A stronger new code for auditors

Our new Code of Audit Practice marks an exciting step change in the responsibilities of auditors looking at spending and services by public bodies in Scotland. Following an extensive consultation, these changes will come into force from the start of the 2016/17 audit appointments in October.

Two years ago we recognised that if we wanted to deliver a world class public audit service, we’d need to revise and improve the code. The challenge was to produce a code  grounded in legislation and auditing standards but which could also be applied by auditors to the wider scope of  public audit  and the developing approach to the audit of Best Value.

We also knew that Scotland’s public sector was undergoing a significant period of change and by revising the code we’ve set out to ensure our work adds more value and makes a real difference to public services in Scotland. It requires auditors to comply with professional and ethical standards, and sets out in detail their responsibilities, and those of audited bodies. It also sets the strategic direction of all audit work carried out for the Auditor General for Scotland and the Accounts Commission.

In order to achieve world class public audit and give reassurance that we’re all receiving value for money from public spending, the new code aims to assist improvement by audited bodies in the delivery of services. It does this by requiring auditors to use their work to provide explicit conclusions on four key aspects: financial sustainability, financial management, governance and transparency, and value for money.

Reporting against these dimensions means that auditors must be clear when highlighting significant risks within audits that they also provide a judgement on how effectively the audited body is mitigating these risks. Clarity about the potential impact of risks and making recommendations for improvement creates an enhanced understanding for the organisation and the public of how an audited body is performing.


The code also formalises the commitment of auditors to sharing knowledge and resources, giving an enhanced ability to address audit risks. This means financial and performance auditors working together to maximise the value and impact of public audit for service delivery.

Appointed auditors also have an option to carry out a reduced wider scope audit for low risk small audits. This maximises available audit resources, enabling a greater focus on higher risk audits. Our work is, however, firmly grounded in legislation and auditing standards. Compliance with the code is a condition of appointment for auditors appointed by the Auditor General or the Accounts Commission.

And continuing our commitment to making our audit work as transparent and accessible as possible, we’ll be publishing all our principal audit reports, such as annual audit plans and final reports, on our website.

The new code equips auditors with the information and structure they need to carry out their role effectively within the changing landscape of public finances and services. Building on our independent and authoritative reputation within Scotland’s public sector, the code helps to ensure a strong and effective system of financial accountability and transparency with public audit at its centre.

About the author

OwenOwen Smith is a senior manager in Audit Scotland’s audit strategy group. He is responsible for audit procurement, audit quality and the National Fraud Initiative (NFI) in Scotland. He has been working in public audit since 1997 and been with Audit Scotland since its creation in 2000 working mainly in local authority audits. He is currently finalising the 2016 NFI report.

Local government accounts – what can they tell me?

All 32 of Scotland’s councils publish a wealth of information through their annual accounts. They can tell you everything from how much your council spent on social work or education to the value of their buildings and what reserves they have built up over time. The Accounts Commission’s report ‘An Overview of Local Government in Scotland 2016presents a high level view of how councils manage finances.  But getting more specific information that compares spending over time or between different councils from published accounts can be difficult and time consuming. To help, we’ve produced an interactive exhibit which makes these comparisons easy.

Councils make decisions about how best to manage their finances and these will be influenced by various local factors, including local priorities, the size and nature of the area they serve – be it rural or urban – and their local assets and infrastructure.. . For example, councils that still own council houses will generally spend a greater proportion of total spending on housing. This means that comparing some items from the accounts, and some councils to each other, might not be as useful as you first think. All 32 councils, however, need to provide certain core services and looking at how spending on services varies between councils, and within each council over time, can be a useful way of seeing how they are managing their priorities and money.

In this year’s interactive exhibit we have focused on council spending on services: what they spent in total on each of their main services (gross spend) and what they spent after  grants and service charges were taken into account (net spend). By clicking on a particular service you can see how spending has changed over time. You can also look at these changes in real terms, where the figures have been adjusted for inflation, to show what the earlier amounts would have been worth in 2014/15. Comparing these figures over time can provide a useful insight into how your council has managed its budget in a period of reducing public spending.

We intend to update this information as we receive new figures (2015/16 figures will be added once they are available later this year). We have focused on one particular part of the accounts but we’re keen to hear what you think is missing and what you think we should consider including in the future.

About the author

MM6A6194Martin Allan is an audit officer with Audit Scotland’s Performance Audit & Best Value group. Before joining the organisation he worked in statistics in the English civil service – first in the Department for Business, Innovation & Skills, then in the Department for Environment, Food and Rural Affairs (DEFRA).

Audit and accountability: Supporting the new Scottish Parliament

Holyrood meets for the first time today, and it’s set to be an interesting few weeks as the new Scottish Parliament comes into focus.

It’s clear that the new Parliament will be different from the last. As well as welcoming new MSPs and preparing for the fifth session to officially open on 2 July, the months ahead will bring big changes in Scotland’s public finances as the Parliament takes on a substantial increase in its financial powers.

Given the very different manifesto commitments from each of the political parties, there will continue to be a debate about the use of these powers over the life of the new Parliament – in particular, whether to use its new tax powers, and how to use any revenues raised by them.

This new chapter in Holyrood’s history brings opportunities and risks for everyone involved in ensuring that public money is spent well, including Audit Scotland.

We provide independent and expert insight into how public money is spent and policy is delivered, responsible for auditing more than 200 public bodies in Scotland. Whatever the political make-up of the Parliament, we’re here to support it in scrutinising the use of public money and holding government to account.

The Smith Commission agreed that the Scottish Parliament should seek to expand and strengthen the independent scrutiny of Scotland’s public finances, in view of the additional variability and uncertainty that further tax and spending devolution will introduce. I wrote to the Conveners of the Finance Committee and the Devolution (Further Powers) Committee in March, highlighting my interest in two key issues – the need to ensure the financial sustainability and management of the Scottish public finances, and the case for comprehensive, transparent, reliable and timely reporting.

The new powers mean there’s a need to look again at the Parliament’s arrangements for budget oversight. The budget processes put in place in 1999 have served the Parliament well, but they need to be refreshed so that Parliament, Government and the public can understand and debate the basis on which spending decisions and policies are made. This is especially important with the continuing financial pressures on Government, and the ambitious programme of public sector reform now underway in areas such as health and social care, education and communities.

As well as the budget process, an overall account of the revenues, expenditure, assets and liabilities of the Scottish public sector as a whole will also be essential – we have Whole of Government Accounts for the UK, which incorporate Scottish information, but we don’t yet have the equivalent picture for Scotland.

As Auditor General for Scotland, I report in public to the Parliament’s Public Audit Committee. I’m looking forward to meeting and working with new committee members so we can build on the good work of the previous session and ensure MSPs – and the public – get real value from the wide range of Audit Scotland’s work.

I’m also keen to explore new opportunities to support Parliament by informing and engaging with other committees and their members.

We’re committed to helping Parliament to develop its arrangements for using the new financial powers, and to seizing this unique opportunity to help shape Scotland’s fiscal future for generations to come.

About the author

MM6A8690croppedCaroline Gardner is the Auditor General, and Accountable Officer for Audit Scotland. She started her term in July 2012, and has 30 years’ experience in audit, governance and financial management. Follow her on twitter @AuditorGenScot