Audit backstop plan delayed by snap election

The statutory deadline for outstanding financial opinions is not likely to be set for 30 September due to the timing of the general election.

As of March 2024, a total of 646 audit opinions are delayed for financial years 2015-16 to 2022-23, according to the latest figures from the Public Sector Audit Appointments (PSAA).

The Department for Levelling Up, Housing & Communities proposed a backstop deadline for external audits of 30 September as a first step towards clearing the backlog.

All outstanding audits for financial years 2015-16 to 2022-23 would have to be published resulting in disclaimed and qualified opinions if the auditors have not obtained appropriate audit evidence for all matters.

Financial experts have previously warned that these types of opinions could damage the integrity of the sector but DLUHC has said this backstop is designed to “allow assurance to be rebuilt over multiple audit cycles”.

The Department of Levelling Up, Housing & Communities consulted on the proposals in February. It has not shared the feedback it has received from stakeholders or its response. DLUHC has confirmed to the LGC how this will be paused until after the general election.

The National Audit Office (NAO) and the Chartered Institute of Public Finance and Accountancy (Cipfa) ran consultations concurrently to reform the Audit Code of Practice.

Even though these consultations have been concluded, none of the proposed short-term measures, including the backstop dates can be implemented until a new government is in place.

The NAO has confirmed that any changes to the Code of Practice including backstop dates, ability to publish incomplete annual reports and change appointment contracts cannot take effect without Parliament’s sign off.

A spokesperson for NAO said: “Our work in relation to the code of audit practice and the response to the recently completed consultation continues during the pre-election period.”

However the NAO added that due to the fact “the comptroller and auditor general’s statutory responsibility to maintain and update the code involves Parliament’s authorisation” any action required to amend the code will not be taken before the new government is in place.

The statement added: “Additional statutory guidance for auditors is under active consideration and does not require Parliament to be sitting. Further details on the code and guidance will be set out in due course.”

According to Local Audit and Accountability Act, the updated code must be approved within a 40-day period otherwise the comptroller and auditor general needs to redraft another version.

Typically Parliament’s summer recess begins around the third week of July, so following the general election, there would only be around two weeks for the new government to finalise the code of practice.

Parliamentarians would return in early September for a week before the political party conference season and would not return until October.

Cipfa has told LGC that its review of responses on options to simplify accounting for tangible fixed assets or reduce disclosures for pensions reported has been finalised. But the dissolution of Parliament has “introduced delays to this process”.

A spokesperson said: “There may be further delays in obtaining ministerial approval and in parliamentary process generally after the election, especially if there is a change of government. Due to the potential delay to the cross-system measures, Cipfa will need to further review the position with the consultation updates.”

DLUHC has confirmed that announcements on future policy will only be made after the general election on 4 July.