Audit monitoring of local authority audits in England
The Local Audit and Accountability Act 2014 established a framework for the regulation of auditors of local public bodies. All firms registered with ICAS to conduct local audit work must receive a monitoring visit from ICAS Audit Monitoring as part of the requirements of this registration. Regulatory Monitoring is one of the functions of ICAS and Audit Monitoring is responsible for checking audit work is conducted properly, with integrity, and upholds the required professional standards.
The approach to monitoring local audit work is similar to the monitoring of a company incorporated in the UK or ROI; or other entities requiring audits under legislation specified in the Audit Regulations. Indeed, a firm registered to conduct audit work for such an entity, and which is also registered to conduct local audit work, will likely be subject to one monitoring visit that covers both areas of work.
Who conducts the local audit monitoring visits?
The Audit Monitoring team is made up of Chartered Accountants who have significant experience from an audit practice background. All of the team have local audit experience; large firm listed audit experience; and a number also have smaller firm audit experience. All reviewers enter an in-depth induction and training programme when they join and, thereafter, receive ongoing training and supervision.
What are the reviewer procedures?
The monitoring unit's procedures and processes are contained within a detailed visit methodology that the Audit Monitoring team must follow.
The reviewers are also bound to comply with ICAS's continuing professional development and independence requirements, and the monitoring unit is bound by strict confidentiality rules regarding the audit client information reviewed.
The responsibilities, duties and powers of the monitoring unit and the Committee to whom it reports are contained within the Local Audit Regulations.
How often are monitoring visits Conducted?
In compliance with Schedule 5 to the Local Audit and Accountability Act 2014, the Audit Monitoring team will conduct an inspection of each person who is eligible for appointment as a local auditor at least once every six years, with those conducting major local audits being visited at least every three years.
A risk based audit monitoring approach is adopted and the six year cycle is the maximum period, with some firms potentially being visited on a more frequent basis, and some visits may be selected for other reasons, such as a random selection; or a visit being conducted at the request of the Authorisation Committee.
How are firms notified of a visit?
Audit Monitoring contacts firms when they are selected for a monitoring visit, at least six weeks before the visit (unless this visit has already been postponed or rescheduled). The notification will provide details of the proposed date for the visit, the time the visit is estimated to take and the name of the reviewer(s) who will conduct the visit.
If the date is not convenient due to unavoidable circumstances, you must send us your request in writing or call +44 (0)131 347 0284 within 10 business days of receiving the notification letter. Requests for postponement will only usually be accepted if a reasonable alternative date can be agreed upon between your firm and Audit Monitoring.
If there is some reason why the reviewer is unsuitable, then please write to, or call, the Visit Co-ordinator within 10 business days, explaining your reason. If the reason is considered valid, we will arrange for another reviewer to conduct your visit. If another reviewer is not available, your visit may require to be rescheduled to the next available date.
Firms may be offered a practice monitoring visit at around the same time as the audit monitoring visit and the firm can liaise with the Visit Coordinator as to whether the quality review visit should proceed. The practice monitoring visit is explained in the Practice Monitoring section of this website.
In addition to the visit notification, each firm will receive a visit feedback form in order to provide useful feedback on what it thought of the visit process, and a documents and records list that explains what information requires to be made ready for the visit.
What is the visit process?
The Audit Monitoring visit consists of an opening meeting, fieldwork and a closing meeting.
The Opening Meeting
The visit will start with a meeting to discuss the firm's local audit practice clients, and allows the reviewer to understand the firm and its associated risks. This allows the reviewer to focus the fieldwork on areas of risk.
As part of the visit fieldwork the reviewer will select a number of local audit engagement files for review. The review will check the quality of audit work and how the audit file supports the final audit opinion. The reviewer will also assess compliance with the Local Audit Regulations, the auditing standards; reporting requirements; the National Audit Office code of practice, applicable National Audit Office Guidance Notes and regulatory and legislative requirements. Each Key Audit Partner will be required to respond in writing and by discussion to any review points or findings raised by the reviewer.
In addition to reviewing local audit files, the reviewer will also review the firm wide policies and procedures for compliance with the Local Audit Regulations and ISQC1, such as appraisals, declarations, CPD, PII, ethics procedures, anti-money laundering, internal quality control review procedures and the firm's Audit Compliance Review process.
The Closing Meeting
The main findings coming from the file reviews and the review of the whole firm policies and procedures will be pulled together into a preliminary report. This will be discussed in detail with the firm, which is usually given 14 days to respond and produce an action plan to these findings.
All visits are independently quality reviewed to ensure that the visit methodology has been met, that the visit conclusions are fair and balanced. The Authorisation Committee includes qualified Chartered Accountants from ICAS registered audit practices, as well as lay members. The Committee will make the decisions on the continuance of a firm's audit registration and of any corrective action that requires to be taken. The Committee will take into account the follow up action taken from previous monitoring visits. The Committee is also responsible for referring any disciplinary issues to the ICAS complaints and disciplinary process. The Committee is also bound by confidentiality rules.
When you will hear about the outcome of your visit will depend on whether there is anything to follow up on post visit or if your registration will continue without any additional information being provided to the Committee. The Committee only meets every two months, so it may be some time before you hear. If you are concerned about the delay in hearing back after the visit, please contact email@example.com.
All Key Audit Partners must be available during the visit in order to be able to respond to the engagement files that have been selected for review, and the Audit Compliance Principal should be available for the duration.