs Committee of the House of Lords. A critical question
has arisen upon the appropriateness or otherwise of the IFRS,
which came via an EU Directive and was effectively meant for company
Group Accounts. Questions are raised as to whether it would be
relevant to return to GAPP. Whilst there are particular conflicts
between IFRS and Company law which do not apply to Local Authorities,
it should be noted: 1.That the IFRS standards have been mandatorily
applied to Local Authorities by the Audit Commission at an additional
cost. 2. If it is decided that the private sector should return
to GAPP, then there would be an anomaly in retaining IFRS for
the public sector.
2. The question essentially before the Committee
is the appointment of the external auditors. There would be a
contradiction with the rationale put forward by the Secretary
of State to alter the current arrangement of the internal auditors
being appointed within the Local Authority. The reasons are: 1.
there would be still be an inherent supervision cost 2.The internal
auditor is also concerned increasingly and correctly with the
review of RISK appraisal.
3. Hitherto, the choice or selection of the external
auditor by the Local Authority has been restricted. There has
been an upward spiral of auditing fees lead by the Big Four, which
has coalesced with the fees of the Audit Commission. To take an
example, the audit fees for a parish council are often disproportionate
to the work involved. While more work is clearly required for
a District Council concern must be expressed at the standard charges.
Again, there cannot be a need for the External Auditor to attend
every meeting of the Council Audit Committee.
4. In summary; there should not be a restriction
of market choice, no reduction in quality of firms with competence
in Local Authority accounting.
5. Lastly, it is noted that the NOA will report
to Parliament upon ".. the economy, efficiency and productivity
of these sectors." Yet the question arises how will this
become more focussed and taken forward between the different Authorities.
John Horne
Chairman, Audit Committee
MBC
12 November 2010
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