The Chartered Institute of Public Finance and Accountancy (CIPFA) has warned external auditors could be ‘reduced to signing off the accounts and meeting the regulatory requirements'.

Speaking at a Public Accounts Committee hearing, chief executive Rob Whiteman, said external auditors were not using their public interest reporting requirements enough and suggested CIPFA would work with them to ensure that they understood their duties.

He said: ‘When I entered local government, the external auditor was quite an important player in the good governance of the local authority, and the DA [district auditor] would comment on individual decisions, as well as the financial standing of the authority.

‘Northamptonshire wasn't Northamptonshire three years ago.

'It didn't make the decisions that it should have made three years ago to avoid getting where it has got to.

'There are other councils in that position now and we need to work with them in order to help them not go down the same route.'

However, speaking at the same hearing, head of the National Audit Office, Sir Amyas Morse, said external auditors did raise warnings but were ignored.

He said: ‘When you look at the report of Northamptonshire what you see is that, in the inspector's report, the auditors had raised red flags years before and they were casually ignored or they were treated casually.

‘I have to say that there are numerous qualifications and warnings out there.

'My question is: are they being paid attention to?

'In the view of many auditors, the answer to that is no. It needs fixing.'