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John Selwoods audit clinic

This month John focuses on the audit and independent examination of charities.


I am the independent examiner for a small charity where there has been a fraud. The size and nature of the fraud do not give rise to a qualified independent examiners report and the trustees have already reported the fraud to their regulator. Am I required to report this to the regulator as well?


Auditors and independent examiners are required to report “matters of material significance” to the relevant regulator, be that the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator or the Charity Commission for Northern Ireland. The fact that the trustees have already reported does not remove your obligation to do so.

There is some logic to this, as you might be aware that a report has been made but you might not know the precise content of the report. As independent examiner, you might have additional information to report and you will certainly have a different perspective. Also, it is possible that the trustees report might be biased in a way that your report would not be, because of your independence. The trustees could gloss over facts or underplay the impact of the fraud. If the size of the fraud is small, it is often tempting not to bother reporting it because the reporting requirements relate to matters of ‘material’ significance.

However, materiality referred to in this context is not normal accounting materiality; it is the regulator’s perspective on what is material to the functioning of the charity. Any instance of fraud might indicate weak internal controls and poor governance, which in themselves are reporting matters. As a rule of thumb if in doubt, report.

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