New firms capable of taking on local government audits

THE AUDIT FUNCTIONS of the Audit Commission should be broken up and transferred completely to the private sector, leading firms have told a parliamentary committee.

BDO said that multiple bidders should be able to bid for the auditing contracts of public bodies "as quickly as possible" in its submission to a communities and local government select committee inquiry into the abolition of the commission. Furthermore, bidders should be judged on their ability to build on the acquired contracts "not solely on their prior experience in public sector auditing".

BDO's preferred choice came from what it saw as four possible options: Full transfer to the private sector, with local bodies appointing the auditors; transfer of the functions with central government retaining a commissioning and regulatory role; sale of the audit practice wholesale; and a full management or employee "buy-out" of the commission.

Deloitte said there was "sufficient capacity to maintain comprehensive and quality audit coverage once local audit choice is made available" in the private sector. "We believe that existing and new firm entrants into this market will have sufficient resources to be deployed in this market to handle the planned introduction of local audit competition."

Currently, the Audit Commission oversees the audits of the majority of public bodies, including local authorities. It appoints private firms - the Big Four plus Grant Thornton - to carry out 30% of its audit work, accounting for fees of £45m. Local Government Secretary announced its abolition in August last year, and it is expected that there will be new arrangements in place by 2012/13.

As well as auditing, the Audit Commission inspects public bodies and carries out research on value-for-money approaches in a variety of areas.