60-seconds on the ICAS charity audit exemption guide
Guidance is available on charity audit exemption for ICAS members acting for charities in England and Wales.
Here, Christine Scott, Head of Charities and Pension at ICAS answers some quick-fire questions on the guide.
What is the guide for?
The guide is to help ICAS members acting for charities in England and Wales understand when a charity client is entitled to audit exemption.
What is covered in the guide?
An overview of the audit thresholds relevant to charities, including charitable companies, registered with the Charity Commission for England and Wales (the CCEW).
Do excepted charities fall within the scope of the guide?
Yes, they do. Excepted charities do not need to register with the CCEW. However, they are required to comply with the accounts and scrutiny requirements of charity law.
While they are not required to file accounts, they can be requested to do so by the CCEW and they must file an annual report and annual return.
Charities can be excepted by order or regulation but will need to register with the CCEW if their annual income in a financial year is more than £100,000.
What isn’t in the guide?
The guide does not specifically address the external scrutiny requirements which apply to exempt charities.
Exempt charities are those exempt from registering with the CCEW. Most exempt charities have their own ‘principal’ regulator. Therefore, the legal requirements which apply to the audit of an exempt charity depend on how the charity is constituted and the regulatory regime under which it operates.
What charities will be audited?
Most charities in England and Wales will be below the audit threshold, in terms of size. Some charities which are below the audit threshold will receive an audit because their constitution requires one or due to trustee or donor preference.
ICAS members acting for charities in this position should encourage the trustees to review on a regular basis whether an audit is the required or is the most appropriate form of scrutiny for the charity.
What if the funder or donor want an audit?
Where funder or donor preference is the only reason for undertaking an audit, charity trustees should be encouraged to engage with them to establish whether an audit is really necessary to meet their needs.
What if the charity is not audited?
Charities which do not receive an audit must receive an independent examination under the Charities Act 2011 unless their gross annual income is less than £25,000.
The trustees of such charities are still required to prepare annual accounts in accordance with the charity law and, of course, a charity’s trustees can choose to have its accounts independently examined or audited if they wish.
ICAS member firms undertaking an accounts preparation engagement for a charity should follow our Framework for the preparation of accounts.
Who can audit a charity?
Only accountancy firms which are registered to undertake audit work.