By Caroline Webster – our Charity Specialist
With the arrival of Covid- related and other one-off or ongoing funding, many smaller charities are finding that they are tipping over the audit threshold this year.
A charity in England and Wales must undergo an audit if:
- its income is more than £1m or,
- its income is more than £250k and its gross assets are more than £3.26m
Audits are completed in accordance with International Standards on Auditing. As such, the level of scrutiny is increased compared to that of an independent examination.
We have recently helped many of our charity clients through the transition from independent examination to audit. An audit can be an opportunity for Charity Managers and Trustees to scrutinise aspects of their systems which aren’t covered by an independent examination, and to put in place processes more appropriate to their growing charity.
For instance, as part of an audit, the auditor will typically:
- Document and evaluate the charity’s systems and controls, identifying any deficiencies and potential improvements
- Review the risk register and the charity’s mitigations
- Examine the accounting system and in particular methods of allocating costs to funds
- Review the reserves policy and going concern
- Provide feedback on the annual report disclosures and how the narrative is reflected in the numbers
- Evaluate management reporting
Rather than a compliance burden, the transition from independent examination to audit is an opportunity for our charity clients to gain valuable feedback and suggestions for improvements to assist in their further development.