Changes to the reporting requirements of Auditors and Independent Examiners

It seems like the requirements imposed on Independent Examiners and Auditors are changing every day.

As with most reports that are required, the main principal behind the report is to enhance public perception of charities and raise the trust of the public. 

Independent Examiners and Auditors have to report Matters of Material Significance to the Charity Commission.  A summary of the matters that need to be disclosed to the Charity Commission are as follows:

  • Dishonesty and fraud
  • Internal controls & governance
  • Money laundering & criminal activity
  • Support of Terrorism
  • Risk to charity’s beneficiaries
  • Breaches of law or the charity’s trusts
  • Breaches of an order or direction made by a charity regulator
  • Modified audit opinion or qualified independent examiner’s report
  • Conflicts of interest and related party transactions

The list above may seem clear and most Trustees’ will be confident that there is nothing reportable for their particular charity. However the keynote is the last point, conflicts of interest and related party transactions.  As Independent Examiners and Auditors, we are required to make a report to the Charity Commission if there is evidence that related parties and conflicts of interest are not being managed properly, or disclosure in the accounts is not adequate.  Please see a recent blog article for more information on this.  This should serve as a reminder to the Trustees that Related Party registers must be held and updated. 

In addition to this, from November 2017 Independent Examiners and Auditors are now required to report Relevant Matters to the Charity Commission.  These matters do not have to be the same as Matters of Material Significance, they are simply matters that may be of interest to the Charity Commission, and their guidance is ‘if in doubt, report it’.  There are no specific guidelines for what must be reported, but the examples of reportable matters includes inadequate financial oversight.  This is in relation to the Trustee’s not properly and periodically reviewing the finances of the charity.  Again, this should serve as a reminder to the Trustees to regularly review finances, not just bank balances, but also income and expenditure to ensure that the charity’s resources are being used in an effective manner to better serve the public and the charity’s beneficiaries.

If you require any help and support on the matter, please do not hesitate to contact the Charity Team.