Spotting errors after filing – what you need to do next

Errors in filed charity accounts are hardly welcome, but they are manageable. This article explains how to respond in a way that is technically correct, proportionate, and transparent. By supporting trustees in making informed decisions about corrections, accountants play a vital role in maintaining trust and integrity in charity reporting.

The starting point is to establish exactly what has gone wrong. Under FRS 102, errors are defined as omissions or misstatements in financial statements arising from a failure to use, or misuse of, reliable information that was available at the time the accounts were authorised for issue. In other words, this is not about new information coming to light, but about something that should have been properly reflected in the original accounts.

Once identified, trustees must consider whether the error is material. The Charities SORP explains that materiality depends on whether the omission or misstatement could influence the decisions of users of the accounts. This is not simply a numerical exercise; both the size and the nature of the error must be judged in context. An error affecting a sensitive disclosure or a restricted fund, for example, may be material even if the amount involved is relatively small. This assessment is critical, as it determines whether any correction is required at all, and if so, how it should be handled.

Where a charitable company discovers a material error after filing, the Companies Act 2006 provides a helpful framework. The so-called “defective accounts” provisions (CA 2006 s454 to s462) allow directors (and therefore trustees) to choose between two approaches: revising and reissuing the accounts or correcting the error in the next set of accounts through a prior period adjustment.

Trustees must decide which option is most appropriate in the circumstances. Timing often plays a key role. If the error is identified shortly after filing, it may be more straightforward to revise and reissue the accounts. Conversely, if the next reporting cycle is already underway, it may be more practical to address the issue in the upcoming accounts.

Other considerations are equally important. Funders may have specific expectations about how errors are handled, particularly where grant reporting is affected. Regulators may also have preferences or requirements, so early engagement can help avoid complications later. Where the accounts have been audited or independently examined, the auditor or examiner will need to be involved in any revision process. Cost is another factor, as reissuing accounts can be resource-intensive. In practice, the decision often comes down to balancing transparency and timeliness against proportionality and administrative burden.

If the trustees elect to revise and reissue the accounts, there are requirements to be followed. Further detail can be found in our helpsheet Defective accounts and reports, which is available to ICAEW members, affiliates, students, and people with member firm access.

The situation is less straightforward for unincorporated charities and Charitable Incorporated Organisations (CIOs). Unlike companies, there is no equivalent statutory mechanism in the Charities Act 2011 that allows filed accounts to be formally revised. For charities preparing accounts under the SORP, the usual route is therefore to correct the error in the next set of accounts. This is done through a prior period adjustment, which involves restating comparative figures and providing appropriate disclosures to explain the nature and impact of the error.

However, there may be circumstances where trustees feel that waiting until the next reporting cycle is not appropriate, particularly if the error is significant or could mislead users. In such cases, the recommended approach is to engage with the relevant regulator to determine whether amended accounts would be accepted. Trustees may also wish to seek legal advice and should involve their auditor or independent examiner where applicable.

Whichever route is taken, clear documentation is essential: trustees should record the nature of the error, how it arose, its impact, and the reasoning behind the chosen approach. This not only supports good governance but also provides an audit trail if the decision is later scrutinised.

Transparency in reporting is equally important. Whether through revised accounts or disclosures in the next reporting period, users should be able to understand what went wrong and how it has been corrected.

Finally, trustees should not lose sight of the opportunity to learn from the situation. Errors often highlight weaknesses in processes or controls. Taking steps to address these underlying issues can reduce the risk of recurrence and strengthen the charity’s overall financial management.