Technical Enquiry Service- Frequently Asked Question

Transcription

1 Technical Enquiry Service- Frequently Asked Question As a CIPFA member, what audit rights do I have? The attached table sets out the qualification requirements for the person signing the audit of various bodies, or (where the audit is signed by the Comptroller and Auditor General or equivalent), the qualification requirements of the engagement lead / lead auditor. CIPFA members who do not meet the qualification requirements to sign the accounts (or be the engagement lead / lead auditor) may participate in the audit but must not sign the audit. DISCLAIMER The CIPFA Technical Enquiry Service offers members and registered students a service providing information, guidance and advice on professional issues. Please note that the guidance offered by the Technical Enquiry Service should not be taken as an authoritative interpretation of the law and should not be considered as constituting a definition of proper accounting practice. Answers offered are based solely on the information provided to the Service. All reasonable care is exercised in preparing responses to questions. However enquirers should always refer to the primary sources before relying on this advice and check any interpretation of published guidance with their own professional advisors.

2 Local (England) Local Authorities Local Pension Scheme Fire & Rescue Authorities Waste Authorities Internal Drainage Boards Currently covered by the Audit Commission Act Audits can be signed by firms registered under the Companies Act to do company audits, or by Audit Commission staff nominated by the Audit Commission. Light touch arrangements apply to smaller bodies such as parish and town councils. Where a private sector firm is used to deliver the audit, there are no specifications in the contracts regarding the lead auditor; each firm will have its own arrangements. The following extracts from section 3 of the Audit Commission Act 1998 are relevant: (5) A person shall not be appointed by the Commission as an auditor unless (a) he is a member of one or more of the bodies mentioned in subsection (7); (b) he has such other qualifications as may be approved for the purposes of this section by the Secretary of State; or (c) he was approved before 1st April 1996 by the Secretary of State under section 13(5) of the Local Finance Act 1982, and the approval has not been withdrawn. (6) A firm shall not be appointed by the Commission as an auditor unless each of its members is a member of one or more of the bodies mentioned in subsection (7). (7)The bodies referred to in subsections (5) and (6) are (a) the Institute of Chartered Accountants in England and Wales; (b) the Institute of Chartered Accountants of Scotland; (c) the Association of Certified Accountants; (d) the Chartered Institute of Public Finance and Accountancy; (e) the Institute of Chartered Accountants in Ireland; and (f) any other body of accountants established in the United Kingdom and for the time being approved by the Secretary of State for the purposes of this section. This would allow scope for CIPFA members to undertake local government audits, subject to the terms and conditions of any appointment as determined by the Audit Commission. In future, audits will be governed by the requirements of the Local Audit and Accountability Bill when this becomes legislation. Local Local Authorities Relevant extracts from the Public Audit Wales Act 2004

3 (Wales) Local (Scotland) Local Pension Scheme Fire & Rescue Authorities Local Authorities Local Pension Scheme 13 Audit of accounts of local government bodies in Wales (2) The Auditor General for Wales must appoint auditors to audit the accounts of local government bodies in Wales. 14 Appointment of auditors (1) This section applies in relation to the appointment of persons as auditors under section 13. (2) The Auditor General for Wales may appoint a person only if the person is eligible for appointment under this section. (3) But the Auditor General for Wales may not appoint himself. (4) A person is eligible for appointment under this section only if the person (a) is eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006, or (b) is a member of a body of accountants, established in the United Kingdom or another EEA State, which is for the time being approved by the Assembly for the purposes of this subsection. The WAO holds a letter from the National Assembly for Wales that approves CIPFA as a relevant body under Section 14(4)(b). Currently one Auditor is appointed as the auditor to all Welsh Local bodies. There are no formal requirements regarding the qualifications of engagement leads; however in practice they would be CCAB qualified accountants, irrespective of whether the audit work is undertaken by a firm or in-house by the WAO. Under Section 11(1) of the Public Audit Wales Bill, the AGW will be appointed as the auditor to Welsh local government entities. See Central for expected treatment of engagement leads. The Local (Scotland) Act 1973 section 97 (7), which relates to the appointment of external auditors to local authorities by the Accounts Commission states: A person shall not be appointed as auditor by the Commission under subsection (6) above unless

