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NHS Audit Market Study launch information sheet
NHS Audit Market Study
In July 2024 the Financial Reporting Council (FRC) launched its market study into the market for the audits of NHS providers (NHS Trusts and Foundation Trusts) and Integrated Care Boards (ICBs).
The market study will examine market choice and access, resilience and risks. This will involve considering how well this market is functioning and how stakeholders believe it should perform in the future, and any barriers to entry and expansion for those audit firms who wish to participate.
Background
The timely provision of financial statements which have been subject to external audit supports effective decision-making by organisations and ensures transparency and accountability. Delays in their production have become a growing problem for local bodies, including among NHS providers and ICBs. This has also had consequences for providing assurance over central government accounts.
It is agreed that limited capacity in the local audit system is a contributory factor. For example, there are currently only 106 Key Audit Partners across 9 firms undertaking local audits who are able to sign off audit opinions of 647 local audit entities for 2023/24. The FRC are also aware that some NHS bodies are having difficulties with the appointment and retention of auditors.
One of the FRC's priorities as incoming shadow system leader for local audit in 2024/25 is to lead work with system partners to improve the capacity and capability of the local audit market which covers both local government and NHS bodies.
We will take a holistic, system-wide approach to improving competition, and bolster capability and market supply, working alongside stakeholders across the sector to tackle this complex, long-term challenge.
The FRC wants to better understand those issues which may be preventing the market for the audit of NHS providers and ICBs from functioning effectively and delivering timely financial statements which are subject to external assurance. We also want to identify any differences between NHS provider and ICB audits and local government audits to inform a proportionate approach to regulatory frameworks.
The findings from the study will inform the FRC's policy and work relating to local audit, and may result in potential suggestions for action which the FRC will seek further comment on from stakeholders before recommending to Government. This market study will also consider whether there are any lessons on good practice seen in the NHS audit market which would be carried over into the wider local audit market, such as with local government bodies.
Supply of auditors: We want to understand any barriers to entry and expansion for audit firms, including identifying potential routes to entry for firms and auditors who want to participate in the NHS audit market. We also want to understand capacity constraints on audit firms and the impact of competing engagements.
Demand for audit: We would like to understand more about the audit tendering process and any difficulties NHS bodies experience in appointing and retaining auditors. We are also interested in the level of engagement by the NHS body's audit committees. We intend to explore the perceived value of these audits, including Value for Money work, and whether there is an expectation gap between NHS bodies and audit firms on the purpose and requirements of audits.
Regulatory Framework: We are interested in the unique features of NHS provider and ICB audits which may include additional requirements, as well as differences in the complexity of these audits compared to local government audits. We are keen to hear how these features should be reflected in the regulatory framework to support market capacity and capability while maintaining the public interest.
Taking part
The FRC is engaging with the Department for Health and Social Care and NHS England, as well as the Ministry of Housing, Communities and Local Government, as it undertakes this market study.
This market study is being carried out the basis of voluntary contributions. Stakeholders taking part in the market study will have the opportunity to develop our understanding of the market and inform our approach to future local audit work.
The FRC is keen to hear from those organisations and individuals involved in the market for the audit of NHS Providers and ICBs, as well as any other relevant parties who wish to comment.
Submit a written response to the market study
Get in contact to take part in the FRC's NHS audit market study: [email protected]
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