HL Deb 21 July 1995 vol 566 cc517-9

1.27 p.m.

Lord Lucas rose to move, That the code of practice laid before the House on 27th June be approved [25th Report from the Joint Committee].

The noble Lord said: My Lords, the updated Code of Audit Practice for Local Authorities and the National Health Service in England and Wales has been prepared by the Audit Commission and is now presented for approval by this House.

Appointed auditors have a duty to comply with the code in carrying out their functions under Part III of the Local Government Finance Act 1982. Responsibility for the code rests wholly with the Audit Commission. As required by the 1982 Act, the Commission has consulted the bodies most directly concerned: local authority associations, and representative bodies for the National Health Service and the accountancy profession. The code has also been the subject of consultation with the commission's own auditors—the National Audit Office—the District Audit Service and private accountancy firms and government departments.

The commission has taken legal advice on the form and content of the code and is satisfied that it covers all appropriate aspects of auditors' responsibilities. The code can only deal with the auditor's own powers and duties. Other people's responsibilities are mentioned only where it is necessary to explain the auditor's own function. However, the commission has used the explanatory foreword, which is not part of the code, to set the auditor's role in context.

The content of this updated code is not radically different from the current version. Certain changes have been made specifically to bring the code into line with current thinking or to take account of recent developments. The key ones are as follows. References have been added to the auditor's statutory duties under Section 3 of the Local Government Act 1982, which were not enacted when the current code was approved. These are to ensure that, where an audited body has a duty to publish performance information, it has made sufficient arrangements for collecting, recording and publishing the information. Performance indicator work for the National Health Service is not covered by the code as it is done in response to a request from the Department of Health, on a non-statutory basis.

The updated code generally expresses the auditor's duties, including their duty of care, more clearly. This will help auditors themselves, and those who have an interest in their work, to understand better the framework in which they operate. In particular, new paragraphs on the scope of the code (paragraph 1) and the scope of the audit (paragraph 5) seek to dispel any misconception about how the code is to be applied or about what can be expected from the auditor.

The code gives greater attention to the need for auditors to follow up local value-for-money work and to encourage audited bodies to realise identified opportunities for efficiency savings. It would be easy to take for granted the professionalism and integrity of the auditors and the Audit Commission on which we rely to ensure that public money is accounted for properly. But those high standards are not achieved by accident. They are the result of personal commitment and professional attention to detail. This code has a key role in ensuring that audit work is carried out thoroughly and effectively. I beg to move.

Moved, That the code of practice laid before the House on 27th June be approved [25th Report from the Joint Committee].—(Lord Lucas.)

Lord Carter

My Lords, I thank the Minister for introducing the order. I shall be extremely brief. Obviously we welcome the code. Can he tell us how the work of the Audit Commission in future in this respect will relate to the Nolan review, which has undertaken a review of local government and the way in which finances are controlled? If Nolan makes certain recommendations, will it mean a revised code?

Should a part of the Audit Commission's function be to test or evaluate the adequacy of arrangements regarding the conduct of Members and officers? That has been suggested, by the AMA for example. Is that a proper role for the Audit Commission? If not, who should do that? If there were some form of evaluation, it would enable an appraisal to be made of the various authorities and the way in which they implement national codes of practice.

Are the Government entirely satisfied that the code is explicit enough regarding disclosure of pecuniary interests of Members and staff? What are the formal procedures for evaluating auditors' compliance with the code? What is the procedure for ensuring that the auditors who are responsible for carrying out the code in the local authorities and the NHS in fact are doing the job properly?

I have one final question, on which I am sure the Minister has been briefed—at least I hope so—which concerns the legal status of the advice given by the Audit Commission. That point has arisen from a particular case in which a former legal adviser to the Audit Commission, Mr. Childs, gave certain advice—he has since left the commission—which has caused some concern over the use of pension funds. What is the legal status of advice given by the Audit Commission? There is a famous judgment to the effect that an auditor is a watchdog and not a bloodhound. It would be helpful if the Minister could tell us which of those roles he believes that the Audit Commission fulfils.

Lord Lucas

My Lords, I am very conscious of the remarks made by the noble Lord, Lord Williams, when he suggested that this was a boring subject. I am an accountant. I do not consider it boring. I consider it deeply fascinating. I should like to reply to the noble Lord, Lord Carter, at great length.

Lord Williams of Elvel

My Lords, I beg the noble Lord's pardon. I have not made any remark. I have not risen to speak. I have not intervened. Would the noble Lord care to withdraw his observation?

Lord Lucas

My Lords, I am very sorry if I misheard the noble Lord. Nevertheless, I am conscious that there are other subjects on noble Lords' minds today. The noble Lord, Lord Carter, asked a number of detailed questions, to which I should like to give a proper reply. If the noble Lord will allow it, I should like to give that reply in writing.

On Question, Motion agreed to.