ICAEW.com works better with JavaScript enabled.

NAO issues updated Code of Audit Practice

21 April 2020: the National Audit Office has issued a revised Code of Audit Practice for relevant local public sector audit commencing with 2020/21 financial statements, according to Schedule 6 of the Local Audit and Accountability Act 2014.

The update includes the audits of local authorities, police forces, fire services and NHS trusts amongst other local bodies, and applies to financial years ending 31 March 2021 onwards.
The update of the code has been developed over the last 18 months and seeks to reflect the issues stakeholders perceive to be the most relevant to local audit over the next five years. In particular, it has been written in the context of the Brydon Review on statutory audit and the Redmond Review on local authority audit.
Revisions to the code include extending the requirements for auditors to provide an enhanced audit report (providing information over and above simply giving an opinion on the financial statements) and improvements to reporting on Value for Money assessments. 
The code encompasses audits of different types of local public bodies, reflecting the fact that the core statutory responsibilities placed on the auditors are essentially the same, regardless of the type of local public body they audit. This single code, therefore, has practical benefits and helps promote consistency of approach.
In the same way as statutory auditors report to the members of a company, local public body auditors must report to local residents upon the truth and fairness of the financial statements, as well as on stewardship of public funds. This must be done in a proportionate manner and carried out with professional scepticism.
The code is principles-based and reflects a lay person’s understanding of expectations of the auditor such that the auditor must ensure that they have:

  • the necessary skills and knowledge to discharge their functions effectively; and
  • arrangements in place to ensure that audit teams have sufficient knowledge of the relevant public sector financial reporting, regulatory and legislative frameworks. 

The code also sets out a reminder to the bodies being audited of the expectations placed on them, such as complying with relevant legislation, regulations and other requirements in the production and reporting of financial statements. All audited bodies are expected to have effective corporate governance arrangements to deliver their objectives.

There are always questions over the value of local public body audits. Does the audit report give the required assurance that public money has been spent appropriately? The

  • financial sustainability
  • governance
  • improving economy, efficiency and effectiveness.

The code is accompanied by detailed guidance to support auditors in the conduct of their work; this is also being revised and will be issued in due course.
Commenting on the update, Director of Public Sector for ICAEW Alison Ring said, “The Code of Audit Practice is an important component in the UK’s approach to ensuring citizens can both trust the financial information provided to them by local public bodies and be assured that public funds have been spent appropriately.

“It is positive that this update to the Code has been carried out in consultation with key stakeholders and that it endeavours to make local authority auditors’ work more useful to local residents and their representatives, as well as to the wider public.”
For the latest news and guidance on the ongoing impact of COVID-19 for businesses and accountants, visit ICAEW’s dedicated coronavirus hub.