The government financial watchdog has also been told to end market testing – a crude form of tendering for audit work by firms – in a move that will come as a blow to Andrew Foster, head of the Commission, who has personally endorsed the policy in the past.
Major restructuring has also been called for in the report, produced by the Commons environment select committee, which says the relationship between the Commission and its own arms’ length audit agency, District Audit, was ‘somewhat cosy’.
The group of MPs say the separate identities of the two will have to be ‘enhanced’ to avoid conflicts of interest. Despite concluding that the Commission is ‘overall’ a ‘well-run organisation’, the report provides the Commission with an enormous amount of work to do as it prepares a formal response to the recommendations. Publication of the report follows sessions in which evidence was taken from local authorities and Big Five firms.
In stinging submissions to the committee KPMG said the public sector audit market was weighted unfairly in favour of District Audit, and claimed fees were not high enough.
Audit work is currently split with 70% going to District Audit and only 30% carried out by private sector firms.
The Audit Commission has declined to comment on particular recommendations preferring to save its views for a formal response.
However Dame Helena Shovelton, chairman of the Commission, said: ‘The committee makes a range of recommendations that the Commission will respond to in a thorough and constructive manner within the timetable set down by the committee and Commissioners will begin this process at their next meeting.
‘We can always improve how we undertake our role and this will inform our continual process of refining our strategy.’
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