This section tells you about the two types of external scrutiny, Independent Examination and Audit, when they should be carried out and what they entail.
This depends on its gross income and net assets or whether or not the charity is also a company. See Part 1: The Overview to check the type of scrutiny to which a charity must subject its statement of account.
All charities must have their accounts externally scrutinised in either the form of an independent examination or an audit.
Under charity law a charity preparing fully accrued accounts can have an Independent Examination where:
Where the thresholds are exceeded then an audit must be carried out by a registered auditor, or in the case of public bodies the Auditor General for Scotland or an auditor appointed by the Accounts Commission for Scotland.
Where a charity prepares consolidated accounts as the income of the group (after consolidation adjustments) is £500,000 or more, then these consolidated accounts must be audited.
Where the charity is a company then the requirements of the Companies Act 2006 also apply. If the charitable company does not meet the conditions for audit exemption under company law and therefore requires an audit under the Companies Act 2006, an audit is required under both the 2006 Regulations and the Companies Act 2006.
For further information about the requirements of the Companies Act 2006 you should contact your accountant.
For charities which produce fully accrued accounts, the independent examination must be carried out by a member of one of the following professional bodies:
See section 4 in Part 1: The Overview for guidance on deciding who to appoint as an independent examiner.
After completing the independent examination of a charity’s accounts the examiner must make a report to the charity trustees which:
Where a charity has prepared accrued accounts and requires an audit, the audit must be carried out by a registered auditor or by the Auditor General for Scotland or by an auditor appointed by the Accounts Commission for Scotland following UK auditing standards.
The auditor must prepare a report on the accounts for the charity trustees that:
The statement must contain the grounds for forming any of the above opinions.
In preparing the audit report the auditor must carry out such investigations as are necessary to enable an audit opinion be formed.
Where an auditor appointed by charity trustees resigns he or she must send to the charity trustees:
The auditor must also send to OSCR a copy of any statement he or she has sent to the charity trustees containing circumstances connected with the auditor ceasing to hold that office that he or she feels should be brought to the attention of the charity trustees.
Further detailed guidance on audit requirements can be found in Practice Note 11 – The Audit of Charities in the United Kingdom, produced by the Financial Reporting Council.
See section 4.3 of Part 1: The Overview for guidance on the independent examiners and auditors duty to report matters to OSCR under the 2005 Act.
More detail relating to this can be found within our guidance ‘Matters of Material Significance reportable to UK charity regulators’.
In addition to the reportable matters set out above auditors and independent examiners are may report any other matter which may be of significance to us in exercising our functions. Further information is available in our guidance – ‘Reporting of relevant matters of interest to UK charity regulators’.