MPs 'disappointed' by Audit Commission axing

CLIVE BETTS MP, chairman of the Communities and Local Government Committee, has told Accountancy Age that there is "widespread disappointment" over the handling of the Audit Commission, condemned to close within the next few years.

The Department of Community and Local Government's claims that scrapping the commission would save £50m a year remain entirely unsubstantiated, Betts said, despite repeated requests to see the numbers behind the claim.

Betts said the decision to axe the body – formerly responsible for public audit and oversight – was taken "at the drop of a hat" with "no justification at all".

Gillian Fawcett, ACCA's head of public sector, was one of two expert advisors assisting the panel. She said this disappointment was "very much a theme" of the written responses and claimed the lack of due process had riled stakeholders.

As a result of this decision being made "without proper consideration of the options", Fawcett said there are "pieces of the jigsaw missing" and warned that the DCLG lacks a clear idea of how to replace the Audit Commission.

Fawcett and Betts were joined by the ICAEW in calling for a wide-ranging review of public audit, warning that it is long overdue. Fawcett said that, without this, inconsistency will dog the sector: "The landscape will be fragmented with the National Audit Office overseeing some areas, disjointed local authority procedures and different regulators; it will turn the audit framework into a mish-mash."

Fawcett commented that the old approach of independent appointments has worked for 150 years without problems, adding: "Why break the system? It's simple and understood by the public."

DCLG has proposed doing away with the commission entirely, allowing local councils to appoint their own auditors and leaving oversight in the hands of the NAO and the accountancy profession. Its plan for maintaining audit independence centres on independent audit committees with a majority of independent members, though critics believe that local authorities will struggle to find the right people with the right skills.

Betts acknowledged there is widespread support – including from local government – to terminate the commission's inspection responsibilities, though joined other stakeholders in calling for the body's audit team to reform into a mutual.

Proponents said the move would preserve staff skills and expertise as well as provide a credible competitor to the Big Four, preventing audit concentration from becoming more entrenched.

The next step will be to see if the Communities and Local Government Committee's advice registers with DCLG. Betts and Fawcett have high hopes that the panel of influential experts will carry weight but DCLG's current stance is far removed from their recommendations. On this basis, converging the two viewpoints could prove challenging.