Why charities need an experienced auditor

The importance of charities appointing auditors and independent examiners with specific experience and a proper understanding of the sector has been underlined by a new report.

The study by the Charity Commission has revealed that only around half of the charity accounts reviewed met the regulator’s external scrutiny benchmark.

Nigel Davies, head of accountancy services at the Charity Commission, says: “We know from research we have carried out into public trust in charities that the public care deeply about transparency.

“It is therefore vital that charities are able to provide an accurate and clear picture of their finances.

“External scrutiny is an essential part of the checks and balances process that charity accounts go through and so it is disappointing that so many independent examiners and auditors appear to lack the necessary understanding of the external scrutiny framework.

“Those that are getting this right are playing an important role in upholding charities’ accountability to us as regulator, and the public.”

The team at WNJ has widespread experience working with a range of small charities, supporting them and working to understand their specific and special requirements.

It is important to remember that these organisations are totally different to limited companies operating in the commercial world.

Take their fundraising. A charity’s money can come from a wide range of sources, from local authorities, private donations and raffles.

Their stakeholders are also different and that also has to be borne in mind. Working with a charity is a different discipline to working in the commercial world.

A sample of 296 charity accounts was assessed in the latest study. The accounts were assessed against a new external scrutiny benchmark to determine whether a minimum standard of scrutiny by auditors and independent examiners had been met.

The commission drew the accounts, for the financial year ending in 2017, from three random samples of charities of different sizes.

It found that 46 per cent of the accounts failed to meet the benchmark, with standards worse for smaller charities.

Nigel Davies adds: “I hope trustees will learn from this study, in terms of the expectations around reporting, and in ensuring they select an independent examiner that knows about and understands the requirements.”

To discuss any aspects of this report and how we can help your charity please contact me on 01772 430000.