Not every charity needs a full audit. Here is everything you need to know about when your charity must have an audit rather than an independent examination.
Your charity needs a full audit instead of an independent examination when your annual income exceeds certain thresholds. The exact threshold depends on where your charity is registered, but for most charities in England and Wales, an audit becomes mandatory when income reaches £1 million.
Below these thresholds, an independent examination is usually sufficient and significantly cheaper. The audit threshold exists to protect larger charities and their stakeholders who have a greater financial exposure.
The Charity Commission for England and Wales sets the following requirements:
No external check required. Your charity must still prepare accounts, but they do not need independent examination or audit.
Independent examination is required. A full audit is not necessary unless your charity specifically requires one under its governing document or another regulation.
Full statutory audit is required. This is a legal requirement for charities registered with the Charity Commission.
Full audit required regardless of income level. Assets are considered before deducting liabilities.
The Office of the Scottish Charity Regulator (OSCR) has different thresholds:
No external check required, but accounts must still be prepared and submitted to OSCR.
Independent examination is required by law in Scotland.
Full audit is mandatory. OSCR requires charities above this threshold to have their accounts audited by a registered auditor.
The Charity Commission for Northern Ireland follows similar thresholds to England and Wales:
No independent examination or audit required.
Independent examination is required.
Full audit is required.
Even if your charity falls below the audit threshold, there are circumstances where a full audit might still be required:
Your charity's constitution, trust deed, or governing document might specifically require an audit regardless of income level.
If your charity is also a company registered at Companies House, the Companies Act requirements may trigger audit obligations even for smaller charities.
Some grant agreements or funding bodies might require an audit as a condition of receiving or distributing funds.
The Charity Commission or another regulator might require an audit in specific circumstances, such as during an investigation.
If a certain percentage of trustees or members request an audit under your governing document, you might be obligated to comply.
| Aspect | Independent Examination | Full Audit |
|---|---|---|
| Level of assurance | Limited (negative assurance) | High (reasonable assurance) |
| Testing of controls | Limited or none | Extensive testing required |
| Sample sizes | Smaller samples | Larger, statistically valid samples |
| Fraud detection | Not specifically designed to detect fraud | Includes specific fraud detection procedures |
| Examiner qualifications | Appropriate knowledge and experience | Must be a registered auditor |
| Typical cost | Lower cost | Significantly higher cost |
UK charity accounting rules can be confusing. Our specialist charity accountants can help you understand exactly what applies to your charity.