ICAS calls for further charity law reform from the Scottish government
ICAS has called for the Scottish government to scope its planned wider review of Scottish charity law and urgently reassess the Scottish charity audit threshold, as charities struggle to recruit auditors.
In an open letter to Shirley-Anne Somerville MSP, Cabinet Secretary for Social Justice, ICAS has called for long overdue post legislative scrutiny of the Charities and Trustee Investment (Scotland) Act 2005. This comes following the welcome, but relatively limited reforms set out in the Charities (Regulation and Administration) Act 2023, which received Royal Assent last week.
ICAS also highlighted its concerns about the sustainability of the current external scrutiny requirements for charities’ financial statements, calling for the Scottish charity law audit threshold to be reassessed and the independent examination regime for Scottish charities to be strengthened.
ICAS Chief Executive, J Bruce Cartwright CA said:
“Increases to the company law audit threshold over many years has caused a fall in the number of accountancy firms being registered to undertake audit work. This continuing trend means there are fewer auditors available to take on audits, of not just companies, but other kinds of organisations, such as charities. Scottish charities have a significantly lower audit threshold than companies. For example, a company needs to have turnover of more than £10.2 million in a financial year before an audit is required, but a Scottish charity only needs to have gross income of £500,000 or more. The differential between these two thresholds only adds to the current challenges charities can face in finding an auditor.”
Cartwright also said:
“While the last significant uplift in the company law audit threshold took place in 2016, regulatory changes to the audit environment have led to a rise in demand for audit skills in a tight labour market and an increase in audit fees. The result is a greater risk that some Scottish charities may not be able to find an auditor to do their statutory audit.
To assist with this problem, the Scottish government should urgently review the charity audit threshold. We believe that it will also be necessary to strengthen the independent examination regime for Scottish charities by being more prescriptive about the work an independent examiner should undertake.”