My Lords, I thank the noble Lord, Lord Beecham, for raising this interesting point, but I am bound to say that I have the same scepticism about this as the noble Baroness, Lady Eaton, and my noble friend Lord Tope. It is scepticism about whether it is necessary.
The Bill currently requires local authorities or local bodies to make a new appointment every five years, as the noble Lord said. In most cases, this will require them to go through a full EU tendering process. We expect that most authorities would have that as a requirement, if not in their code of procedure then in their code of conduct. They will also have to go through the process with the independent auditor panel, which will have to manage the tendering process so that it is both independent and transparent. The independent auditor panel will also look regularly at the quality of the audit from the auditors currently doing the job. If they are not doing the job, it will not recommend that they are allowed to proceed. The Financial Reporting Council has ethical standards as well, and will require that key audit staff are rotated on a regular basis. The Government believe that the requirements for a maximum five-year term and the rotation of key staff provide sufficient assurances, along with the other measures on auditor appointment and removal, to safeguard auditor independence and the local bodies’ independence of view in taking on their auditors.
I know that there have been wider discussions about, for example, a recent Competition Commission report on the need for mandatory auditor rotation. However, we understand that the evidence that mandatory rotation supports improved auditor independence and auditor quality is inconclusive. Bearing in mind what my noble friend Lord Tope and the noble Baroness, Lady Eaton, said, sometimes there is benefit in the continuation of an auditor, not on a cosy basis but because of the mere fact that, particularly with bigger authorities, you have somebody who understands the processes and what has been happening during the past five years. In any event, I think it would be wrong to exclude them from being able to tender, to bring down the barricade and say, “No, you can’t do that”.
There is sufficient professional involvement to ensure that auditors are not reappointed where they are unsuitable, where they have not done the job properly or where the local body thinks that they could do with
a change of auditor and makes that clear. I do not think we need to make it mandatory that they cannot go beyond five years; that would be too draconian. I am satisfied that we have the processes in place to ensure that a full appointments system takes place every five years. If the current auditors were seen to be the most successful, they should be able to be reappointed.
I hope that that explanation will satisfy the noble Lord, Lord Beecham, and that he will be able to withdraw the amendment.