What Are Independent Examinations and Charity Audits

Introduction

Financial transparency is essential for maintaining public trust in charities. To ensure this, the Charity Commission requires every registered charity to review its accounts annually. Smaller charities usually undergo an independent examination, while larger ones must have a statutory audit.

Both processes verify that your charity’s accounts are accurate, that money is being used for charitable purposes, and that trustees are meeting their legal responsibilities. Understanding the difference between the two helps you stay compliant and avoid penalties.

What is an independent examination

An independent examination is a formal review of a charity’s accounts by someone who is independent of the charity and has the right skills to assess financial records. It is a less detailed process than an audit but still provides assurance that the accounts are properly prepared.

The independent examiner’s role is to:

Check that accounting records match the accounts presented

Confirm that the accounts comply with legal requirements and accounting standards

Identify any material errors or inconsistencies

Report findings to the trustees and, where necessary, to the Charity Commission

The examiner does not give an opinion on the financial statements, unlike an auditor. Instead, they confirm that nothing has come to their attention suggesting the accounts are misleading or incorrect.

When a charity needs an independent examination

Most smaller charities fall under the independent examination threshold. In England and Wales, the current rules are:

Charities with income up to £25,000: No independent examination or audit is legally required, but trustees must still maintain proper financial records.

Charities with income between £25,000 and £1 million and assets less than £3.26 million: Must have an independent examination.

Charities with income above £1 million, or income above £250,000 with assets over £3.26 million: Must have a full audit.

For charitable companies (those also registered with Companies House), the audit threshold is generally higher, aligning with company law limits. However, some grant funders or donors may require an audit regardless of size.

Who can carry out an independent examination

The examiner must be independent, meaning they cannot be a trustee, employee, or anyone with a financial interest in the charity. They must also have the appropriate skills and experience to review the accounts.

For charities with income:

Up to £250,000: The examiner should have relevant financial knowledge but does not need to be professionally qualified.

Over £250,000: The examiner must be a member of a professional body such as ACCA, ICAEW, or CIPFA.

Choosing someone with charity accounting experience is recommended, as charity reporting rules differ from those of private businesses.

What is a charity audit

A charity audit is a more detailed and formal process than an independent examination. It provides a higher level of assurance about the accuracy and fairness of a charity’s financial statements.

An audit involves:

A full assessment of accounting systems and internal controls

Testing samples of transactions to confirm accuracy

Reviewing how funds are recorded and restricted

Checking that financial statements comply with the Charities SORP (Statement of Recommended Practice)

Issuing an official auditor’s report providing an opinion on whether the accounts give a true and fair view

Because audits are more rigorous, they are generally more expensive and time-consuming than independent examinations.

When a charity needs an audit

Under the Charities Act 2011, an audit is mandatory if a charity:

Has income over £1 million, or

Has income over £250,000 and assets exceeding £3.26 million

Some charities may also require an audit if it is written into their governing document or required by funders. Even if an audit is not legally required, trustees can choose to have one voluntarily for added credibility or assurance.

Who can perform a charity audit

An audit must be carried out by a registered auditor who holds a recognised qualification and is authorised under the Companies Act 2006. They must be independent of the charity and have experience in charity accounting and audit standards.

Auditors must follow specific ethical and professional guidelines to ensure objectivity and confidentiality throughout the process.

Differences between an independent examination and an audit

Feature Independent Examination Charity Audit
Purpose Checks accounts are consistent with records Provides assurance that
and legally compliant accounts give a true
and fair view


Level of scrutiny Moderate High

Performed by Independent person(not necessarily a registered Registered auditor
auditor for smaller charities)

Required for Income between £25,000 and £1 million (with assets below Income over £1 million
£3.26 million) or assets over £3.26 million

Cost Lower Higher

Outcome Examiner’s report Auditor’s report and opinion

Both reviews improve accountability and give stakeholders confidence that funds are being managed responsibly.

How to prepare for an examination or audit

Good preparation makes the process smoother and reduces professional fees. Trustees should ensure:

All accounting records and receipts are organised and up to date

The charity’s bank statements, invoices, and grant documentation are available

Restricted and unrestricted funds are clearly separated

Trustee meeting minutes and governance records are complete

Any potential financial risks are identified and documented

Communicate early with your examiner or auditor so they can plan their review efficiently.

The examiner or auditor’s report

At the end of the process, your charity will receive a formal report. For an independent examination, this confirms that the accounts are in line with records and meet legal standards. For an audit, the auditor issues a signed opinion stating whether the accounts give a true and fair view.

This report must be included in your annual filing to the Charity Commission and, if applicable, Companies House.

Ongoing responsibilities for trustees

Even with an independent examination or audit, trustees remain legally responsible for the accuracy of the charity’s accounts. They must:

Approve and sign the final accounts

Submit them to the Charity Commission within ten months of the financial year-end

Review any recommendations from the examiner or auditor and take corrective action

Regular financial monitoring throughout the year helps prevent surprises during the review process.

Common mistakes to avoid

Submitting incomplete or poorly organised records

Misclassifying restricted funds or donations

Assuming small charities do not need any review at all

Ignoring recommendations from previous audits or examinations

Failing to meet filing deadlines with the Charity Commission

Avoiding these issues demonstrates good governance and strengthens donor confidence.

Conclusion

Independent examinations and charity audits both play vital roles in ensuring transparency, accountability, and good financial management. The process your charity needs depends mainly on its size and financial complexity.

Smaller charities usually require an independent examination, while larger ones need a statutory audit by a qualified professional. In both cases, keeping accurate records and cooperating fully with your reviewer will make compliance easier and help your charity maintain the trust of supporters, regulators, and the public.