Charities – audit or independent examination?

For many charities, 31 March will mark their financial year end, and the end of a full year where the global pandemic has impacted on their ability to raise funds and deliver their objectives.  

For some this may mean that they have changed category for scrutiny of their statutory accounts, please see our useful reminder below.

Unincorporated charities and CIO’s *

• Audit: an audit is required where either gross income is >£1m or where income is >£250k and total assets are >£3.26m
• Independent examination: where income exceeds £25k but remains below the criteria for an audit an independent examination is required

Where gross income is less than £25,000 there is no scrutiny requirement.

*Please note that where a charity’s governing document requires an audit, a full audit under the Charities Act will be required.

Limited companies 

Scrutiny levels are the same as for unincorporated charities, however, other considerations are required.

In order to qualify for audit exemption a company must qualify as a small company in relation to that year (This will require consideration of size per the qualifying condition in both the current and previous year and what size the company reported as in the previous year).

The qualifying conditions are met by a company in a year in which it satisfies two or more of the following requirements:

• Turnover: not more than £10.2m
• Total assets: not more than £5.1m
• Average number of employees: not more than 50

If there is an audit requirement in the charitable company’s governing document or more than 10% of members have requested an audit, a full audit is required.