Part 4: Annual accounts and external audit – Academy Trust Handbook – Guidance

Appointment of external auditors

4.5 Under the Companies Act 2006, academy trusts must appoint an auditor to advise on whether their annual accounts present a true and fair view of the performance and financial position of the trust (appointment being made by members, except where the Companies Act allows the trustees to be appointed – for example for the first account period). Trusts should renew their external audit contract at least every five years and should take into account the relevant points of 4.17 during the assessment.

4.6 The audit contract and the regularity mission as described in 4.15, must be in writing and should not cover other services. If additional services are purchased, a separate letter of commitment should be obtained detailing the labor and costs. Trusts should note that auditors are subject to the Financial Reporting Council’s ethical standard, which aims to strengthen auditor independence and prevent conflicts of interest when additional services are provided to a client.

Replacement of external auditors

4.7 Letter of commitment must allow the dismissal of the statutory auditors, before the expiration of the mandate, in exceptional circumstances. Proposals for dismissal of auditors must require a majority vote of members who must justify its decision to the board of directors. The must be a requirement in the engagement letter for auditors to provide the trust with an explanation if auditors resign, within 14 calendar days of their resignation.

4.8 Board of directors must immediately inform ESFA of the dismissal or resignation of the statutory auditors. For the withdrawal, the trust must notify ESFA of the reasons, copying to ESFA any statement received from the auditor on this subject. For the resignation, the trust must copy to ESFA an explanation from the auditors. A change of auditor at the end of their agreed mandate does not require notification to ESFA.

Auditors and sector account

4.9 The DfE will consolidate the accounts of each academy trust in a report and sectoral annual accounts (SARA). The DfE will use the verified financial statements and other information to generate the SARA, which the National Audit Office (NAO) will verify.

4.10 As each trust is a component of SARA, the trust must prepare the financial information requested by the DfE for this purpose.

4.11 Academy trust auditors will be required by the DfE to audit certain information, and this requirement should be incorporated into the terms of engagement.

4.12 The NAO must rule on the regularity of ESFA’s accounts and will rely for this on the regularity opinions of the auditors.

Shirlene J. Manley