Charity & Community

All audits are conducted under the same basis, regardless of if they are statutory or non-statutory.

There can be other pieces of work that require an auditor to undertake the assignment, for example grant claim audits.

Shareholders can also request an audit or an assurance report to be carried out and these require a registered auditor.

Some companies require an audit because they are part of a listed group or either in the UK or elsewhere in the world.

Ward Goodman Audit Services Limited is registered with the PCAOB in the US.

The process for a charity audit is in a lot of ways similar to a company audit with the aim being to verify that the financial statements are not materially misstated.

Areas that would feature more heavily in a charity audit compared to a company audit may be in relation to the monitoring of funds (restricted and designated), charitable activities, and the recognition of income streams from grants or contracts to ensure these are recorded correctly. The audit would also review the Trustees report to ensure it is compliant with the Charity SORP.

The audit process is made up of three main steps; planning, fieldwork and completion.

The planning stage will involve enquiry with key members of the finance team and trustees to get to understand more about the charity and its activities in the year. At this stage the auditor will look to understand your internal financial systems (including IT) and processes and the financial controls in place. There will also be a focus on assessment of risks and the auditor will set a materiality level at this stage.

Fieldwork will involve the majority of testing of balances. This will likely include a mixture of analytical procedures, testing of financial controls and sampling of balances in the accounts to supporting documentation. We offer availability to conduct the audit fieldwork through on site attendance or predominantly remote methods depending on your requirements.

The completion stage will involve finalising the financial statements and reports for the year and at this stage we would also suggest best practice in areas that have been identified in your charity to ensure that the processes in place are suitable.

A charity that is not required to carry out a full audit may still require an independent examination to be completed on their financial statements. An independent Examination is required for all charities with gross income over £25,000 for the financial year.

An independent examination offers a less formal review of financial records and compliance with regulations than an audit but can still provide cost-effective assurance to stakeholders. The purpose of this is to give the charity’s trustees, supporters, beneficiaries and the wider public, some independent assurance that the charity’s money has been properly accounted for and accounting records kept.

A statutory audit is a formal examination of a charity’s financial records, transactions, and operations to ensure compliance with legal and regulatory requirements. It is important for charities and not-for-profit organisations as it provides assurance to stakeholders, donors, and regulatory bodies regarding financial transparency, accountability, and governance. Our team of charity accountants specialises in conducting these audits to uphold the highest standards of financial integrity.

A good place to start when answering this question is to review your charity constitution to see if there are any specific requirements included upon inspection of the financial statements. Where there is nothing specific in the charity constitution, the following thresholds would indicate the level of review required by the charity.

Charities with annual income below £25,000 require no external review, however trustees may still wish to undertake a review.

An independent examination is required for a charity if the gross income for the year is:

• more than £25,000, but not more than £1 million, provided that
• if its gross income is more than £250,000, its gross assets (fixed assets plus current assets) are £3.26 million or less

If your charity is above these thresholds, then a charity audit is required.

An audit committee is an internal group of a charity which focuses on monitoring risks, controls and governance.

A charity does not need to have an audit committee and this would usually depend on the size and complexity of the charity.

Charities are required to keep books and records to support the transactions of the charity if they were to be requested. This would include, for example, cash books, invoices, receipts, expense claims, Gift Aid records etc. Records are required to be kept for a minimum of 6 years from the end of the financial year in which they were made.