The study assessed the accounts of 296 charities against a new external scrutiny benchmark developed by the Charity Commission to determine whether a minimum standard of scrutiny by auditors and independent examiners had been met. The benchmark is based on the requirements of the Charities Act 2011, the Charities Statement of Recommended Practice (SORP), auditing standards and the Commission’s Directions for independent examiners.

Only three quarters of charities with income over £1 million met the external scrutiny benchmark. This fell to 51% in the case of charities with income of £250,000 - £1 million and just 37% for charities with income below £250,000. Particular issues included incomplete reporting of related party transactions (for which a separate report discussing the findings in more detailed is linked below) and charitable companies failing to provide a separate summary income and expenditure account, or not stating that it was included in the Statement of Financial Activities. The Charity Commission also noted that accounts reviewed by an auditor met the benchmark more frequently than those reviewed by an independent examiner.

As a result of its findings the Charity Commission has issued updated guidance for trustees on independent examination (CC31). It has also made the external scrutiny benchmark available on its website.

Click for (all links to the Charity Commission website):

• the study on external scrutiny;
• the external scrutiny benchmark;
• the report on the findings regarding related party transactions; and
• the updated guidance for trustees on independent examination.