Appointing auditors and monitoring audit fees

Councillors' guide to the Auditor-General.

The Auditor-General appoints auditors to carry out annual audits. These auditors are appointed from a group of about 50 audit service providers. For councils, the main audit service providers are Audit New Zealand, Ernst and Young, and Deloitte.

Most audits are allocated directly to an auditor, but from time to time an audit is subject to a competitive tender.

Although Audit New Zealand is organised and operates along the lines of a private sector professional services firm, it is not a profit-making business. It is expected to break even. Its audit fees are used as a benchmark for maintaining reasonable fees among all auditors who do work on the Auditor-General's behalf.

The Auditor-General monitors audit fees to ensure that fees are based on realistic hours (that is, hours that reflect the nature and extent of work required), an appropriate audit team mix, and charge-out rates that are in line with market rates. The aim is for fees that are fair to the public organisations and also provide a fair return to the auditors for the work they are required to do to meet the Auditor-General's auditing standards.

The allocation of audits and fee-setting and monitoring systems are independently reviewed annually to ensure that they are carried out with due probity and objectivity.