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Our final agenda item is on Audit Scotland’s report, “Quality of public audit in Scotland: Annual report 2025/26”.
I again welcome: Colin Crosby, chair of the board; Stephen Boyle, the Auditor General for Scotland; Vicki Bibby, the chief operating officer; and Waqas Sanawar, the head of finance, all from Audit Scotland. I also welcome Jonny Steen, director of audit quality and appointments at Audit Scotland. I thank them all for joining us today and invite Jonny Steen to make a short opening statement.
We present our report on the quality of public audit in Scotland for 2025-26; we believe that it tells a positive story. There are very good results for both financial and performance audit. As was mentioned earlier, there is still some work to do on audit delivery and I would be happy to discuss that today. Importantly, the report also covers feedback from our stakeholders. Each year, we send a survey out to the audited bodies and you will see that we have consistently achieved strong feedback from stakeholders and from the people that we work with on our audits.
That is all that I want to say by way of introduction; I am happy to take any questions.
That is helpful. You mentioned feedback. Can you outline some of the potential changes that those you audit have fed back to you? We have heard evidence today about some of the reasoning behind delays and we would like to hear about the feedback that you have had on that from different organisations.
As chapter 5 of the report sets out, we measure survey results on a scale of 1 to 5, with 4 being a level at which stakeholders feel that the annual audit is, overall, useful. Across the board, most of our indicators sit at between 4 and 5, which shows that we have good engagement with the audited bodies.
As was mentioned earlier, there is late delivery for some audits in our portfolio and those tend to get lower survey responses. That can happen when there are challenges with particular audits or when adjustments are required. The feedback can also be slightly lower when there has been a more protracted audit process or more complications, which can also happen with larger audits.
That is a broad picture of the feedback that we get. As I said, overall, feedback has been consistently positive for a number of years.
Would any other members like to ask any questions?
Earlier in the meeting, I asked about feedback and about the reviews carried out by the Institute of Chartered Accountants in England and Wales. It would be helpful to hear more about that, about what you have learned from its recommendations and about how you share those with external auditors.
That is an absolutely crucial part of the quality process. As the Auditor General explained, we have a contract with ICAEW, which specialises in monitoring quality across the UK, not just in Audit Scotland, and can share knowledge about what is going on elsewhere in the UK with the other audit agencies that it also reviews.
As has already been mentioned, we have a strong internal quality team, which we have built up over the past four or five years. My previous role as head of quality involved helping to establish that team and ensuring that our quality monitoring arrangements are continual throughout the year. They are no longer part of an annual process, whereby the results are cold reviews, as we call them—the graded reviews of completed audit engagements; our internal team also carries out a series of hot reviews throughout the year, which are thematic reviews to support audit teams. That is a constructive and supportive process, especially for new engagement leads, managers and directors.
The ICAEW feedback is a crucial part of learning about areas of improvement that we need to make. We have a very strong connection with quality findings, which inform our training offering and the delivery of audit approaches, methodologies, systems and tools that may need to be developed. That gives us a crucial indicator, which Audit Scotland uses in order to improve.
I would echo all that Jonny Steen has said. As well as being the recipient of audit work, I am directly involved in two audits personally: those of the Scottish Parliamentary Corporate Body and the Scottish Government. They are both hugely important organisations, and they are two of the highest-profile ones that we audit. By its nature and scale, the Scottish Government audit is particularly complex: it is a consolidated group audit.
The work done by Jonny Steen and his colleagues, and by our innovation and quality team, brings learning from quality reviews back into what happens the following year. That involves improvement plans and technical panels. We can see from the current work, as we are concluding our audit of the Scottish Government, that the technical panel is benefiting from recommendations and judgments made through quality reviews, whether by ICAEW or by the internal teams. We are living the results of quality; it is not an abstract thing involving an improvement plan that is reported to the executive team and the board. We can see, day in, day out, that organisations want to maintain high standards. Where we do not get it right, we make the necessary changes for the following year.
When I was reading the papers, did I notice that there is an audit connection across the world, and that you have been involved in that? I think that your deputy leader is involved. Can you talk a bit about that? What learnings have been coming into Scotland from that international activity?
I am happy to start on that, and Vicki Bibby and Jonny Steen might want to say a word as well.
We want to be an outward-facing organisation that learns from elsewhere—in Scotland, the United Kingdom, Europe and beyond. That is a stance that Audit Scotland has had for a long time. We have undertaken international work and we have engaged internationally for many years.
