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Public Audit (Wales) Act 2004

Audit of accounts

Section 13: Audit of accounts of local government bodies in Wales

46.This section requires local government bodies in Wales to make up their accounts each year to 31 March (or such other date as the Assembly may direct) and ensure that those accounts are audited by one or more auditors appointed by the Auditor General for Wales. It imposes a corresponding requirement on the Auditor General to appoint such auditors.

Section 14: Appointment of auditors

47.This section sets out arrangements for the appointment of auditors under section 13. The Auditor General's power of appointment is drafted in terms of "persons". By virtue of section 5 of and Schedule 1 to the Interpretation Act 1978, the term "person" includes a body corporate or unincorporate (unless the contrary intention appears). Thus the Auditor General may appoint an individual auditor or a firm of auditors to audit the accounts of a local government body in Wales. (Where the applicable legislation allows, he may also appoint a body corporate of auditors). He has the power to appoint a member of his staff. The Auditor General may only appoint an individual (including a member of his staff) or a firm of individuals as auditors if they satisfy the criteria set out in the section. These criteria are designed to guarantee that the appointed auditors have the appropriate professional qualifications or experience and can show suitable evidence of good conduct and repute.

48.The Auditor General must consult the body in question before appointing an auditor for it.

49.More than one auditor may be appointed for the same body, in which case references in Part 2 to “the auditor” means any one of them (section 59(3)).

50.The Auditor General may not appoint himself as the auditor of the accounts of local government bodies. This marks a difference between the treatment of local government bodies in Wales on the one hand, and Welsh NHS bodies, Assembly sponsored public bodies etc. on the other.

Section 15: Persons to assist auditors

51.This section enables the Auditor General to approve arrangements for one or more persons to assist an auditor appointed under section 13 (an “appointed auditor”). The remaining references to auditors in Part 2 relate both to appointed auditors and those assisting them. This provision is likely to be used where the Auditor General feels that specialist help is needed for a particular audit - such as a forensic accountant on complex taxation issues or an information technology expert for the interrogation and analysis of particularly complex computer databases.

Section 16: Code of audit practice

52.This section enables the Auditor General to issue and revise from time to time a code of practice embodying the best professional practice with respect to standards, procedures and techniques to be adopted by auditors appointed by him when they are auditing the accounts of local government bodies in Wales. Any code prepared or revised under section 16 must be ratified by the Assembly in the first instance, and is subject to annulment by either House of the United Kingdom Parliament. The Assembly cannot delegate the function of ratifying the code. Until a code under this section comes into force, auditors appointed by the Auditor General must adhere to the extant Code of Audit Practice published by the Audit Commission in March 2002, and prepared in accordance with section 4 of the ACA. Section 17(4) imposes a duty on the auditors to this effect.

Section 17: General duties of auditors

53.This section sets out the general duties with which an appointed auditor must comply when auditing the accounts of a local government body in Wales. These include compliance with the relevant Code of Audit Practice, whether prepared under section 4 of the ACA or section 16 of the Act.

Sections 18 & 19: Auditors' rights to documents and information

54.Section 18 gives the appointed auditor a right of access at all reasonable times to “every document relating to a local government body in Wales” which he considers necessary for his functions under Chapter 1.

55.Subsection (2) makes it clear that the enhanced power of access to documents enables an appointed auditor to have access to documents in a financial chain relating to the use of public money. For instance, a local government body in Wales may (if in accordance with its own specific powers) use a grant paid to it by the Assembly to provide a grant, loan or guarantee to a third party. The local government body in Wales may also contract with another organisation to provide a service to it and certain components of this service may in turn be sub-contracted. Section 18(2) makes it clear that the appointed auditor may, if necessary, have access to documents relating to these kinds of transactions - documents held or controlled by anyone who has received financial assistance from a local government body in Wales, or who has supplied goods or services to the body under a contract, or who has been a sub-contractor in relation to such a contract. The aim of this provision is to ensure that regularity, propriety and the principles of value for money apply to the use of public money at each stage in the chain of expenditure.

56.Section 18 is consistent with section 95 of the GOWA (as substituted) in this respect (see the note on section 11, above), and also with section 52, which deals with the rights of the Auditor General to documents and information etc. when carrying out his functions in relation to local government bodies in Wales. The Act, thus, seeks to ensure a single standard of access to documents and information etc. in public sector audit in Wales, consistent with the recommendations made by Lord Sharman of Redlynch in his report “Holding to Account - the Review of Audit and Accountability for Central Government (February 2001)”.

57.By virtue of section 18(2)(c), the Assembly has a power to extend the categories of documents for the purposes of this section. It may by order specify any other description of documents to which the appointed auditor’s right of access will apply. Before making such an order, the Assembly must consult the Auditor General and such associations of local authorities in Wales as appear to be concerned. The Assembly may use this power in order to extend the description of documents etc. that appointed auditors may access in order to trace the use of public funds. For example, if an auditor is auditing the accounts of a local government body in Wales, he may need to have access to documents relating to the use of funds by organisations in receipt of significant grant funding. If that organisation had contracted with contractor A who in turn had sub-contracted with contractor B, the Assembly could make an order to ensure that the auditor could have access, if necessary, to relevant documents held by contractor B.

58.In addition to his right of access to documents, an appointed auditor has a right to any assistance, information and explanation he thinks necessary for the purposes of carrying out his functions under Chapter 1. By virtue of subsections (4) and (5) of section 18, an auditor can require such assistance, information and explanation from anyone he thinks has information about:

  • a local government body in Wales in relation to which the auditor has functions under Chapter 1;

  • a document to which the auditor has a right of access; or

  • a person who holds or controls such a document.

An auditor can require such a person to attend before him in person to give the assistance, information or explanation, or to produce a document to which the auditor has a right of access.

59.This right to information is intended to assist the auditor to ascertain the facts where, for instance, a document which he is entitled to see cannot be located. It is consistent with provisions in section 95 of the GOWA (as substituted by section 11) and section 52.

60.The auditor is also entitled to “every facility” (e.g. adequate accommodation, lighting, heating, access to relevant computer hardware and software etc.) and any other information he may need to enable him to do his work (section 18(6)).

61.Section 19 specifies that a person who fails to comply with any of the requirements in section 18(4), without reasonable excuse, is guilty of an offence, lays down the applicable penalty and provides for the appointed auditor to be able to recover any expenses he or she incurs in connection with a successful prosecution under the section. Section 18(4) is the provision which enables the auditor to require production of a document to which he has a right of access, or to require assistance, information or explanation from certain persons.

Section 20: Fees for audit

62.This section requires the Auditor General to prescribe a scale or scales of fees in respect of the audit of accounts of local government bodies in Wales. The scale(s) prescribed are subject to prior consultation. If it appears to the Auditor General that work on a particular audit differs substantially from that envisaged by the appropriate scale, the fee charged may differ. Different scales can apply to different categories of local government bodies in Wales (e.g., county and county borough councils, fire and rescue authorities, National Park authorities).

Section 21: Fees prescribed by Assembly

63.This section enables the Assembly to prescribe, following consultation, a scale or scales of fees to replace those prescribed by the Auditor General. It is possible that the Assembly might use this power if, for instance, it considered the scale(s) to be excessive, in general or in particular circumstances, or if consultation by the Auditor General had produced an irreconcilable conflict of views. Under section 93 of the GOWA, the Assembly must make up any shortfall between the Auditor General’s income (such as from fees) and his expenditure.

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