Agenda item

New Global Internal Audit Standards were published in January 2024, these will become mandatory for the profession in early 2025. Further guidance on the application of the Standards in UK public sector and local government will be provided by IASAB and CIPFA respectively and comes into force from April 2025.

This report provides the Committee with an overview of the standards and some materials to assist Members in gaining a better understanding of requirements.

David Hughes (Director of Audit, Fraud, Risk and Insurance) introduced the information paper on Global Internal Audit Standards (GIASs) which were covered in earlier discussions. He reiterated going forward, the reporting of audit work would include a full gap analysis to the GIASs to reflect compliant. Moira Mackie added that things done differently shall fall under gap analysis the outcome of which would lead to acceptable practices.

As regards Councillor Florian Chevoppe-Verdier’s question on the industry feedback about the proposals in GIASs, David Hughes said there were a lot of feedback across the globe from different sectors during the lengthy consultation period.  Local authorities in the UK responded quite strongly that the GIASs did not give enough recognition to the public sector, in particular local governments.  Further guidance on the application of the Standards in UK public sector and local government had been published by IASAB and CIPFA respectively.

Moira Mackie said H&F had shown how it would be compliant to the GIASs through the Internal Audit Strategy. In addition to complying the GIASs, the audit work would also be subject to external assessment similar to the last year against a set of slightly different measures.

Councillor Chevoppe-Verdier asked whether this Committee would adopt one or more of the following (page 91) as recommended by the Chartered Institute of Internal Auditors (IIA):

• An agenda item covering the transition at every Audit Committee meeting until the transition was completed.
• Deep Dives commissioned by the Audit Committee on aspects it felt were key to meet the requirements.
• Appointment of an independent third party to provide assurance to the Audit Committee on the transition arrangements. This might be part of an External Quality Assessment.

David Hughes said the Internal Audit Services planned to highlight the key things going on during the transition as part of the audit update. The Committee might raise any particular areas that members would like to dive deeper through briefings or formal reports. Moreover, unlike the previous arrangement whereby internal audit works were subject to reviews by peers at other London local authorities with no conflict of interests, they would now need to be externally assessed by independent third parties once every five years.

On Councillor Chevoppe-Verdier’s further question about the frequency of gap analysis, David Hughes advised it would be an annual exercise with refreshed information being fed into the annual self-assessment and the Head of Internal Audit’s Annual Reports. In addition to these annual engagements, the internal audit works would be subject to external assessments once every five years. During the interim, the Audit Committee would be briefed on a regular basis about the gaps and steps taken to address them. David said the Committee could give some thoughts on the appointment and engagement frequency of the independent external reviewer in order to obtain an assurance sooner when the GIASs were newly implemented.

In response to the Chair’s concern about the acute shortage of auditing professionals in the market and hence possible delays of assurance, David Hughes agreed recruitment in the internal audit space was a challenge.  There were plans to bring more apprenticeships to grow in-house talents and reduce external reliance.  He added discussion was also underway with IIA to see how it could help organisations like local authorities to carry out the plans in a cost-effective and timely manner. Councillor Chevoppe-Verdier was pleased to note about staff development and retention plans and looked forward to seeing the outcome-focused provisions in the Standards took root. 

RESOLVED

That the Committee agreed

1. To note the content of the report and refer to the guidance found in appendices 1-3; and
2. To request a further report on the implementation of the standards once the relevant sector guidance had been published, including any actions identified and taken as a result of the gap analysis to be carried out.