Regulator slams poor standards of charity accounts audits

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Most auditors and independent examiners in England and Wales failed to identify failings in charity accounts in 2017/18.

The claim comes from the Charity Commission, which scrutinised 296 charity accounts with various annual incomes.

The Commission found that accounts reviewed by auditors met its benchmark more regularly than independent examiners.

How its benchmark is applied depends on a charity’s size and legal form, with closer scrutiny applied to accruals accounts.

Up to 15 criteria apply, nine of which are compulsory for all charity accounts under review. The other six only apply to the scrutiny of charities with accruals accounts.

Only 44% of accounts submitted by qualified examiners met the benchmark, compared to only 18% of unqualified examiners.

Charities with incomes exceeding £25,000 must arrange for either an audit or an independent examination of their accounts.

Audits are compulsory for charities with incomes over £1 million, and those with incomes over £250,000 and gross assets over £3.26m.

Most other charities can opt for an independent examination, unless an audit is required for another reason, such as by the charity’s governing document.

Auditors determine whether or not a charity’s accounts are ‘true and fair’, while independent examiners undertake limited checks on certain matters.

The Commission said audits play a key role in underpinning public confidence in charities, especially when many rely on donations from the public.

Nigel Davies, head of accountancy services at the Charity Commission, said:

“The public care deeply about transparency in charities, and it is vital that charities are able to provide an accurate and clear picture of their finances.

“It is disappointing that so many independent examiners and auditors appear to lack the necessary understanding of the external scrutiny framework.

“Those that are getting this right are playing an important role in upholding charities’ accountability; clearly others are letting the profession and charities down.”

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