Choosing an external auditor
All academy trusts must, under their funding agreements, appoint an auditor. The ESFA has just updated (on 1 March 2022) its good practice guidance on choosing an external auditor for an academy trust.
Role of an auditor
Essentially, the auditor will wish to review and understand details provided by the academy trust, as set out in the ESFA external audit checklist, so that they can:
- Provide a statutory audit of the financial statements of the academy trust.
- Carry out a regularity review of the financial statements of the academy trust.
Officially appointing and changing an auditor
The auditors are appointed by the board of trustees under the Companies Act 2006 at the first meeting of the board. The Academy Trust Handbook (ATH) stipulates that the audit contract and regularity engagement must be in writing. The letter of engagement must:
- Allow for the removal of auditors before the expiry of the term of office in exceptional circumstances. Proposals to remove auditors must require a majority vote of members who must provide reasons for their decision to the board of trustees at a general meeting. The ESFA must be notified immediately of the removal of the auditors and of the reasons for their removal. Copies of any statement received from the auditor on this matter should also be sent to the ESFA.
- Require auditors if they resign to provide a letter of explanation to the academy trust within 14 days. The board must copy this letter immediately to the ESFA.
To draw assurance from the reporting accountant’s regularity report, the ESFA requires that academy trusts and reporting accountants must adopt the terms of engagement which can be found in Annex A of Framework and guide for external auditors and reporting accountants of academy trusts.
In subsequent years, it is normal for the academy trust’s members to deal with the reappointment of auditors at an annual general meeting, with the term of office lasting until the next AGM.
Academy trusts should re-tender their audit contract at least every five years as set out in the ATH.
Finding an auditor
The guidance gives examples of how an academy trust can find an auditor who may wish to respond to an invitation to tender.
- By word of mouth – perhaps on the recommendation of another academy trust.
- From the Register of Statutory Auditors. Which lists both statutory auditors and accountancy firms in the UK – it is possible to search by individual, firm, area or recognised supervisory body.
- Procurement through a DfE framework. The DfE recommends Crescent Purchasing Consortium.
The process of appointing an auditor
Trusts should:
- Specify clearly what they are looking for and provide potential auditing firms with the relevant key information about the academy trust.
- Establish who will be on the audit team, their level of expertise, how they will be supervised and an assurance of continuity of staffing as far as possible.
- Ask for a clear explanation of a firm’s audit procedures, including an overview of what the auditor will require for the audit – a list of the documents and evidence required – and how feedback is given after the audit.
- Require details of the value-added support given to the trust relating to the audit and also the firm’s approach to quality assurance.
- Require clarity about the fees involved and require that any possible conflicts of interest must be identified.
Evaluation of the quality of an auditor
- This must be the responsibility of the trust’s audit and risk committee.
- It should be evidence-based and measure the effectiveness of the audit process and whether the agreed costs were adhered to.
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