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What matters most for charity auditors

Guidance from regulators makes clear the reporting duties for auditors if they are required to give a modified audit opinion on a charity’s accounts, explains Paul Cooper of Citroen Wells.

Paul Cooper

April 2018

Issued by the three national charity regulators – the Charity Commission for England and Wales, the Charity Commission for Northern Ireland and the Scottish Charity Regulator - CCNI EG058 sets out under nine headings matters of material significance that must be reported to them by the auditor or independent examiner of a charity.

Of particular interest is the section concerning a modified audit opinion or qualified independent examiner’s report. Unlike other matters under the nine headings, compliance with the requirement to report a modified audit opinion is quite readily monitored through reviews of filed annual reports. The Charity Commission for England and Wales has done this, and has issued a report expressing concerns.

Material significance here applies to the exercise of the regulator’s functions, rather than financial statement materiality. Each heading is accompanied by a description of the circumstances that make a matter reportable. Where there is scope for judgment, the advice is ‘when in doubt, report it.’

The separate report does not just constitute duplicate reporting when a modified audit report has been issued and filed. The separate report has to be made as soon as the auditor intends to give a modified opinion, which is likely to happen before the date of the audit report.

But while trustees are encouraged to file the annual report as soon as possible, they might not do so, which further delays the time when the regulator becomes aware of the content of the audit report.

Furthermore, while the separate report covers the same matter as the modification to the audit opinion, it is unlikely to contain identical wording, as it has to be prepared with the regulator’s functions in mind. The guidance does specify what information should be provided, including for example, whether other relevant authorities have also been notified.

Modifications in this context include an emphasis of matter or a material uncertainty relating to going concern. Auditors of unincorporated charities may routinely include an emphasis of matter or other matter, as the Accounts Regulations do not refer to the current version of the SORP. Where this matter is the only modification, the auditors do not now have to make a separate report.

Paul Cooper is a manager at Citroen Wells Chartered Accountants and a member of the LSCA Technical Committee.

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