The scraping of the audit commission will
result in higher audit fees with most of the work going to the Big
Four, the UK House of Commons communities and local government
select committee inquiry was told.

Professor of accountancy at University of
Aberdeen David Heald said auditors will have to charge higher fees
to local authorities in order to pay for insurance that is
currently covered by the audit commission itself.

“One of the reasons I am skeptical of audit
fees going down is that private audit firms will have to buy
insurance in the market, meaning that some councils will find it
very hard to get audited,” Heald said.

Heal predicts that councils will favor the Big
Four, which will lead to greater market concentration

“My prediction would be that when councils do
pick their own auditors, there will be a rush to appoint the Big
Four for the same reputational reasons that universities and
foundation trusts currently do. What the audit commission did or
does is build up providers in a managed market,” Heald

Aftermath of abolition

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Cardiff University professor of public policy
and management Steve Martin said the abolishing of the audit
committee was not a policy driven decision.

Heald said there were no reports reviewing the
audit commission’s work prior to the August announcement of it
being scrapped.

“There has been a fundamental failure by the
government to review the audit commission,” he added.

Guardian public contributing editor and former
audit Commission head of communication David Walker said the
government should provide information on what the benefits of
abolishing the Commission will be.

“There should be some release of figures on
how the money is going to be saved by abolishing the audit
commission,” Walker said.

The government select committee is to hear
from several more witnesses as part of the examination into future
arrangements for local authority audit and inspection.