Currently, there are two main vehicles. First, Audit Scotland is a member of the Public Audit Forum, which encompasses the National Audit Office, Audit Wales, the Northern Ireland Audit Office and ourselves. I meet my contemporaries a couple of times a year to exchange insight and learning. We have connections across different roles and responsibilities throughout the organisation. The Public Audit Forum is a really important vehicle for us. We are all dealing with relatively similar issues; it is also about sharing resources.
We have touched on this already this morning: one of the important benefits from that has been the technology that we have accessed and shared from developments at the National Audit Office. That has served us very well. Vicki Bibby has touched on our engagement with the creation of the local audit office. There has been a desire for local government accounting in England to address some of the many challenges that that sector has faced for the best part of 10 years. We are playing our part in helping to establish that organisation.
You have mentioned our European engagement. We are members of EURORAI. Forgive me, but there are a lot of acronyms in audit.
There always are.
EURORAI is the European Organization of Regional Audit Institutions.
Audit Scotland is currently involved in its management arrangements: we hold the deputy presidency, as I think it is referred to. Some of the titles are quite grand. In 2028, Audit Scotland will become the president of EURORAI. That is a tremendous accolade for us as an organisation. It allows us to engage with regional and national audit bodies across Europe. We are learning from their application of international standards and applying those lessons to our performance audit and best-value work.
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Jonny Steen or Vicki Bibby might want to say a bit more about this, but we have delivered sustained, high-quality performance audits. There is plenty of assurance from me and the Accounts Commission on the work that has been undertaken, and I hope that that extends to Parliament and the users of our work.
The wider context of quality monitoring and reviews is that they are intended not only to identify issues but to share best practice. We have had a number of results this year that are grade 1 audits. Those are excellent results.
We carry out root-cause analysis for both positive findings and areas of improvement audits to share that learning. That happens within Audit Scotland but also with the other agencies that the Auditor General has just described. That learning with staff and other agencies is crucial.
I am never quite sure what is defined as “international”, but one thing that has been instigated over the past 12 to 24 months has been twice-yearly meetings of the chairs of the four audit organisations in the UK, which has been well received and proved very useful. There is no formal agenda, but issues and problems are shared, and that is hugely useful.
The other thing that comes out of that—it sits ill with me to be immodest—is that it would be quite wrong to say that Scotland is not one of the thought leaders of that group. We are ahead of the curve in many things, and we should be quite proud of that. It is also good to be ahead of the curve because, if we can be the instigators of change, it is a heck of a sight easier to implement it ourselves than to implement it on somebody else’s terms.
You are allowed to sing your own praises.
Absolutely.
Maybe we do not do that enough in Scotland, to be quite honest.
I have a final question. Earlier, we discussed the development of a potential new model for smaller audits. How would you guarantee and maintain the quality of such audits? Given what you have outlined in relation to the other UK audit bodies, are they also looking to adopt such a model? Is there a model in development that shows what that might look like in practice? It would be quite useful for us to understand what that might look like.
We cast our net widely to explore how other jurisdictions are tackling the challenge of proportionality, so that audit can still provide assurance while remaining manageable and reasonable, especially for smaller bodies. There has been a lot of discussion about the need to do that in different places.
To echo Colin Crosby’s point, we are further ahead than many other places in introducing this approach. We know that discussions are taking place, broadly in parallel, including in HM Treasury and the National Audit Office. There has been considerable discussion in the profession about varying standards of assurance for smaller organisations and lower audit thresholds under the Companies Act 2006. We have tried to strike a balance. We consider that public spending should be subject to a higher level of assurance than would apply in a commercial setting. We are still providing assurance to Parliament and taxpayers, but we are doing so in a way that is more manageable.
I will pause there to see whether Jonny Steen in particular wants to add anything.
I will add one quick point. A report is underpinned by an audit quality framework, which sets out what constitutes high-quality public audit work for all of our audit providers. That framework will need to be revised as a result of the changes that are coming in the code of audit practice and for the smaller bodies that you have referred to. That work will be part of activities next year.
That is helpful.
As we have no more questions, I thank you all for the evidence that you have given to us this morning, as well as those who have provided written evidence. Finally, I thank our clerking team and the Scottish Parliament information centre for their support today.
Meeting closed at 12:04.