Guidance for charity independent examiners on going concern
ICAS Charities Panel Guide on going concern for ICAS members acting as charity independent examiners.
About the Guide
The Panel’s Guidance for ICAS members acting as charity independent examiners: Identifying, assessing and reporting on going concern has been prepared in recognition of increasing stakeholder focus on the going concern status of charities.The Guide applies to reporting periods commencing on or after 1 January 2016.
- Applies UK-wide to the independent examination of accounts prepared to give a ‘true and fair’ view. It is intended to be practical and contains decision-making tools and a case study to support the independent examiner’s own professional judgement.
- Is designed to support the independent examiner’s work relevant to the accounting concept of going concern and to meet any related reporting requirements. It is not designed to increase the independent examiner’s workload or broaden the scope of the examination.
- Reflects the requirements of UK charity regulators’ guidance on Matters of material significance, to the extent that this is pertinent to the examiner’s work on going concern, and the recently revised mandatory Directions for independent examiners published by the Charity Commission for England and Wales.
The Guide is intended to set out how an independent examiner can address the accounting concept of going concern, as far as possible, within the routine work undertaken as part of the engagement: of course, additional investigations may need to be undertaken around the going concern concept as the examiner’s preliminary findings dictate. In order to provide structured, accessible guidance, the Guide has three core chapters: identifying going concern issues; gathering and assessing evidence; and reporting on going concern issues.
Identifying going concern issues
An independent examiner’s routine planned work should normally provide insights into a charity’s going concern status and should be designed to do so.
Gathering and assessing evidence
Should a going concern issue be identified during an independent examiner’s routine work, the examiner should obtain additional evidence or make additional inquiries sufficient to determine the implications for their independent examiner’s report.
Reporting on going concern issues
In addition to evaluating whether and how to report on a going concern issue in the independent examiner’s report, the independent examiner has other reporting considerations. For example, if the independent examiner refers to a going concern matter in their independent examiner’s report, the report is considered by the UK charity regulators to give rise to a statutory duty to report to them. The independent examiner may also wish to issue a written report to the trustees setting out their findings and recommendations, although there is no requirement for the examiner to do so.
Independent examination and ‘true and fair’ accounts
All UK charities by law are subject to independent external scrutiny, except for charities registered with the Charity Commission for England and Wales with a gross income of under £25,000. Therefore, in the main, charities not receiving an audit will be independently examined.
Non-company charities exceeding the gross income threshold, for their charity law jurisdiction, and all charitable companies must prepare accounts which give a ‘true and fair’ view. Charities below the threshold have the option of preparing receipts and payments accounts.
The accounting concept of going concern relates solely to ‘true and fair’ accounts and, for UK charities, this means accounts prepared in accordance with FRS 102 and the Charities SORP (FRS 102).
ICAS members acting as independent examiners
Many ICAS members support the charity sector by acting as independent examiners either in public practice or in a voluntary capacity.
Any ICAS member acting as an independent examiner must have the necessary skills and knowledge to deliver a high standard of service. This is achieved through compliance with the ICAS requirements for continuing professional development (CPD). ICAS members must also comply with other relevant regulatory and professional requirements, including those contained within:
- The ICAS Charter, Rules and Regulations.
- The ICAS Code of Ethics.
- ICAS guidance on Practising Certificates, specifically the guidance on whether a practising certificate (PC) is needed to provide accountancy services to charities.