4 (a)he is eligible for appointment as a [statutory auditor under Part 42 of the Companies Act 2006] ; or (b) he is a member of a body of accountants established in the United Kingdom or another EEA State. This would allow scope for CIPFA members to undertake Scottish local government audits, subject to the terms and conditions of any appointment as determined by the Accounts Commission. Local (Northern Ireland) Police (England and Wales) Police (Scotland) Police (Northern Local Authorities Local Pension Scheme Police and Crime Commissioners Chief Constables Statutory powers are set out in the Local (Northern Ireland) Order Department of the Environment, with consent of the C&AG, designate staff of the NIAO as Local Auditors Once designated, Auditors carry out their statutory and other responsibilities, and exercise their professional judgment, independently of the Department and the C&AG. Private firms can be engaged to complete audits on behalf of the Local auditor and completed audits are given back to the Local Auditor for review and final opinion and sign-off. This would allow scope for CIPFA members to complete Northern Irish local government audits, subject to the terms and conditions of any appointment as determined by the Northern Ireland Audit Office. Classified as local authorities, so audit arrangements will be as for local government Classified as a relevant authority under the Local Audit and Accountability Act, so audit arrangements as for local government From 2013/14, as Central. Previously as Local. As Central

5 Ireland) Central (England) Central (Wales) Central (Scotland) Departments (including executive agencies) Non-Departmental Public Bodies All audits are signed by or on behalf of the Comptroller and Auditor General. Where a private sector firm is used to deliver the audit, there are no specifications in the contracts regarding the lead auditor; each firm will have its own arrangements. All audits are signed by or on behalf of the Auditor General for Wales. There are no formal requirements regarding the qualifications of engagement leads; however in practice they would be CCAB qualified accountants, irrespective of whether the audit work is undertaken by a firm or in-house by the WAO. The Public Finance and Accountability (Scotland) Act 2000 section 21 states in relation to the Scottish accounting framework: (3) The account is to be audited by (a) the Auditor General, or (b) a qualified person appearing to the Auditor General to be suitable for appointment to audit the account by reason of, among other things, the person s professional qualifications and experience. and (5) For the purposes of subsection (3)(b) a person is qualified if that person is (a) eligible for appointment as a statutory auditor under Chapter 2 of Part 42 of the Companies Act 2006, or (b) a member of a body of accountants established in the United Kingdom or another EEA State This would allow scope for CIPFA members to undertake Scottish central government audits, subject to the terms and conditions of any appointment as determined by the Auditor General for Scotland. Central All audits are signed by the Comptroller and Auditor General.

6 (Northern Ireland) Private firms can be engaged to complete audits on behalf of the C&AG and completed audits are given back to the C&AG for review and final opinion and sign-off. This would allow scope for CIPFA members to undertake Northern Irish central government audits, subject to the terms and conditions of any appointment as determined by the Northern Ireland Audit Office. State Owned Enterprises National Health Service (England) Primary Care Trusts Other Trusts (eg Mental Health Trusts, Ambulance Trusts) Follow appropriate audit arrangements depending on how these are constituted eg as a charity, as a company, or with specific requirements set out in legislation. CIPFA members would need to check the arrangements on a case by case basis. Currently covered by the Audit Commission Act Audits can be signed by firms registered under the Companies Act to do company audits, or by Audit Commission staff nominated by the Audit Commission. The following extracts from section 3 of the Audit Commission Act 1998 are relevant: (5) A person shall not be appointed by the Commission as an auditor unless (a) he is a member of one or more of the bodies mentioned in subsection (7); (b) he has such other qualifications as may be approved for the purposes of this section by the Secretary of State; or (c) he was approved before 1st April 1996 by the Secretary of State under section 13(5) of the Local Finance Act 1982, and the approval has not been withdrawn. (6) A firm shall not be appointed by the Commission as an auditor unless each of its members is a member of one or more of the bodies mentioned in subsection (7). (7)The bodies referred to in subsections (5) and (6) are (a) the Institute of Chartered Accountants in England and Wales; (b) the Institute of Chartered Accountants of Scotland; (c) the Association of Certified Accountants; (d) the Chartered Institute of Public Finance and Accountancy; (e) the Institute of Chartered Accountants in Ireland; and (f) any other body of accountants established in the United Kingdom and for the time being approved by the Secretary of State for the purposes of this section.

