Charity audit and independent examination
Every charity registered in England and Wales faces a level of scrutiny over its accounts. The type depends on annual income and total assets, but the purpose is always the same – giving trustees, donors, funders, and regulators public trust in how money is being spent.
Check your charity’s requirements: Our audit calculator tells you whether your charity needs a full audit, an independent examination, or neither.
We’ve audited charitable organisations for over 30 years. Our audit team understands the SORP, fund accounting, trustee obligations under charity law, and the practical pressures that finance professionals deal with daily. We work with charities ranging from small community organisations to national bodies turning over tens of millions.
Does a charity require an audit?
Under the Charities Act 2011, a registered charity in England and Wales needs a statutory audit if its gross annual income exceeds £1 million. Charities with income over £250,000 and gross assets above £3.26 million also cross the threshold. These figures apply to unincorporated charities and charitable companies alike, though the Companies Act 2006 imposes separate thresholds for charitable companies.
Below these thresholds, most charities need an independent examination instead. For very small charities with income under £25,000, the Charity Commission allows receipts and payments accounts with no external review required at all. In between, charities with income above £250,000 must appoint someone with a requisite ability and accountancy qualification – typically a member of ICAEW, ACCA, or the Association of Charity Independent Examiners.
Some governing documents and funders insist on a full audit even when the charity falls below the threshold. Check your constitution and any grant agreements before deciding whether you need an audit or independent examination.
What are the audit thresholds for charities?
The audit threshold for a charity sits at £1 million of gross annual income. A second trigger applies where gross assets exceed £3.26 million and income is above £250,000. Charitable companies also fall under Companies Act thresholds, which can differ slightly. The Department for Culture, Media and Sport sets the legislation on thresholds, and these limits have risen over time partly due to inflation. The Charity Commission publishes updated guidance whenever these limits change, and ICAEW issues technical alerts for its members.
If your charity sits close to the threshold, income can fluctuate year to year. A large legacy, donations received from a new charity appeal, or a one-off grant might push you over. We help clients plan for this so there are no surprises at year end.
Independent examination or full audit?
An independent examination is a lighter-touch review. An independent examiner checks the charity accounts against the SORP framework, reviews whether accounting policies are appropriate, and reports any material concerns to the trustees. It costs less and takes less time than a full audit. The review does not produce an audit opinion, but the independent examiner does scrutinise the accounts and flag anything that looks wrong.
A full audit goes further. The auditor tests a sample of transactions, evaluates internal controls, assesses risk management procedures, and forms a professional opinion on whether the accounts give a true and fair view. For charities handling substantial public funds, lottery grants, or government contracts, this deeper level of assurance builds confidence among stakeholders even when it isn’t legally required.
We provide both services. If your organisation isn’t sure which applies, we’ll review your governing document and income figures and give you a straight answer.
What we cover
A typical engagement includes:
- Income recognition testing against the SORP, covering restricted funds, unrestricted funds, and designated funds
- Grant income and expenditure verification against funder conditions and reporting requirements
- Trustee expenses, benefits, and related party transaction disclosures
- Assessment of the annual report, including the trustees’ report and strategic commentary
- Going concern evaluation, reserves policy, and investment portfolio review
- Reporting to the trustee board on findings, control weaknesses, and sector-specific risks
We also review Gift Aid claims and regulation compliance, and prepare the audit report for filing with the regulator and with Companies House where the charity is a company limited by guarantee or a limited liability partnership.
Does a small charity need to be audited?
Not usually. Small charities below the threshold only need an independent examination. But even smaller organisations can benefit from an examiner looking over the books. It reassures trustees, strengthens regulatory compliance, and makes the accounts more credible to grant funding bodies, local authorities, and potential donors.
We offer fixed-fee examination packages designed for smaller charities. The audit process is straightforward – you send us your accounts, we review them, and we deliver the examiner’s report within an agreed timescale.
How should a charity prepare for an audit?
Good preparation makes a real difference to cost and turnaround time. Before we arrive, we ask clients to reconcile bank statements, confirm outstanding debtors and creditors, and pull together accounting records and supporting documents for any large or unusual transactions. Keeping financial information and bookkeeping organised throughout the year – rather than scrambling at year end – cuts the time our audit team spends on site.
