Consultation document by the Local Government Auditor

Background 

The draft Code continues to be principles-based, and tailored where necessary, to reflect the specific auditing duties and reporting requirements placed upon the Local Government Auditor. This is consistent with approaches taken by other UK audit bodies required to issue similar Codes of Audit Practice.

A new visual showing arrangements for public audit of Local Government in Northern Ireland has been included.

There is no substantive modification to the information provided.  The role of C&AG and NIAO have been clarified and a reference to the Statement of responsibilities of Local Government Auditor and Local Government Bodies which the LGA issues has been included.

This statement is aligned to the current Code and serves as the formal terms of engagement between the LGA and local government bodies. It summarises where the different responsibilities of the LGA and of the local government bodies begin and end, and what is expected of both parties.

Chapter One – 

Status of the Code, application and general principles 

We have set the requirements of the Code within the wider expectations of public sector audit. The general principles outlined are those characteristics and behaviours the Local Government Auditor considers to be reasonable for the way auditors conduct their work. 

The revised Code of Audit Practice will take effect from 1 April 2026 with the first audit engagements under its requirements will be for the financial year 2026-27. Audits for the financial year 2025-26 will be carried out under the requirements of the existing Code.

The general principles have not changed materially from the current Code. 

However there have been some changes in terms of presentation and some amendments are proposed to reflect auditing standards, add further clarification and strengthen emphasis on principles where it was felt this would further enhance and clarify the Code and expectations.

The Code takes as its starting point general principles of public audit shared across the UK:  Wider scope of public audit; Independence of auditors; and Public reporting of audit findings, and then builds on them.   

Key proposed changes in the following areas:

• Application of the code clarified and signposting bodies applies to in Sch 2;

• The wider scope of public audit is emphasised;

• Clarifying expectations and auditor responsibilities - Code states that ‘auditors are not expected to review all aspects of audited bodies’ arrangements, systems or records,’ as this is often a misconception amongst stakeholders and does not reflect the reality of auditors’ responsibilities; 

• Cooperation - Highlighting need to ensure comply with statutory and other relevant requirements relating to information including personal data;

• Proportionality - Strengthening emphasis on proportionality and risk-based approach so appropriately reflects existing auditing standards;

• Independence - Strengthening provisions on independence by highlighting need to safeguard independence and the importance of ethical standards;

• Professional scepticism - More explicit about the importance of applying professional scepticism and professional judgement;

• Audit Quality - Clarification on Audit Quality arrangements including the requirements of the Financial Reporting Council’s International Standard on Quality Management (ISQM1) for firms to establish and maintain a system of quality management for audits is included as are the arrangements established by NIAO.   

Chapter Two – 

Audit of the financial statements

The draft Code is aligned to the current auditing standards and the Local Government Auditor’s statutory duties in respect of the audit of the financial statements. 

The responsibilities regarding this aspect of audit duties have not materially changed.  There have been some minor amendments to reflect changes in the audit certificate.   

Chapter Three – 

The Local Government Auditor’s work on economy, efficiency and effectiveness (value-for-money)

The legislative requirement placed on the Local Government Auditor is to be satisfied that the audited body “…has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources”.

The chapter also sets out that the Local Government Auditor may and, if required by the Department, undertake comparative and other studies designed to enable them to make recommendations for improving economy, efficiency and effectiveness in the provision of services by local government bodies.

The responsibilities regarding this aspect of audit duties have not changed. 

Clarification is provided that NIAO publishes an annual Public Reporting Plan incorporating all proposed studies for both central and local government sectors and also that where required under legislation, the Department and the relevant bodies will be consulted on any comparative or other studies proposed.

Chapter Four – 

The Local Government Auditor’s work on performance improvement 

The content of this Chapter is aligned to the Department’s guidance for performance improvement duties of councils and sets out at a high level the respective responsibilities of the audited body and the auditors. 

None. 

There were no changes made to the auditor’s requirements.

Chapter Five – 

Reporting the results of the Local Government Auditor’s work

The draft Code reflects the requirements of auditing standards and the legislative requirements applicable to the different types of audit covered by this Code.  

A table summarises the reports at various stages of the audit process.

There were no substantive changes to principles in the Local Government Auditor’s statutory duties for reporting the results of their work. 

The ability of public auditors to communicate the results of their work and to make them available to the public is re-emphasised as a fundamental principle of public audit.  The importance of this as the means by which auditors’ work achieves its impact is emphasised as is the importance of applying professional judgement when considering the range of reporting available to auditors.

Chapter Six – 

The Local Government Auditor’s additional powers and duties

The Local Government Auditor has the use of a number of additional powers which can be used when particular situations arise. 

The list of the additional duties and corresponding legislation remains the same.  

The auditor responsibilities regarding Raising Concerns have been updated to clarify the types of concerns that can be brought to the attention of the Local Government Auditor by stakeholders and that they will be considered.  The LGA wanted to reemphasise and strengthen the importance of this responsibility to all stakeholders.

Attention was also drawn to updated guidance from NIAO on Raising Concerns.

The fact that operation of the National Fraud Initiative has changed from the Cabinet Office to the Public Sector Fraud Authority is also noted.

Schedules 

Schedule 1 – 

The Local Government Auditor’s statutory responsibilities

Schedule 2 –

List of local government bodies covered by the Code as at April 2026

There are no changes to Schedule 1.

There are no changes to Schedule 2.

Glossary

The Glossary aims to provide clear definitions of key terms used in the Code. 

Some amendments were made to update the definitions in the Glossary in terms of the Comptroller & Auditor General and the NIAO.

1

Do you agree that a principles-based approach for the Code should continue to be used? 

If not, what format would you like to see?

2

Does each chapter adequately outline the Local Government Auditor’s respective responsibilities? 

If not, please make some suggestions for improvement.

3

Are there any other comments you would like to make on the content or format of the proposed Code?

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