When can a charity have an Independent Examination instead of an Audit?
What is an Independent Examination?
Independent Examination (IE) is an alternative to a financial full audit for smaller charities - a legally acceptable form of external scrutiny of their end of year accounts.
Which charities are eligible for Independent Examination?
- Registered charities
- Excepted charities (often churches or scout or guide organisations)
Charities whose governing documents/constitutions do not specify an ‘audit’
(NB: constitutions can be amended if this is the only stumbling block)
Charities where there is not a donor or funder who requires an ‘audit’
(NB: if they do require an ‘audit’, it may be worth negotiating with the donor/funder)
- Charities that are ‘small’
What charities are classed as small?
For year ends on or before 30 March 2009 limited company charities did not come under the IE regime and instead had a Reporting Accountant and not an Independent Examiner. For year ends on or after 31 March 2009 they were brought in line with unincorporated charities.
The thresholds for unincorporated and incorporated charities having IEs are as follows:
For year ends of 31 March 2009:
Gross income for the year of £10,001 - £500,000 (£10,000 or below no external scrutiny is required). BUT If a charity’s income is £100,000 or more and its gross assets are £2.8 million or more it would have to have an audit.
For year ends of 1 April 2009 or after:
Gross income for the year of £25,001 - £500,000 (£25,000 or below no external scrutiny is required). BUT If a charity’s income is £250,000 or more and its gross assets are £3.26 million or more it would have to have an audit.
Why choose an IE?
The main reason for choosing an IE as opposed to an audit, would be that there is less work involved for an Independent Examiner than for an Auditor and therefore the cost of an IE is likely to be less than the cost of an Audit.
Date: 2nd February, 2010
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