Can I undertake an independent examination of a charity?

Many ICAEW members are approached by charities and asked to undertake independent examinations for them. This helpsheet has been issued by ICAEW’s Technical Advisory Service and explores some of the factors to consider before accepting such an appointment.

Members may also wish to refer to the following related helpsheets:

• Charities – financial reporting and scrutiny (England and Wales)
• Charities – financial reporting and scrutiny (Scotland)
• Charities – financial reporting and scrutiny (Northern Ireland)
• Duty to report to the charity regulator(s)

If the charity’s income is less than or equal to £250,000, you would not require a practising certificate to undertake the independent examination of a charity where you do so gratuitously or for financial equivalent value reward of less than £100 per assignment, provided there are no other circumstances that would require you to hold a practising certificate (ICAEW statement on engaging in public practice). If the charity’s gross income is in excess of £250,000, a practising certificate would usually be required.

If you need a practising certificate for the role, you will need appropriate PII cover. If you are not engaged in public practice, do not hold a practising certificate and are undertaking the independent examination on a voluntary basis, you would not be required to hold PII cover. Care should be taken, however, as claims may still be made even if you do not hold such cover. If you do not have PII cover, you should notify the charity in writing of this fact.

You may wish to purchase a professional liability insurance product, designed specifically for volunteers.

An independent examiner needs to be sufficiently independent of the charity to ensure that their independence is not compromised. As such the independent examiner must not have a connection with the charity or its trustees which might inhibit or be perceived to inhibit the impartial conduct of the examination.

The charity regulator(s) include independence in their respective guides for independent examiners (see How do I undertake an independent examination?).

In addition to the requirements imposed by the relevant charity regulator(s), members should have regard to the independence requirements of Part 4A of the ICAEW Code of Ethics.Where firms have elected to apply the FRC Ethical Standard instead of Part 4A of the ICAEW Code of Ethics, they should refer to the Ethical Standard.

A further consideration is whether you have the professional competence to undertake such work. Whist it may be possible to present accounts on a ‘Receipts and Payments’ basis for certain charities, the presentation of charity accounts in accordance with the Charities SORP (FRS 102) can be more challenging.

Members undertaking such work should ensure they have a good understanding of the applicable requirements and that they fully comply with the ICAEW’s CPD requirements.

Guidance on completing an independent examination is available from the relevant charity regulator(s):

• CCEW - Independent examination of charity accounts: examiners (CC32)
• OSCR - Independent examination: A guide for independent examiners
• CCNI - Independent examination of charity accounts: examiner’s guide (ARR07)

The helpsheet, Charities – financial reporting and scrutiny also covers key requirements for charities.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Ethics Advisory Service on +44 (0)1908 248 250 or via webchat.