7 This would allow scope for CIPFA members to undertake NHS audits, subject to the terms and conditions of any appointment as determined by the Audit Commission. In future, audits will be governed by the requirements of the Local Audit Bill when this becomes legislation. Foundation Trusts The requirements are set out in Schedule 7 of the National Health Service Act Foundation Trusts may appoint as auditors firms registered under the Companies Act to do company audits, or an officer of the Audit Commission (with the agreement of the Commission). The following extracts from paragraph 23 of Schedule 7 of the National Health Service Act 2006 are relevant: 3) An officer of the Audit Commission may be the auditor if he is appointed by the board with the agreement of the Commission. (4) But a person may not be appointed as auditor unless he (or, in the case of a firm, each of its members) is a member of one or more of the following bodies (a) the bodies mentioned in section 3(7)(a) to (e) of the Audit Commission Act 1998 (c. 18), [see extract above] (b) any other body of accountants established in the United Kingdom and approved by the regulator for the purposes of this paragraph. The Audit Code for NHS Foundation Trusts, issued by Monitor, also requires that the auditor must have an established and demonstrable standing within the healthcare sector and be able to show a high level of experience and expertise. The work is of a specialised nature, and so general audit experience is not sufficient This would allow scope for CIPFA members to undertake Foundation Trust audits, subject to the terms and conditions of any appointment as determined by the Trust. Clinical Commissioning Groups Classified as a relevant authority under the Local Audit and Accountability Bill, so will be the same as for local authorities National All audits are signed by or on behalf of the Auditor General for Wales.

8 Health Service (Wales) National Health Service (Scotland) There are no formal requirements regarding the qualifications of engagement leads; however in practice they would be CCAB qualified accountants, irrespective of whether the audit work is undertaken by a firm or in-house by the WAO. The provisions in relation to Scottish central government are considered to apply i.e. the Public Finance and Accountability (Scotland) Act 2000 section 21 states in relation to the Scottish accounting framework: (3) The account is to be audited by (a) the Auditor General, or (b) a qualified person appearing to the Auditor General to be suitable for appointment to audit the account by reason of, among other things, the person s professional qualifications and experience. and (5) For the purposes of subsection (3)(b) a person is qualified if that person is (a) eligible for appointment as a statutory auditor under Chapter 2 of Part 42 of the Companies Act 2006, or (b) a member of a body of accountants established in the United Kingdom or another EEA State This would allow scope for CIPFA members to undertake Scottish NHS audits, subject to the terms and conditions of any appointment as determined by the Auditor General for Scotland. National Health Service (Northern Ireland) Higher Education As Central The qualifications required for external auditors of higher education corporations are set out in paragraph 18(5) of Schedule 7 of the Education Reform Act of 1988:

9 Institutions in England No person shall be qualified to be appointed auditor under that sub-paragraph except (a) an individual, or firm, eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006; (b) a member of the Chartered Institute of Public Finance and Accountancy; or (c) a firm each of the members of which is a member of that institute For other higher education institutions, the requirements are the same as under the Companies Acts 1. This will apply whether the institution is established as a company or a charity. Higher Education Institutions in Scotland Educational Endowments (Scotland) Higher Education Institutions in Northern Ireland The qualifications required for external auditors of higher education corporations are set out in paragraph 12(2) of the Universities (Scotland) Act 1966: No person shall be appointed as an auditor under this section unless he is eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006 The qualifications required for external auditors of higher education corporations are set out in section 111(3) of the Education (Scotland) Act 1980 The accounts of every endowment to which this section applies shall be audited each year by an auditor appointed by the governing body; and no person shall be appointed auditor as aforesaid unless he is eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006 It appears that they are the same as for England The qualifications required for external auditors of higher education corporations are set out in paragraph 18(5) of Schedule 7 of the Education Reform Act of For other HEIs, the requirements are the same as under the Companies Acts. Auditors should be registered with one of the appropriate professional bodies, and conform to that body s standards. (para 61 of the England HEFCE Model Financial Memorandum 2010/19) FE institutions The funding bodies have determined that the criteria for eligibility as financial statements 1 See eg HEFCE Audit Code of Practice:

10 in England including sixth form college FE Institutions (Wales) Higher Education Institutions in Wales auditor must be the same as set out in Part 42 of the Companies Act 2006: in essence, a firm or individual holding membership of a relevant supervisory body and allowed to carry out audits under the rules of that body. The Assembly has determined that the criteria for eligibility as external auditors of further education institutions should match those set in statute for higher education institutions (Schedule 7 of the Education Reform Act 1988). These are that the auditor must be: (a) an individual, or firm, eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006; a member of the Chartered Institute of Public Finance and Accountancy; or (c) a firm each of the members of which is a member of that institute. The criteria required for the eligibility of external auditors of higher education institutions are set out in Schedule 8 of the Further and Higher Education Act Institutions must ensure that their auditors are eligible for appointment as external auditors under the provisions of the Companies Act Auditors must be registered with one of the appropriate professional bodies, and conform to that body s standards. 2 FE (Scotland) The Auditor General is responsible under the Public Finance and Accountability (Scotland) Act 2000 for appointing external auditors to FE colleges. Part 2, para 21 on the audit of accounts states : (3) The account is to be audited by (a) the Auditor General, or (b) a qualified person appearing to the Auditor General to be suitable for appointment to audit the account by reason of, among other things, the person s professional qualifications and experience (5) For the purposes of (3)(b) a person is qualified if that person is: (a) Eligible for appointment as a company auditor under Chapter 2 of Part 42 of the Companies Act 2006 or 2 Revised Financial Memorandum and Audit Code of Practice 2008 (Higher Education Funding Council for Wales).

11 (b) A member of a body of accountants established in the UK or another EEA state. FE (NI) Para 2(1) of The Institutions of Further Education (Public Sector Audit) Order (NI) 2008 states The Comptroller and Auditor General shall audit the annual statement of accounts of the governing body of an institution of further education. Academies The Academies Financial Handbook 2013 issued by the DfE notes that academies must appoint statutory auditors who are registered under the requirements of the Companies Act.. Schools (England and Wales) Arrangements for schools to produce their own accounts may arise depending on progress with CIPFA/LASAAC s proposals regarding accounting for schools in local authorities financial statements. Charities (England and Wales) Detailed guidance is available on the Charity Commission web site. CIPFA members may act as Independent Examiners (including where the gross income exceeds 250,000) provided they have requisite ability and practical experience to carry out a competent examination of the accounts. For audits of charities (and company charities under the Companies Act), the auditor must be eligible for appointment as a statutory auditor under Part 42 of the Companies Act Charities (Scotland) Detailed guidance is available on the Office of the Scottish Charity Regulator web site. CIPFA members may act as Independent Examiners provided they have requisite ability and practical experience to carry out a competent examination of the accounts. For audits of charities (and company charities under the Companies Act), the auditor must be eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006.

12 Charities (Northern Ireland) At present, the Charity Commission for Northern Ireland does not require charities to submit annual returns or accounts. This is because registration of charities has not commenced. The Department for Social Development will make accounting regulations before registration commences which will give charities more detailed information as to the form and content of their accounts, and the type of accounting practices to be followed. Where the audit of a company charity is carried out under the Companies Act, the auditor must be eligible for appointment as a statutory auditor under Part 42 of the Companies Act Social Enterprises Social Enterprises can be any unincorporated association (not a corporate body or company), charity, credit union, housing association, Company Limited by Guarantee, Industrial and Provident Societies (BenComms) or Community Interest Company. Audit arrangements will depend on the legal structure of the Social Enterprise. Companies Act audits Industrial Provident Societies Registered Social Landlords Auditors must be a statutory auditor under Part 42 of the Companies Act Similarly, all liquidators, administrators, administrative receivers and supervisors taking office on or after 29 December 1986 must be authorised insolvency practitioners. CIPFA is not one of the bodies permitted to authorise insolvency practitioners. The qualification requirements are set out in section 7 of the Friendly and Industrial and Provident Societies Act Auditors must eligible for appointment as a statutory auditor under the Companies Act. Housing associations may be constituted as industrial and provident societies, trusts, cooperatives and companies. They may or may not be registered charities. Audit arrangements will depend on the legal structure of the RSL.