OSCR recently conducted some research that found that a number of charities are failing to ensure that their financial statements are subject to the appropriate external scrutiny and independent review of the financial information.
It also identified some confusion around the correct use of terminology. People often talk about needing an audit when they mean an independent examination. Our EQ Charities team explain the circumstances of when your charity needs to be audited below.
When is an Audit required?
All charity financial statements must be independently scrutinised, but whether you need to carry out an audit or an independent examination will depend on a number of factors.
An audit is required when:
- The gross income in the financial period is £500,000 or more; or
- The assets of the charity are more than £3.26 million; or
- The charity’s governing document states that the financial statements are to be audited; or
- The charity trustees request an audit; or
- Other legislation necessitates an audit.
It is important to note that the above requirements are ‘or’ rather than ‘and’. Also, these requirements are to be reviewed every year in isolation – there is no one year’s grace as there is in other legislation.
It may be that your charity breaches neither of the financial thresholds but still requires and audit because your governing document includes it. If that is the case, perhaps a change to that document is required.
If you would like to discuss how we can help you complete your charity accounts, independent examination, or audit, please contact a member of our EQ Charities team at charities@eqaccountants.co.uk, or call one of our offices.