Who audits the UK government and the public sector in England?
The National Audit Office performs the financial and other audit work on the UK central government on behalf of the Comptroller and Auditor General. It contracts out around 20% of its financial audit work to private sector firms.
The small number of central government bodies where the Comptroller and Auditor General is not the auditor, whether by legislation or agreement, are audited by private sector firms. There are also a few bodies, including the Bank of England, where the financial audit is performed by private sector firms, but the National Audit Office can provide wider audit work.
The National Audit Office does not audit English public sector bodies apart from those that are part of the UK central government or parliament. Since the abolition of the Audit Commission, all local audit has been carried out by private sector firms. With the exception of the audits of NHS foundation trusts, the audit firm must be registered to perform local audits with ICAEW and the engagement partner must be registered as a Key Audit Partner under statutory guidance issued by the Financial Reporting Council.
The audits of academies, local government-owned companies and charities are also performed by private sector firms, but no such specific registration requirements exist for these entities’ auditors.
Public Sector Audit Appointments Limited is the national appointing body for the audits of local police and fire services, local authorities and other local government bodies. It is responsible for the procurement and appointment of auditors for every eligible body that opts into its scheme. The appointments are for a period of five years and currently 97% of bodies opt into its scheme.
Smaller Authorities’ Audit Appointments Limited is the national appointing body for the audits of local authorities and over local government bodies with income and expenditure below £6.5m. These bodies are subject to a limited assurance review rather than an ISA-compliant audit.
Neither the Public Sector Audit Appointments Limited or Smaller Authorities’ Audit Appointments Limited schemes cover the audits of NHS bodies. NHS trusts and Clinical Commissioning Groups are responsible for appointing their own auditors and NHS England provides support where necessary.
The audits of academy school trusts are not considered part of local audit. The Education and Skills Funding Agency is responsible for setting the audit code, supporting academy trusts in their procurement of auditors and issuing guidance to auditors.
Public sector financial reporting in the UK and England
The United Kingdom government and parliamentary bodies account under International Financial Reporting Standards, as adapted by HM Treasury’s Financial Reporting Manual. HM Treasury also issues directions about the content of the narrative annual reports.
Executive agencies, non-department public bodies, companies and charities produce separate accounts, which are also consolidated into the relevant government department’s accounts. Most central government charities and companies apply the requirements of the Financial Reporting Manual where it does not conflict with their primary reporting frameworks as established by companies or charities legislation.
NHS trusts, clinical commissioning groups and other local NHS bodies in England also account under International Financial Reporting Standards (IFRS), as adapted by HM Treasury’s Financial Reporting Manual. The Consolidated NHS Provider Accounts brings together the accounts of these individual bodies and ensures they are consolidated into the Department of Health and Social Care’s accounts.
Academy Trusts are charities so account under FRS 102 and the Charities SORP, as well as an accounts direction issued by the Education and Skills Funding Agency (ESFA). ESFA produces consolidated Academies Sector accounts, which consolidate into the Department for Education’s accounts.
Local police and fire services, local authorities and other local government bodies produce accounts under CIPFA / LASAAC’s Code of Practice on Local Authority Accounting, which is based on IFRS. These bodies’ accounts are not consolidated into a sector consolidation in the same way as academies or NHS bodies.
The accounts of these bodies are all consolidated into the Whole of Government Accounts. These accounts include all bodies classified as public sector by the Office of National Statistics, apart from a small number that are not part of government, such as parliamentary bodies or the audit offices.
The financial audit of the UK government and English public sector bodies
The financial audits of public sector bodies in the UK are carried out in accordance with International Standards on Auditing (ISAs) as interpreted for the public sector by Practice Note 10 - the Statement of Recommended Practice on audit in the public sector.
The financial audit opinions of the UK government departments and their agencies, parliamentary bodies, academy and NHS provider consolidations, and clinical commissioning groups include an opinion on whether income and expenditure are in line with the purposes intended by Parliament (the "regularity" opinion). The Comptroller and Auditor General also issues a regularity opinion on many other central government bodies, but this depends on their framework agreement with their sponsor department and their founding legislation.
There is no regularity opinion for the whole of government accounts, local authorities and other local government bodies, local police and fire services or NHS trusts. The auditors of academy trusts are required to perform a limited assurance engagement over the regularity of expenditure.
Wider public sector audit work on UK government and English public sector bodies
Public sector auditors also carry out a variety of other public audit and assurance work:
Value for money studies
These are studies evaluating the economy, effectiveness and efficiency of a project, programme or other area of central government spending chosen by the Comptroller and Auditor General. The reports are laid in Parliament. They usually seek to reach a conclusion on value for money and include recommendations for improvement.
Investigations
Investigations are also laid in Parliament. However, they are shorter than value for money studies and do not evaluate the expenditure. Instead, they set out the facts about an area of public spending where concerns have been identified.
Reports on accounts
The Comptroller and Auditor General has the power to include a report on accounts alongside the audit certificate in most bodies where they are the statutory auditor. These are designed to bring an issue to the attention of Parliament and they often provide further details on the cause of a qualification.
Reporting on arrangements to secure value for money
Under the Code of Audit Practice, local auditors are required to provide commentary in the Auditor’s Annual Report setting out whether the local authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice requires the commentary to cover financial sustainability, governance and improving economy, efficiency and effectiveness.
Statutory reporting and quasi-judicial functions
Local auditors are required to issue public interest reports or statutory recommendations if they become aware of matters that need to be brought to the attention of the public. Local authorities in receipt of such a report must hold a public meeting within one month to consider their response to the recommendations. As in the rest of the UK, local electors have the power to object to local government accounts.
Other work
The National Audit Office also produces annual departmental overviews, briefings for Parliament and good practice guides.
Further reading
For an introduction to public sector audit across the UK, please refer to this page.
For more information about how public sector audit operates in the other nations of the UK, please refer to our nation specific pages: