The Charity Commission believes some auditors in England and Wales are letting the sector down after around half of charities failed to meet basic benchmarks.
The regulator scrutinised 296 charities with various incomes and found that 44% of accounts submitted by qualified examiners met its external benchmark.
For unqualified examiners meeting the Commission’s benchmark, this figure dropped to just 18%.
Charities with incomes exceeding £25,000 must arrange for either an audit or an independent examination of their charity’s accounts.
Audits are compulsory for charities with incomes over £1 million – and those with incomes over £250,000 and gross assets over £3.26m.
Most other charities can opt for an independent examination, unless an audit is required for another reason, such as by the charity’s governing document.
It is important that charities are given the right support from their advisors to ensure that trustees are in a position to make informed judgements.
Nigel Davies, head of accountancy services at the Charity Commission, said: “The public care deeply about transparency in charities, and it is vital that charities are able to provide an accurate and clear picture of their finances.
“It is disappointing that so many independent examiners and auditors appear to lack the necessary understanding of the external scrutiny framework.
“Those that are getting this right are playing an important role in upholding charities’ accountability, clearly others are letting the profession and charities down.”
Where a charity is concerned an audit gives important, independent credibility to all stakeholders that the charity is acting in line with its aims and objectives and that funds are being utilised correctly.
After the issues at Kids Company a number of years ago there has been a determined effort to tighten up the audit of charities.
If you are involved in a charitable entity and want to understand more about your audit requirements we have a team of dedicated charity sector experts on hand to help.