Regional ALC as trainer, advisor, and Internal Auditor?

Question

It's common for a council's regional Association of Local Councils to be engaged to carry out the council's Internal Audit. But is there a potential conflict between the ALC's role as auditor and trainer/advisor?  The internal audit often concerns matters in which the ALC has been involved. I understand the ALCs typically put some measures in place to keep auditors separate from advisors, but is this sufficient? Cf. the 'big four' accountancy firms also providing advice to companies - a source of controversy.

The Joint Panel on Accountability and Governance Practitioner's Guide (March 2021) says:

 Independence

10. A current or recent authority member, who cannot demonstrate independence from decisions in the year to be audited, cannot be its internal auditor. Similarly, it would not be appropriate for any individual or firm with a personal connection to a member or officer of the authority to be appointed. Conflicts of interest must be avoided, such as in cases where an external provider of accounting software or services to the authority, also offers internal audit services through an associate company, firm or individual.

Isn't an ALC acting like a firm that provides services to the council on addition to its audit service?

Answer 1

It's an interesting point and I'm not sure that my ALC can demonstrate the separation of roles you mention. Some ALCs are little more than a one-man band these days. Not sure how much IA work they do, as in my experience, they've priced themselves out of the market.

Answer 2

In the version of the same document for 2023 I also found this:

There are various ways for an authority to source an internal audit service, for example: 

● Purchasing an internal audit service from a local firm or specialist internal audit practice with an understanding of the local government legal framework 

● Purchasing an internal audit service from a principal local authority 

● Engaging a competent internal auditor with sufficient organisational independence to undertake the role 

● Appointing a local individual or a member of a panel of individuals administered by a local association affiliated to NALC, SLCC or ADA

So, this says it's fine.  But it seems contradictory to the other statement above which is still in the 2023 edition.  The assumption seems to be that the ALC must be sufficiently independent, despite it also probably providing other services to a council.

ALC's also have the stated aim of "protecting and promote the interests, rights, functions and privileges of members [ie. councils]". Also, supporting the "corporate interests" of councils. One could could argue that a proper and complete audit is in the interests of a council.  On the other hand, an org involved in providing advice to a council on matters covered by the audit might take the view that it is not in the interests of the council and/or the ALC to highlight all the areas for improvement. It might be in the public interest, but not in the council's interest or the ALC's. Am I wrong?

Comments

Conversely, an ALC trying to sell expensive training courses might be tempted to overstate the problems in order to make a quick buck by providing the solution!

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True! A system in desperate need of reform.