The announcement comes in the wake of the Financial Reporting Council’s (FRC) annual audit reviews of the biggest firms.
The FRC’s review found that “poor quality audit work remains unacceptably common” across the six largest firms in the UK.
Brokenshire’s new review will assess the speed at which auditors spot early warning signs, and whether audit practice for councils should be a more transparent process.
It will also investigate whether the public has lost faith in the major audit firms. After high-profile failings at Carillion and Patisserie Valerie, among others, the review will come as the audit profession is under intense scrutiny.
Brokenshire’s ministry has overall responsibility for local authorities’ funding, which accounts for around a fifth of UK public spending.
The House of Commons Committee of Public Accounts reported its research on the Communities Department earlier this year.
“When we examined the financial sustainability of local authorities in July 2018, we concluded that the Department did not have a consistent and transparent method to assess financial risk in local authorities”, the committee said.
It also noted that in response to its report, “the Department committed to publishing more information about projections for demand and spending six months after the conclusion of the next Spending Review, but it did not agree to work with the sector to reach and publish a shared definition of financial sustainability.”
Sir Tony Redmond, a past president of the Chartered Institute of Public Finance and Accountancy, will lead the review. His initial recommendations are expected to arrive in December, with a final report in March.