For charities with restricted funds, clear tracking of how each fund has been spent against donor or funder conditions avoids problems at the reporting stage. Senior management should also review any accruals accounts and ensure receipt records for donations received are complete. We send a detailed preparation checklist well before fieldwork begins.
Do charities need an auditor with charity sector experience?
Technically, any registered auditor can carry out a competent examination or audit. In practice, charity financial reporting is different enough from commercial accounting that generalist experience isn’t enough. Fund accounting, SORP reporting, trustee duties under charity law, grant compliance conditions, and regulator expectations all create risks that a generalist accountant may not recognise.
Our team does audit work with charities throughout the year, not just at year end. We understand the sector because we’re in it every week, and we offer advice and support beyond the annual audit or examination.
Charity SORP and reporting
The Charities SORP (FRS 102) sets out how charities in the UK should prepare their financial statements. It covers fund accounting, activity-based reporting, the statement of financial activities, and the balance sheet presentation that regulators expect.
We’ve seen charities trip up on SORP compliance in areas like multi-year grant recognition, donated services valuation, and heritage asset accounting. Our approach is to flag these issues during planning, not at the end of the engagement when it’s too late to fix them.
Who can audit charity accounts?
Where a charity is above the audit threshold under the Charities Act 2011, the work must be carried out by a Registered Auditor. That means a firm entered on the audit register held by a recognised supervisory body, in our case the Institute of Chartered Accountants in England and Wales. Not every accountant qualifies – chartered status alone isn’t enough, and the firm must hold a specific audit registration on top of its practising certificate.
The report is signed in the name of the firm by a Responsible Individual (RI). The RI is the named signatory who takes personal responsibility for the opinion and is themselves listed on the register. The Charity Commission will reject filings signed by anyone outside that framework, and trustees who appoint an unregistered firm are in breach of the Act.
Independent examinations are different. For charities below the threshold, an independent examiner can be a qualified accountant or, for very small charities, a competent person not connected with the charity. The Charity Commission publishes guidance on who qualifies for each tier – the rules tighten as income rises. If your charity is approaching the £1 million income mark, plan ahead: the move from examination to full audit takes preparation, and the firm you appoint needs to be a Registered Auditor from day one.
Audit Group is an ICAEW Registered Auditor with charity sector experience across Manchester and the UK.
Benefits of a charity audit
A well-run engagement does more than confirm numbers add up. It gives the board visibility of financial health, highlights risks early, and delivers recommendations for improving controls. The benefits are practical. Funders gain confidence in the numbers. Trustees get a clear picture of the financial position and reserves. The audit provides evidence that the charity is compliant with Commission and tax rules. And the report carries weight with members of the charity finance community.
Charity auditors: common challenges in the not-for-profit sector
Our charity auditors see the same issues repeatedly:
- Restricted fund management – Tracking spend against grants needs good systems. We help your charity set things up from the start.
- Gift Aid claims – Missing declarations and late claims cost millions. We check processes and HMRC compliance as part of each engagement.
- Reserves policy – The Commission expects a justified policy. We help you articulate one for your size and risk profile.
- Accounting services for groups – Where there are trading subsidiaries, the consolidation requirements are often underestimated.
Charity and not for profit trustee responsibilities
Under the law, trustees carry direct responsibility for preparing annual accounts, the report and maintaining adequate charity accounting records. The governance framework means they must actively engage – it can’t be delegated. We work with the board and with the accountant to ensure findings are understood.
Working with us
We plan around your charity’s year end and reporting deadlines. Most of our charity clients have a 31 March year end. We aim to complete fieldwork within two weeks and deliver the signed report well before your filing deadline. We also work with not-for-profit organisations and partnership structures where similar reporting rules apply.
We’re on the Register of Statutory Auditors and regulated by ICAEW. Fees are fixed and agreed before we start. No hourly billing, no surprises.
If your organisation is looking for a new firm to handle your audit and assurance needs, call us on 0161 832 4451 or request a callback.
