All Scottish charities are required by law to prepare annual accounts.
Annual accounts consist of:
- financial statements and explanatory notes (numerical
information)
- a Trustees' Annual Report (a narrative providing details
which cannot be expressed in financial terms)
- an external scrutiny report.
We have published specific guidance on how to prepare
accounts. This guidance has been updated in 2011 to reflect changes
in the statutory requirements. Click on the links below to read
this guidance or read our
Scottish charity
accounting page.
Under statutory requirements, the accounts of Scottish
charities must also be externally scrutinised. That is, someone who
is independent of the charity must review the accounts and produce
a report, attached to the accounts, that highlights any issues to
the reader.
External scrutiny is an important component
of the overall regulation of charities in Scotland.
Forms of external scrutiny
There are two recognised forms of external scrutiny:
Independent examination
An independent examination will look at a charity's accounting
records and annual accounts and consider whether the annual
accounts are a fair reflection of the underlying records. An
independent examination provides a degree of comfort to the reader
that the figures in the accounts, including the Trustees' Annual
Report (TAR), present an accurate picture of the financial activity
of the charity during the accounting period.
Also involved in the examination process is consideration of
any unusual items in the accounts that may require further
discussion or explanation from the charity trustees.
Please read our
Independent Examination
guidance for further information about the requirements and
best practice procedures. You can choose to view the guidance
in full or read specific sections which have been written with
particular groups in mind.
Audit
Under the 2006 Regulations, if the term 'audit' is used in a
charity's constitution or governing document, the charity must have
its accounts audited by either:
- a registered auditor
- the Auditor General for Scotland
- an auditor appointed by the Accounts Commission for Scotland
(responsible principally for public bodies).
Audits are more commonly required for larger charities, although
smaller charities may also require an audit as a result of a
provision within their governing document or a decision of the
charity trustees.
Choosing the correct form of external scrutiny for your
charity
The type of external scrutiny you choose depends on your
charity's gross income and net assets and whether or not the
charity is also a company.
To understand what form of external scrutiny is required for
your charity's accounts, please refer to section 3 and figure 2
within the updated accounts
guidance.
Guidance
We have published guidance for charities and independent
examiners with further information about the requirements and best
practice procedures. This is a large document. You can
choose to download the full guidance or just those sections which
are applicable to you.
Please click on the links below:
Guidance sections:
Section
4: Eligibility for independent examination (all)
Section
5: Who can act as an independent examiner? (charity trustees
and independent examiners)
Section
6: How to select and appoint an independent examiner (charity
trustees and independent examiners)
Section
7: Preparation for an independent examination (charity
trustees)
Section
8: The work of the independent examiner (independent
examiners)
Section
9: Whistleblowing - continuing reporting duties for independent
examiners (independent examiners)
Section
10: Cross-border charities (charity trustees and independent
examiners of cross-border charities only)
Appendix
1: Summary of accounting requirements for Scottish
charities
Appendix
4: Example independent examiner's reports