Strengthening the audit process for charities
Formal audits are a statutory requirement for any charity whose gross income exceeds £1m and The Financial Reporting Council (FRC) recently issued updated best practice guidance for auditors.
The revision of Practice Note 11 is intended to assist practitioners to comply with the increasingly robust requirements of UK auditing standards. The FRC stresses that the legislation requires auditors of both charitable companies and non-company charities to report on the consistency of the information given in the trustees’ report with the financial statements, and these rules apply to all charities.
Practice Note 11 applies to the audit of financial statements prepared in accordance with the Charities Statement of Recommended Practice (FRS 102) (Charities SORP). The Practice Note has been developed with input from an expert working group comprising audit practitioners, charity regulators, and representatives of charities.
While the Practice Note is intended for the audit of financial statements of charities prepared on an accruals basis, some smaller charities that prepare receipts and payments accounts may be required to have an audit by their governing document or another enactment.
The revisions were issued in response to recent well-publicised failings of certain charities that have been investigated by the Public Administration and Constitutional Affairs Select Committee, and the Public Accounts Committee (PAC).
Michaela Johns, Director says: “A formal audit is a crucial process and more important than ever in this era when charities are under increasing scrutiny from both the public and regulators. The audit process provides reassurance that a charity’s accounts are true and fair and moreover, ensures transparency.
“As an experienced auditor and having completed detailed and complex audits for a number of charities, I welcome this best practice guidance that further strengthens the audit process.”