Code of Audit Practice 2010 for Local Government Bodies

My Lords, I declare my interest in this matter because I am a member of the board of the Audit Commission, which is responsible for approving the codes before they are submitted to the Secretary of State for laying before Parliament. It is true to say that nearly all public comment about the work of the Audit Commission focuses on our high-profile national value-for-money reports on our inspection and assessment work—particularly the comprehensive area assessment or its predecessor, the comprehensive performance assessment or CPA. There is relatively little comment about the work of the commission’s appointed auditors. Yet, as the commission’s name implies, audit is its core business. It is easy to take the audit process for granted. It occurs mostly behind the scenes and is generally regarded as an unexciting, and some would say even boring, activity. Having spent two days with auditors in a local authority setting, I have sympathy with that idea. However, audit in the public sector is an essential element in the process of accountability for public money and the proper conduct of public business. The fact that we in this country enjoy very high standards of financial probity and propriety across the public sector is in large part a result of the strength of the public audit regime. These codes of audit practice are an important part of that regime. They prescribe how independent auditors appointed by the commission should meet their statutory and professional responsibilities. They underpin the statutory independence of auditors, which enables them to speak without fear or favour. The codes are deliberately pitched as high-level principles, and that is a good thing. They are principles-based documents rather than "how to do" manuals. This enables the commission in the guidance and advice that it gives to auditors, and auditors themselves, to focus audit work on emerging risks. That is surely a matter of great importance these days. This ensures that our public audit regime can adapt and respond to developments in the operating environments of local government and NHS bodies. The commission made some fundamental changes to the codes in 2000 and 2005, but this time around it has decided to make only minor changes to reflect legislative change since the code was last approved and various tidying-up amendments. This approach has been welcomed by stakeholders. In summary, these are important documents underpinning an important, if unsung and often boring, activity, and I hope that the Committee will support them.