Scots audit review.

A Review of audit procurement is to be launched by Audit Scotland, the new public sector audit body north of the border, which will examine complaints from firms that fees are too low and concerns about risk exposure.

The investigation comes in addition to Audit Scotland announcing that all contracts for public sector audit will be retendered for the year 2002/2003.

Pressure has been mounting for some years among private sector firms discontent with the current level of fees in Scotland for public sector work. At the forefront has been the Public Sector Audit Association that has called for a review and wants the current ‘flat rate’ system removed and a new formula put in place.

Under discussion is the possibility of ending the daily rate in favour of an ‘audit fee’.

Grant Macrae, KPMG partner in charge of pubic sector audit in Scotland, said: ‘We are hopeful that there is some movement.’

He said the main problem for firms was putting together expensive, dedicated teams with specific skills without any corresponding change in the fee level.

Firms complain the Audit Commission working in England and Wales pays a much better rate and wants to see Scottish rates come up to the same level.

Bob Black, auditor general in Scotland, has indicated he has some sympathies with the firms’ view.

He said: ‘I have taken steps to understand more fully the business context within which remuneration has to be set. I am looking at this issue very closely.’

Meanwhile Black will also have to deal with fears among firms about their exposure to risk. This may be as a result of the more complex audit environment in Scotland since the introduction of the new parliament. Reports can now go straight to parliamentary select committees that could use them as a basis for initiating legislation.

Audit Scotland has responsibility for auditing 250 public sector bodies including local authorities, NHS boards and trusts, FE colleges and police and fire services.

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