MPs announce inquiry into Audit Commission abolition

MPs will investigate the the abolition of the audit commission, following the announcment of an inquiry yesterday.

The inquiry will look into how best to maintain the audit of local authority expenditure, along with the oversight and inspection of local authority performance .

The audit commission, which audits public bodies, was abolished in a surprise decision in August.

In an issues paper, released last month, commission staff warned that putting audits to tender in an open market may lead to increased audit and tendering costs among local authorities.

The commission outsources 30% of its audits to a handful of accounting firms with dedicated public-audit departments. The remaining work it handles in-house. There are only five accounting firms which compete for these public contracts: Deloitte, Grant Thornton, KPMG, PKF and PwC.

Communities and Local Government Committee Chair, Clive Betts MP, said MPs will need to be satisfied that arrangements are in place for auditing local government expenditure effectively and efficiently.

“We will also be looking closely to ensure that the useful work which the Commission does through ‘value-for-money’ studies can be continued, for the good of local government as a whole,” he said.

The Financial Reporting Council has previously warned that allowing the work to be tendered in an open market may further entrench the position of the Big Four accounting firms.

Gillian Fawcett, head of public sector at accounting institute ACCA said she was concerned at the level of scrutiny so far on plans to abolish the commission.

“There is a distinct lack of clarity and openness about the plans for developing a new public audit framework. It is time to debate what type of public audit framework we want in England,” she said.

“Whatever replaces the Audit Commission needs to promote confidence and protect public funds. This is a chance to really drill down into the plans to ensure they offer value for money for the tax payer, and, importantly, protect the public purse. As its stands we have know way of knowing at the moment.”