There is now more information available on the new approach.

Apparently, "In an ideal world we wouldn’t want to audit at all. We know it involves a lot of work for providers and it’s also a big drain on the resources of the LSC." They want to reduce auditing for the good guys and concentrate it on the risky providers

The news item is here:
www.legalservices.gov.uk/civil/cls_news_13008.asp?page=1

But the page introducing the new audit guidance is here:
www.legalservices.gov.uk/civil/auditing.asp
and it warns that "During our visits to providers we’re still uncovering significant problems. For example, during the year up to 31 March, 2011 more than 1,100 contract notices were issued and £12m of overpayments and misclaims identified."

There is now a detailed chart setting out the seventeen types of compliance and audit we could be subjected to here:
www.legalservices.gov.uk/docs/main/Audit_and_file_verification_work.pdf

And a list of the relative seriousness of the various possible audit-failure crimes is published here:
www.legalservices.gov.uk/docs/main/Provider_dashboard.pdf

And after the destruction of big players like RMJ, IAS and L4A, we know they ain't kidding...