The democratic paper trail

Bill McKenzieBill McKenzie on the importance of a proper and accountable public auditing process 

For all Eric Pickles bluster, it has taken him some three years to get around to abolishing the Audit Commission. 

While we’re not calling for the Commission’s retention, we do need reassurance that new arrangements maintain auditor independence, encourage probity and make appropriate provision for local whistleblowers. We also need to examine the gaps that will arise from the demise of the Commission, which means that no single body will have overall responsibility for supervising and coordinating local public audit. 

Audit is a dry subject, but it also underpins accountability. It is an independent assurance of how public resources have been spent and how services are being delivered on our behalf. To all intents and purposes, it is a democratic paper trail. And with regard to the current bill going through Parliament, Labour wants to see a timely process whereby we can assess what is happening to the cost of audits, particularly for smaller authorities. We also want Ministers to consider some retention of a central procurement capability.

The upshot is that we remain unconvinced that local procurement will deliver reduced audit fees, as the evidence suggests otherwise. Neither is there any sign that local procurement will bring many new firms into the market. The big four will dominate, subject always of course to developments in the EU, and deliberations of the Competition Commission.

We understand that the appointment of local auditing is about local choice and localism. But how much choice should there be on audit services? Audit is – quite properly – a highly regulated market. Who can act, suspension of firms, a code of audit practice, accounting requirements, are and will continue to be set nationally. That is as it should be. Auditor shopping can be dangerous. Moreover, we also wish to be reassured on the rules that will govern auditors selling other services to their audit clients, and the safeguards that must be in place to prevent conflicts of interest.

What is welcome is the requirement placed on the National Audit Office (NAO) to consult with representatives of relevant authorities in the planning of its examinations into the economy, efficiency and effectiveness of how such bodies use their resources. It is important that the NAO is properly resourced to carry out its expanded role and we would not wish to see some formal limit placed on the number of studies it can undertake.

Audit may not arouse the passions of many people in Parliament – and I imagine even fewer on the pavements and green outside. But done properly auditing is a vital part of our democracy. Maintenance of its integrity is fundamental.

Lord Bill McKenzie of Luton is Shadow Minister for Communities and Local Government in the Lords

Published 19th June 2013

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