Is Independent Examination the Same as an Audit?

A clear guide explaining the key differences between independent examination and audit for UK charities.

The Short Answer

No, independent examination is not the same as an audit. They are two different types of financial review, and understanding the difference is important for any charity trustee.

Think of it this way. An audit is like a full health check at the doctors, with lots of tests and detailed examination. An independent examination is more like a quick check-up. It still gives you useful information, but it is not as thorough or as expensive.

Key Differences Between Independent Examination and Audit

Here are the main ways in which independent examination differs from a full audit:

  • The level of testing. An auditor will test your systems and controls in detail. They will check lots of transactions to make sure everything is working properly. An independent examiner does much less testing. They will look at a sample of transactions to check things appear correct, but they do not test every single item.
  • The level of assurance. An audit gives what is called "reasonable assurance" that the accounts are correct. An independent examination gives "limited assurance". This means the examiner is saying "these accounts look right" rather than "these accounts are definitely right".
  • The cost. This is usually the biggest difference for charities. An audit can cost anywhere from £2,000 to £10,000 or more, depending on the size and complexity of your charity. An independent examination typically costs between £300 and £2,500. That is often a fraction of the cost of an audit.
  • The time it takes. An audit involves much more work, so it takes longer. An independent examination can often be completed in a shorter timeframe, which is helpful if you are working to a tight filing deadline.
  • Who can do it. An audit must be carried out by a registered auditor. An independent examination can be done by a wider range of people, including qualified accountants, appropriately experienced individuals, or even volunteers with the right skills for smaller charities.

Side by Side Comparison

Aspect Independent Examination Statutory Audit
Level of assurance Limited reasonable assurance High reasonable assurance
Testing procedures Sample-based testing of transactions Extensive testing of controls and transactions
Typical cost £300 to £2,500 £2,000 to £10,000+
Time required Fewer hours needed Significantly more hours
Fraud detection Limited detection capability Better detection, but not guaranteed
Who can carry it out Qualified accountants or appropriately experienced individuals Registered auditors only
Legal requirement Charities with £25,000 to £1 million income Charities over £1 million income or with other audit triggers

When Does a Charity Need Which?

In the UK, the law decides whether your charity needs an audit or an independent examination. It depends mainly on your annual income:

  • Under £25,000 income. You do not legally need an independent examination or an audit. However, many charities choose to have some form of external check even at this level, as it is good practice.
  • £25,000 to £1 million income. You must have an independent examination. This is the legal requirement for charities in this income band.
  • Over £1 million income. You must have a full audit. There are also other triggers that can require an audit, such as if your charity is a charitable company, or if your governing document requires an audit.

Even if your charity is above the audit threshold, you can still choose to have an independent examination instead if your trustees decide this is appropriate, unless you are a charitable company (which must be audited by law). Some charities do opt for a voluntary audit because their funders or stakeholders expect it.

Benefits of Independent Examination Over Audit

For charities that qualify for independent examination, there are several advantages to choosing this option:

  • Lower cost. This is often the deciding factor for small and medium-sized charities. The money saved can be spent on charitable activities instead.
  • Less disruption. Because the examiner does not need to test as much, there is less demand on your staff and trustees time.
  • Faster completion. You are likely to get your report back more quickly, helping you meet your filing deadlines.
  • More flexibility. You have a wider choice of who can carry out the examination, including qualified volunteers for smaller charities.

However, it is worth noting that an audit does provide more assurance and may be expected by some large funders. If you are applying for major grants, check what the funder expects before deciding.

In Summary

Independent examination is not the same as an audit. Here is what you need to remember:

  • An independent examination is a lighter-touch review of your accounts
  • An audit is a more thorough examination with more testing
  • Independent examination costs much less than an audit
  • Your charity income determines whether you legally need an audit or independent examination
  • Most charities with income between £25,000 and £1 million only need independent examination
  • Charities over £1 million must have a full audit

Need Help Understanding Your Options?

Our specialist charity accountants have years of experience helping charities understand whether they need an audit or independent examination. We can guide you through the process and provide the right level of assurance for your charity.

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