Charity accounts assurance

13th August 2019

Whether unincorporated, a charitable company or a CIO (charitable incorporated organisation), charities are required to have certain levels of assurance over their financial statements depending on their size. The limits are much smaller than companies, meaning that many charities require some sort of external scrutiny.

The requirements by size are as follows:

Income up to £25,000 No external scrutiny required*
Income £25,001 to £250,000 External scrutiny required
Income £250,001 to £1m and total assets below £3.26m External scrutiny required
Income over £1m or gross assets over £3.26m and gross income over £250,000 External scrutiny and full audit required

*unless the charity’s governing document requires a certain level of scrutiny

External scrutiny is a limited form of assurance where the accountant will prepare an ‘independent examiners report’ which will be attached to the charity’s financial statements. An independent examination, in contrast to a full audit, is more limited in scope than an audit as the accountant only needs to review specific matters required by charity law. For example, there is likely to be less in-depth testing, as the charity commission requires checking of the extraction of the underlying data into the accounts, and performing an analytical review.

A full audit is a reasonable form of assurance where the auditor will prepare an ‘independent auditors report’ which also be attached to the financial statements. It requires the auditor to follow detailed auditing standards, and reaching an opinion on whether the financial statements show a true and fair view of the charity. This requires auditors to review any areas of the accounts that could be ‘materially misstated’ – essentially any areas which could give rise to a large error.

In practice, a full audit is generally more wide-ranging in terms of testing, more rigorous, and must be carried out by a registered auditor. This means that charities will usually pay more for a full audit than an independent exam, as much more work is required.

Some trustees still choose to be subject to a full audit, despite not needing to by law. They often desire the additional assurance that an audit gives and believe the benefits outweigh the costs.



 
Other items in Blogs
 
Lisa Smith
10th August 2020 Covid-19 – VAT complexity of Eat Out to Help Out Scheme

  From 3 to 31 August 2020 businesses that offer a discount under the The Eat Out to Help Out Scheme are able to claim the discounted amount back from the Government.   Whilst on the face of it you might expect VAT only to be payable on the discounted amount, in-fact VAT is payable…

Read More »

Jodie Pheby
5th August 2020 DING DING – ROUND 2!

Claims for the second round of the Self Employed Income Support Scheme (SEISS) can be made from 17 August to 19 October.  The online claims service is not available yet: HMRC are expected to release further information shortly.   The second SEISS payment: Amounts to 70% (previously 80% for the first grant) of average monthly…

Read More »

Jaimie King
31st July 2020 Accounting for Coronavirus Support

Due to the pandemic, many Companies and businesses are receiving support from the government in the form of grants, loans and reliefs. Most of these businesses would not have accounted for something like this previously. UK Accounting Standards have different accounting rules for these types of transactions. Based on the latest guidance available, we have…

Read More »

Chris Kelly
31st July 2020 New grant for employing apprentices

A new scheme which will be launched next Monday, 3rd August to support non-levy paying businesses which recruit new apprentices aged 16-24.   The scheme is called Recruit – Retain – Reward and is provided by the apprenticeship teams at Norfolk and Suffolk County Councils.  It will pay the following:   £1,000 to businesses taking…

Read More »

Stephen Malkin
22nd July 2020 Government sets out draft agenda for a 21st century tax system

Today the government has set out its draft agenda for a 21st century tax system, they say these are the next steps in an ambitious plan to create a modernised digital tax system fit for the modern world.   This is part of the Treasury’s long term tax digitisation plan, which is designed to increase…

Read More »

Stephen Malkin
22nd July 2020 Are you MTD compliant?

Over the last week or two HMRC have begun getting in touch with small businesses across the UK who are not complying with Making Tax Digital (MTD) but are required by law to do so.  These businesses need to take action now to avoid any potential penalties being levied.   If you are a VAT…

Read More »