Commentary Part 2 – Basic Requirements and Concepts Section 5: Modification of Act in relation to smaller authorities
22.Section 5 gives the Secretary of State the power to make provision about the audit of the accounts of smaller authorities (bodies whose gross income and gross expenditure does not exceed £6.5m in a financial year). The regulations may disapply or vary any of the provisions in the Act in relation to smaller authorities (subsection (2)).
23.Regulations may provide for a body specified by the Secretary of State to appoint an auditor on behalf of a smaller authority, make provision about who may be specified, set out procedures for specifying, and de-specifying, such a body, and for arrangements in the event of de-specification for the transfer of the body’s rights and liabilities. Regulations may confer functions on the body specified by the Secretary of State and require consultation before functions are exercised (subsection (4)). Regulations may make provision for smaller authorities to either opt-in or to opt-out of the body specified by the Secretary of State and for the procedures required to opt-in or to opt-out. Regulations may make provision in relation to the payment of fees and provision of information by opted in authorities. In addition, regulations may make provision to enable smaller authorities to pay into a fund to cover auditors’ costs in certain circumstances (subsections (5) and (6)). The regulations may also make provision about the eligibility of an auditor of a smaller authority and about the nature of the audit itself (subsection (7)). Regulations may provide for specified types of smaller authorities (for example, this power may be used in relation to relevant authorities with a turnover under £25k in a financial year) to be exempt from the requirement for external audit and the circumstances under which such exemption would not apply or would cease to apply, for example, where a small authority is new or its auditor issued a public interest report (as to which, see Schedule 7) in the previous financial year (subsection (8)). All smaller authorities will still be required to have an internal audit.