The Charity Commission is the regulator for charities in England and Wales. Here is what their official guidance says about independent examination.
The Charity Commission for England and Wales is the official regulator of charities in England and Wales. They set out clear guidance on when independent examination is required and what it should involve.
Their guidance makes a clear distinction between independent examination and audit, and explains exactly what trustees need to do to comply with the law.
According to Charity Commission guidance (CC22), the requirement for independent examination depends on your charity's annual income:
No independent examination or audit is required by the Charity Commission. However, you must still prepare annual accounts.
Independent examination is required. The examiner does not need to be a registered auditor but must be independent of the charity and have appropriate skills and experience.
Independent examination is required. The examiner must be independent and have appropriate qualifications or experience. Some charities in this bracket may qualify for audit exemption.
Full statutory audit is required. An independent examiner is not sufficient.
Full statutory audit is required regardless of income level.
The Charity Commission guidance sets out who can act as an independent examiner:
The examiner must have no connection to the charity that could compromise their independence. This includes not being a trustee, employee, or close family member of a trustee.
For charities with income over £250,000, the examiner should normally be a member of an appropriate professional body (such as ICAEW, ACCA, or ICAS) or have equivalent experience.
The examiner should have appropriate professional indemnity insurance to cover their work.
According to CC22, the independent examiner's role involves:
The examiner checks that the accounts are properly prepared and are in accordance with the charity's records and governing document.
The examiner agrees the figures in the accounts to the underlying accounting records, such as bank statements and invoices.
The examiner produces a written report to the trustees, identifying any material matters that need attention.
The examiner states whether the accounts show a true and fair view, or whether they have concerns that need to be raised.
The Charity Commission is clear that independent examination is not the same as a full audit:
Unlike an audit, independent examination is not specifically designed to detect fraud. However, the examiner should report any concerns they come across.
The examiner does not test your charity's financial controls in the same way an auditor would.
Less verification work is carried out compared to a full audit. Sample sizes are typically smaller.
The Charity Commission requires the following documents to be filed:
Deadline: These documents must be filed with the Charity Commission within 10 months of your financial year end.
The Charity Commission publishes several documents relevant to independent examination:
The main guidance document on independent examination requirements and procedures.
Guidance on completing your annual return to the Charity Commission.
Guidance on maintaining proper financial controls, which supports the independent examination process.
Our specialist charity accountants understand Charity Commission guidance inside out. We can help ensure your charity complies with all requirements.