Section 5 Appointment as an independent examiner

Published: 18/04/2019
Updated: 18/04/2019

Taking on the role of Independent Examiner can be a valuable way of contributing to Scotland’s charity sector. Ensuring charity annual reports and accounts are independently scrutinised is an important part of charities being transparent and accountable with the public.

Where an individual is approached to act as an independent examiner, they should ensure that they have the necessary knowledge of the 2005 Act, the 2006 Regulations, the SORP and accounting standards (if appropriate) and the charity itself to be able to carry out the examination.

They should also ensure that they comply with any relevant requirements of, or guidance issued by, any professional bodies of which they are a member, before accepting such an engagement. Individuals who hold membership of one of the professional bodies listed in section 4.2 should ensure that the status/level of their membership permits them to act as independent examiner of the accounts for the charity concerned.

Where an individual is a member of more than one professional body, compliance with the relevant requirements and guidance issued by all of those bodies should be ensured. They must have regard to the rules of the stricter body and not undertake an independent examination outwith those limits.

Where an individual has been asked to take on the role of independent examiner and there has been a previous examiner, there should be some form of correspondence between the previous and new examiner to ensure a smooth handover between them. This also allows any issues that may have been a factor in the previous examiner ceasing to hold office to be brought to the new examiner’s attention.

The new examiner may consider asking the following questions of the previous examiner. Has the previous examiner stopped acting for this charity because:

  • they have retired or changed their line of business?
  • the circumstances have changed such that the examiner cannot continue in that role e.g. the charity’s income has risen above a key threshold, or the individual wants to become more involved in the charity which would compromise their independence?
  • they are no longer prepared to work with the charity? For example, has their advice been ignored?

Before accepting appointment, the prospective independent examiner may wish to use the following questions as a guide to whether they feel they have the relevant skills and abilities to carry out the examination.

  • Do I have sufficient knowledge of the charity itself and the charitable sector?
  • Do I have sufficient understanding of the legal requirements for the charity’s accounts?
  • Are the accounts likely to be simple or complex?
  • Do I have the necessary skills to understand the level of complexity of the accounting records?
  • Am I independent of the charity trustees and the management, control and administration of the charity?
  • If this is my first appointment as an independent examiner, do I feel able to carry out the work?
  • Does my governing body authorise me to carry out the work? (qualified independent examiner).
  • Are there any issues raised by the previous examiner that need to be considered? (if applicable)
  • If I am being asked to prepare the accounts as well as acting as the independent examiner, do the trustees clearly understand the difference between my role in assisting them with their duty to prepare accounts and my own role as independent examiner? 

Milestone 3  

Should I accept appointment as independent examiner? 


Before accepting appointment, individuals may wish to consider whether it may be appropriate for them to take out professional indemnity insurance (PII) to cover them in their capacity as an independent examiner. This is normal practice for professionals acting in such a capacity and therefore potential examiners may wish to consider whether this would also be appropriate for them.

OSCR’s view is that it is difficult to foresee situations where it would be necessary for non-professional independent examiners to need professional indemnity insurance as it is hard to envisage where there may be third party exposure or significant risk arising from reliance placed on a set of receipts and payments accounts.

However, there are no set rules and, in highlighting this issue here, OSCR does so to bring the matter to the attention of the reader to enable an informed choice to be made.

Once the charity trustees have chosen an independent examiner, there should be a formal record of the agreement between the charity trustees and the examiner to ensure that both parties understand the services to be provided and the extent of the duties and rights of both the charity trustees and the examiner.

One method of formalising the relationship between the charity trustees and the independent examiner is by way of an ‘engagement letter’. This is most commonly used by independent examiners who are providing such services on a commercial basis – that is, they are charging a fee for such work – and will usually take the form of a formal letter issued by the independent examiner. Alternatively, a letter can be issued by the charity trustees.

An ‘engagement letter’ is usually written by the person who is being asked to act as an independent examiner. This type of letter is addressed to the charity trustees and sets out the services that the independent examiner will provide, their fee and the duties that they have, as an examiner, under the relevant legislation. The letter should include details regarding the timetable for the independent examination and a schedule of the work to be carried out.

The examiner will prepare and sign two copies of the letter and send them to the charity trustees for consideration and signing. Thereafter, one copy will be returned to the independent examiner and the other retained by the charity trustees for their own records.

Charity trustees are encouraged, as a matter of best practice, to consider formalising their relationship with the independent examiner by setting out the services that are expected via a letter of appointment. This will enable both parties to understand and appreciate the extent of the work and duties involved in the independent examination process.

For smaller charities, where the examiner is an unpaid volunteer for example, an email could be adequate if the charity trustees and independent examiner feel that this is appropriate.